I feel for all those out there facing foreclosures and potentially having their homes taken away. I really do! The loans they were able to obtain in the wild real estate market of the past few years got them into a lot of hot water. But wait, didn't they get a written contract spelling out the arrangements?
If the government bails people out either through straight out legislation or via some scheme concocted for the FHA to do it, what are people going to think? Is there no risk to anything anymore? Are there no consequences to stupid actions?
One complaint made was that if it wasn't for these loans that people wouldn't have been able to get loans in the high priced real estate markets of places like San Francisco? Uh, Hello...anyone home? Isn't that how the market is supposed to work? Since when did what the seller wants dictate what the market should pay? If no one had been able to get loans for these outrageously priced pieces of property they wouldn't have sold for these crazy prices in the first place.
Did you pay too much for your house? Guess who's to blame. All these people who purchased houses they couldn't afford in the first place. Sure, the rising prices of real estate benefited those who owned but guess what, if you sell your place, you still need to buy another and you'll be paying the same insane prices again. If it is a second home for you, congratulations! You've just screwed the people who can't afford a second home.
I've heard a lot of complaints that contractors can't sell homes they've already built. Well, let's correct that a bit. How about, you can't sell the house at the price YOU want. And that's the problem, the real estate market was letting the seller set the price instead of the buyer. People could get money like turning the water on in your sink. Unless your wealthy, buying a home is difficult and takes some planning. Getting a home shouldn't be like buying at stereo system at your favorite electronics store.
Maybe a bailout won't change what happened but it sends a clear message that this kind of thing is OK. If the FHA plan works then perhaps it won't be so bad as my understanding is the obligations of others won't be written off. The problem is, the FHA is going to probably take on a lot more bad debt than they would have otherwise and then they're going to need bailing out later.
I surely hope this doesn't become another bottomless pit for tax payer dollars.
The damage of yesterday's real estate market has been done but let's not make it worse.
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I think a lot of people were vicitmized by predatory lenders who deliberately and maliciously sold bad loans to trusting people. I'm not saying those people deserve amnesty, and I'm definitely not saying that every troubled homeowner falls in that category. But I am saying that the balance of power in this country has shifted way too much from the ordinary citizen into the hands of big business.
And I look at this bailout not as a gift to homeowners, but as a gift to lending corporations who were facing a crisis themselves: what to do with so many defaulted loans and foreclosed property. Nobody here is really helping the people. They're helping the companies who mislead the people into dangerous loans. The fact that some ordinary people benefit is a negligible side effect.
What should happen? The government should set a maximum foreclosure rate for all lending businesses. So that, for example, they cannot allow more than 1% per year foreclosures of properties they own. That will make them write smarter loan, make sure that people get the right loans for the right properties for them, and really work with people who have means but have fallen on hard times.
Which is, of course, what any decent institution should have been doing all along.
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