Tuesday, September 4, 2007

"Bailout? No way"

Excellent op-ed "Bailout? No way"in the LA Times today by LA Land blogger Peter Viles!

Here's what you do with it to make a difference: Send a copy with your comments to your senators (e.g. Dianne Feinstein and Barbara Boxer), congressmember, President Bush, presidential candidates like Hillary Clinton, Barack Obama, John Edwards, Bill Richardson, and Chris Dodd, and other prominent senators on this issue (see "Mortage mess echoes in Congress" in today's LA Times) like Charles Schumer. Hey, how about your favorite talk-radio host while you're at it? Show them a lot of people care. Get noticed!

Here are some highlights of Pete's op-ed (emphasis added):

President Bush announced his intention last week to reach out a hand to the "many Americans" who "may have been misled" in the sub-prime mortgage market. Two days earlier, presidential hopeful Barack Obama called for fining "predatory lenders" to bail out "hoodwinked" families. ... The news media report on families losing homes, disabled owners facing foreclosure and newlyweds being tossed into the street. ...

[But] According to a recent Fox News poll conducted by Opinion Dynamics, there's 70% opposition to a taxpayer sub-prime bailout.

"It is amazing all the sympathy we are seeing from politicians for people who knowingly took out loans they couldn't afford, often lying on their applications to do so," commenter "srl" posted at the LA Land blog I write for the Los Angeles Times. "Usually," added "Brian," "when the facts are examined closely, we find people who ... took a chance that house prices would keep rising, that they could remodel the kitchen, buy the truck and the motorcycle, put it on the credit card and pile that debt into the next refinance..." ...

And yet now, just as the market is starting to cool and possibly provide buying opportunities, many of these folks -- especially those patiently waiting out the bubble -- find themselves crashing a pity party for the very buyers who priced them out of the market. They are furious that the government appears interested in supporting overextended borrowers and high prices, and they cite data to support their position. ... No wonder LA Land commenter "jbunniii" writes: "No bailout is needed -- most of the borrowers in trouble didn't put any money down in the first place, so they will lose nothing by walking away." ...

Politicians, by rushing to the defense of recent home buyers, give the appearance of endorsing price stability at historically high levels. This makes little sense in Los Angeles, which ranks among the least affordable markets in America when housing prices are matched against income levels. Why should government favor today's owners over tomorrow's buyers?

"I make nearly 100K and cannot afford a home in California," "JK" wrote on LA Land. "Using my tax dollars to help irresponsible people keep homes they can't afford, while at the same time keeping me out of the market, will be enough to send me over the edge." ...

3 comments:

WarChestSM said...

Ok at the risk of being shot at...

I don't think this is a big deal (especially for most southern Cali locations...especially the westside of LA). Speculators/homeowners/flippers who are in trouble because they bought 2 bedroom condos for $750K or $1.5 million tear downs aren't going to be bailed out under most of these proposals.

Secondly, it seems like most of these "programs" are being introduced to score political points...maybe a few folks get helped in Ohio or Michigan as a side effect. For bubble markets (yes, the westside is in this category), there is little that can be done to change the laws of finance/math/money. When you borrow too much money to buy a property that your income can not truly satisfy, there is no "bailout" plan that can really save you. The government won't be giving out neg-am teaser loans.

Everyone needs to stop beating around the bush. In many areas, homes can't be sustained given the current level of incomes. By definition, houses are too expensive and the ONLY way out of this mess is to take some pain and have prices come back to levels which are supported by incomes. I apologize if this seems callous but short sales and foreclosures won't kill people. They will teach people a life lesson and then they will go back to renting for a while.

Mr.Mortgage said...

Property Speculators first to default.
http://thegreatloanblog.blogspot.com

Anonymous said...

warchestsm
I believe this is the first step with many more to come at your and my expense. They will throw money at it just to look good (which will slow but not fix the problem).

Tell your representatives no bailout. It only takes 2 min - links are here.

http://westside-bubble.blogspot.com/2007/09/bailout-no-way.html