My point of view on home ownership and debt is very different than most financial reporters, and apparently it’s different than most Americans. In my view traditional views of home ownership, like those extolled in Mike’s weekend piece Why our less educated parents and grandparents were more intelligent on homeownership, have been replaced by a twisted concept of money rentership as a proxy for home ownership. I described the slow deterioration of our concepts of home ownership in the post Money rentership: housing and the new American dream:
One of the most common encumbrances on property is the mortgage lien, and it is among the most restrictive. For instance, if you own a property not encumbered with a mortgage lien, you could demolish any structures on the property (within legal and practical constraints) and nobody will care; it is your property. Once a property is mortgaged, the “owner” no longer has the right of demolition because a lender has claim to the real estate and has interest in preserving its value. In fact, the lender will even require a borrower to carry insurance to prevent loss. If the lenders is not the owner, how can they require insurance, and why do they care?
Lenders want to protect the value of their collateral, the property they may force sale of at auction. At a public auction, the lender, standing in first lien position, bids the property up to their outstanding balance in an attempt to regain their loan balance from a cash buyer. If the house is worth less at auction than their loan balance, lenders often buy the property at auction and sell in the resale market were prices are usually 15% higher. In short, through a complicated chain of events, lenders know the collateral may become their house, so lenders make borrowers care for collateral as if the lender owned it even though the lender doesn’t…
legally…
Hey, if it walks like a duck and quacks like a duck….
Since lenders behave like owners of a borrower’s real estate, and since lenders have right to force sale if a borrower defaults, lenders are owners, and owners are money renters.
Over the last several years millions of people faced the reality of these once-obscure nuances of property law when they were forced to vacate the lender’s collateral after a foreclosure proceeding. The mainstream media likes to portray this as “people losing their homes.” But that is not an accurate view of what happened. Borrowers were forced to leave houses purchased by the bank with the bank’s money because the borrowers failed to pay their rent on that money. That’s the reality of what happened. These people didn’t own anything. In most cases, they only owned a very small percentage of the bundle of property rights we call “ownership” from their down payment. Many of these borrowers put down nothing at all.
What did they own?
Retired loan owners
One of the saddest realities emerging from the aftermath of the housing bubble is the excessive debts given to seniors, many of whom are now facing foreclosure. It takes two parties to a loan, a lender and a borrower. Both are responsible for their decisions to enter into the transaction. In my opinion, Lenders Are More Culpable than Borrowers. However, in our rush to bash the banks for their predatory lending, and senior lending is ripe with this abuse, it’s important that we don’t lose sight of the foolishness of borrowers who made decisions that lead to their own foreclosures.
Foreclosing on seniors
I am fortunate that my own parents don’t have a large sense of entitlement. They live very modestly and within their means. Their property in Florida is paid off, and although they have debt on their second home in Las Vegas, it is small, and it’s more than offset by the positive cashflow from the other investment properties they picked up over the last few years. Other seniors haven’t been so conservative and responsible, and I can’t help wondering how many wage-earning children face bailing out their spendthrift parents who are facing foreclosure. I am thankful I am not facing those circumstances.
The reality is for every senior facing foreclosure due to their excessive borrowing late in life, there was a lender who gave them a loan the senior is struggling to repay. How did that happen? This raises some difficult questions for lenders that the mainstream media is ignoring.
Why would a lender underwrite a 30-year mortgage to someone who statistically has far fewer than 30 years to live?
Why would a lender underwrite a loan with excessively high debt-to-income ratios to people whose only income is social security?
Why would a lender put themselves in a position to foreclose on millions of seniors and deal with the bad press sure to result?
Mortgage Catch Pushes Widows Into Foreclosure
By JESSICA SILVER-GREENBERG — Published: December 1, 2012
Geraldine Bates lost her husband to kidney failure last year. Now, she has fallen behind on her mortgage payments and is terrified that she will lose her home in Jacksonville, Fla.
Ms. Bates, 70, is caught in a foreclosure trap that is ensnaring widows across America: she cannot get help lowering her payments until her name is added to the mortgage note, but the lender says she must be current on payments before that can happen.
I’m surprised lenders would have such a requirement. Why would they want to limit anyone from assuming responsibility for repaying a loan?
The reality is that they don’t. Lenders are merely using this obscure provision they wrote into the contract to compel surviving spouses to dip into savings to make good on overdue payments. It’s backfiring on them when the surviving spouse doesn’t have the savings to dip into.
“I keep praying,” said Ms. Bates, who is fighting with the bank to stay in the four-bedroom house.
Why does a widow need a four-bedroom home? Is it really asking too much for her to sell and move into a small, more affordable home? She is displacing a family who would make use of that additional space.
Just as the housing market is recovering, a growing group of homeowners — widows over the age of 50 whose husbands alone were holders of the mortgage — are losing their homes to foreclosure because of a paperwork flaw that keeps them from obtaining loan modifications.
In the latest chapter of the foreclosure crisis, homeowners over 50 are falling into foreclosure at the fastest pace of any age group, according to nationwide data, in part because women are outliving their spouses and are unable to cope with cuts in their pensions, ballooning medical costs — and the fine print on their mortgages. …
Isn’t the real problem that these women can no longer sustain the entitlements they are accustomed to? Is that a problem the bank’s must solve by modifying a mortgage? Or perhaps the US taxpayer should be brought in to maintain her entitled state? Doesn’t anyone have to live within their means anymore?
Part of the problem, according to Debra Whitman, AARP’s executive vice president for policy, is that older Americans are saving less and borrowing more. Debt for Americans ages 65 to 74 is outpacing any other group, according to the Federal Reserve.
Part of the problem? That’s the whole problem. In case it isn’t obvious, people who don’t borrow money don’t lose their homes. Lenders are encouraging seniors to go Ponzi. And why are they doing it? Because they know seniors often have assets, and if lenders can get seniors to borrow a lot of money, lenders will have claim against those assets when the seniors die. Anyone hoping for an inheritance from their aging parents should advocate to restrict senior lending because otherwise, any assets left over will go the bankers to repay their loans. How would you feel about a banker stealing your inheritance? Or should our parents be encouraged to live for the day and leave nothing behind?
Housing advocates say most of their widowed clients still remain in their foreclosed homes.
Widows will be the last squatters thrown out of the bank’s houses.
Complaints from widows about botched forms, unanswered calls and the peculiar frustration of being asked repeatedly by servicers for the same documents … While the process of obtaining a modification can be taxing for healthy homeowners, it can be virtually impossible for older borrowers, many of whom do not have the energy to get through the bureaucracy.
Maria Ginise, a 75-year-old widow, says she has developed dizzy spells from the stress of trying to save her mobile home in Deerfield Beach, Fla. When she and her husband, Joseph, left Connecticut, Ms. Ginise said, she dreamed of beach strolls and shuffleboard evenings. But, after her husband died in May 2009, those plans were derailed.
Ms. Ginise, whose only income is Social Security, could not afford payments on her $140,000 mortgage.
A $140,000 mortgage on a mobile home? What lender gave this couple a $140,000 loan to buy a mobile home? Obviously, when this couple retired, they had no assets, and no way to pay other than social security. What is the best course of action here? Obviously, a big loss needs to be recognized, but how should it happen?
Should she be given principal forgiveness and allowed to keep this severely underwater mobile home?
Should the bank foreclose and boot her out?
The answers aren’t as clear cut when a 75-year old widow is involved. The answer is that this loan should never have been underwritten in the first place.
Since her name was not on the mortgage, though, Wells Fargo, refused to work out a payment plan with her. Now, she faces foreclosure. A spokeswoman for Wells Fargo declined to comment on Ms. Ginise, but said in a statement that the bank reviewed “all applicable, affordable options for customers facing financial difficulties.”
A bullshit statement from a bank public relations department.
Housing advocates have won reprieves for some homeowners, including Aurora MacDula, 80, in Vallejo, Calif., whose husband died last November. She said when she first contacted Wells Fargo, the servicer, to pay the mortgage, a representative refused to talk to her because she was not on the loan.
In August, with the help of her lawyer, Ms. MacDula got a temporary loan modification and is paying $1,733.21 a month. The problem, advocates say, is that most distressed widows do not have the benefit of legal aid.
Ms. Malinis, with the housing advocacy group in California, said: “We stay up thinking of the ones who we don’t know about.”
If she really wanted to advocate for seniors, she would lobby for regulations to prevent lenders from saddling seniors with so much debt. The problem is not the foreclosure, it is the debt that lead to the foreclosure.
Bankers have taken over
The more I see the results bankers have produced for America over the last several decades, the less enchanted I am with them. Since the introduction of credit cards in the 1950s — or perhaps it goes back to the founding of the federal reserve in 1913 – lenders have systematically undermined the system of saving and investment that made America great. In it’s place they created a culture of crass consumerism, Ponzi borrowing and lender dependency.
Lately, in collusion with the US government, lenders managed to pass the risk for their Ponzi loans to the US taxpayer thus encouraging neighbors to steal from neighbors. Prudent savers must now pay the bills for imprudent private borrowing. Ostensibly for the public good, the government has always taken from the productive to give to those who aren’t, but at least that was always a matter of public debate and public policy. It could be changed through elections and legislation. Now we have people who can tap the US treasury through private contracts, a form of government-sanctioned theft never before seen. Bankers make millions in fees while enabling Ponzis to loot the treasury. I am amazed at how we’ve devolved.
“The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our Constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens. Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it; every generation coming equally, by the laws of the Creator of the world, to the free possession of the earth he made for their subsistence, unencumbered by their predecessors, who, like them, were but tenants for life.”
“Educate and inform the whole mass of the people… They are the only sure reliance for the preservation of our liberty.”
The high end market is still very weak
Bankers have only recently begun foreclosing on properties over $1,000,000 in price. Previously, they knew the market requiring jumbo loan financing was practically non-existent, but with recent strength in the below $1,000,000 market, lenders are starting to push out the high-end squatters who have been enjoying the free ride for the last several years. Well, the rumors of market strength appear to be greatly exaggerated. Check out the steep discount from it’s 2007 purchase price. If the market is so strong, why are lenders discounting 35% on these high-end properties?
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Proprietary OC Housing News home purchase analysis
20 WILD ROSE Pl Aliso Viejo, CA 92656
$1,025,000 …….. Asking Price
$1,600,000 ………. Purchase Price
3/15/2007 ………. Purchase Date
($575,000) ………. Gross Gain (Loss)
($82,000) ………… Commissions and Costs at 8%
============================================
($657,000) ………. Net Gain (Loss)
============================================
-35.9% ………. Gross Percent Change
-41.1% ………. Net Percent Change
-7.7% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$1,025,000 …….. Asking Price
$205,000 ………… 20% Down Conventional
3.90% …………. Mortgage Interest Rate
30 ……………… Number of Years
$820,000 …….. Mortgage
$208,023 ………. Income Requirement
$3,868 ………… Monthly Mortgage Payment
$888 ………… Property Tax at 1.04%
$192 ………… Mello Roos & Special Taxes
$256 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$170 ………… Homeowners Association Fees
============================================
$5,374 ………. Monthly Cash Outlays
($995) ………. Tax Savings
($1,203) ………. Equity Hidden in Payment
$273 ………….. Lost Income to Down Payment
$148 ………….. Maintenance and Replacement Reserves
============================================
$3,598 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$11,750 ………… Furnishing and Move In at 1% + $1,500
$11,750 ………… Closing Costs at 1% + $1,500
$8,200 ………… Interest Points
$205,000 ………… Down Payment
============================================
$236,700 ………. Total Cash Costs
$55,100 ………. Emergency Cash Reserves
============================================
$291,800 ………. Total Savings Needed
The property above is available for sale on the MLS.
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39 Responses to “Kicking widows to the curb, the sad fallout of excessive senior debt”
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Market cheerleaders continue calls for recovery
Despite a number of potentially damaging headwinds, the ongoing housing recovery will remain sustainable for the foreseeable future, analysts for Capital Economics say in a recently released report.
The housing industry’s rapid rebound took many experts by surprise-even the researchers who authored the report admit they “have been slightly taken aback” by the recovery’s speed. However, they point to several major indicators that show the current upturn is more than a temporary blip or a false recovery.
Sustained rises in demand, home prices, homebuilding activity, and new and existing-home sales all demonstrate that the market is seeing a lasting recovery, they say. They also forecast further price growth of 5 percent in each of 2013 and 2014.
What’s more, even as prices rise, valuation and affordability-“the cornerstone on which the improvement in housing is being built”-remain very favorable.
The major threats to the market at this juncture, the analysts say, are the potential for a new American recession (brought on by complications from the fiscal cliff and the potential of a partial euro-zone break-up) and the risk that properties in the shadow inventory will flood the market and drive prices down.
Obama’s reelection encouraging strategic default?
A foreclosure agency suggested borrowers may be more encouraged to strategically default due to the expectation that little will change over the next four years surrounding policies on housing and the economy.
Strategic default occurs when a borrower stops making mortgage payments on a property he or she can afford. Typically, strategic defaulters are also underwater. In a recent survey of YouWalkAway.com customers, 47 percent said they believe the Obama administration had no effect on the foreclosure crisis.
About 31 percent believe the administration had a negative effect, and 22 percent of respondents said they think the Obama
administration had a positive effect on the foreclosure crisis, the agency reported.
Due to the perception that housing issues are not a priority for the current administration, YouWalkAway said, “underwater homeowners who were previously undecided about whether or not they should strategically default are choosing to do so given the election results.”
Banks want to get bigger
It seems more banks are eyeing the possibility of expansion in 2013, according to a survey sponsored by Crowe Horwath LLP.
The 2013 Bank Director & Crowe Horwath LLP M&A survey was completed by 224 CEOs, senior officers, and directors of banks across the country. An analysis of the survey will publish in the Q1 2013 issue of Bank Director magazine scheduled for release in January.
According to the results, 57 percent of banks intend to make some form of acquisition in the next year, up from 52 percent in last year’s survey. Of those planning to acquire another institution, 45.5 percent are interested in buying a healthy bank, 20.6 percent are looking at branches, and 17.2 percent intend to buy a FDIC-assisted institution. About 9.9 percent said they intend to acquire a loan portfolio.
Furthermore, many bankers expressed interest in acquisitions outside of their core banking franchises. Out of the banks that are looking at expanding, 28.8 percent said they intend to acquire a residential mortgage origination business in 2013. That comes as little surprise, Bank Director says in a release.
“Mortgage companies that weathered the financial crisis are in a relatively strong position, particularly those that specialize in refinance,” the release says.
That may be easier said than done, however. While more bankers are interested in making acquisitions, 88.9 percent have no intention of selling any aspect of their business. Of those willing to sell, most intend to part with branches or loan portfolios—only 2 percent intend to put their actual bank on the block.
There are other barriers to expansion standing in the way, as well. The majority (61.7 percent) of respondents consider unrealistic price expectations one of the top three hurdles stopping their acquisitions. Asset quality is another major concern, with 58.6 percent of bankers saying they’re worried about the asset quality of their potential targets. The third-most cited barrier was limitations set by capital demands (34.4 percent).
Pricing was also a major worrying point for sellers—of course, their concerns went in the other direction. Most potential sellers (71.1 percent) said the current pricing is just too low. Economic and regulatory uncertainty were the second- and third-most common responses.
I knew Andrew Jackson had a problem with the banks, I didn’t realize it went all the way back to founding fathers. The banks need to broken up, and I am including Goldman Sacks.
I don’t I will ever retied with debt on primary residence.
The founding fathers were very distrustful of banks. They would be appalled by what we have allowed to happen.
That’s not accurate. Leaving aside Jefferson, who was a narcissist twit about borrowing and spending, as bad as any of the modern Ponzi schemers you profile, the Founders distrusted government-issued paper money, unbacked by gold or silver, because it could very easily be printed by the government to inflate away its debts, essentially stealing the wealth of savers without a vote (much as is happening today, of course, thanks to QE1 to 3 and counting).
Most of them also had a profound distrust of government bank, for similar reasons: because the government could manipulate its operations, and the nation’s finances in general, to buy and sell votes, to pay off its debts through hidden taxation of wealth, or open and close economic opportunities at will, to serve its own ends.
But they had no problem with private banks, nor with private notes issued by those banks. In those cases, there was no danger the losses could be socialized. If a private bank did something stupid, only those who volunteered to do business with it, or hold its notes, et cetera, could lose — and should, frankly, to serve as an example to others. Thrift and caution do not come naturally to human beings, they usually need regular examples of what can happen if you fall off the path of self-discipline.
The Founders certainly knew about “crony capitalism,” the way a large private firm can essentially enter into collusion with the government, so that the former funds the latter’s electioneering, and the latter shovel public money and benefits their way — essentially the way public employee unions and the California legislature work, or the way Wall Street banks and the Obama Administration work. And it was a signiifcant worry.
Madison argued that there would be so many private whores competing to be government’s bitch that no capture could be lasting, or broad enough — the competing interests would displace each other, turn on each other, soon fracture any coalition. He was probably wrong — it probably just took 200 years for a party to find the right coaltion that could capture government for its own benefit indefinitely.
Part of Madison’s blindness came from the fact that he lived in an error when very strong philosophical differences between men were typical, and came from a religious and philosophical tradition of thinking for yourself. He did not anticipate the death of Protestant religion and its modern pseudo-relligious culture replacement, which is about as conforming and rigid as the medieval Catholic Church. For most practical purposes, socially we resemble 1300s Germany more than we resemble 1700s England, and this explains why our politics resemble the former more than the latter.
Great comment. Thank you.
Good historical perspective. Ben Franklin encourged the US to inflate their way out of debt and to repay gold debt with the inflated paper currency. Hayim Soomon refused to accept the inflated paper money and demanded gold. There’s nothing new under the sun.
I saw paper currency issued by a Walnut Creek, CA bank c.a. 1910. I though only the mint had such authority, but live and learn.
Carl I really liked your comments above.
I find it interesting that in 1300 Germany didn’t really exist. It was a bunch of backwater, non-united vassalships, similar in culture and language perhaps and with a fancy Holy Roman Empire title. Even so, they may have been more united politically than we are today in 2012 USA.
There must have been rampant uncertainty and horror from the bubonic plague, food shortages, the Great Schism, and weird ideas of John Wyclef, which Germans didn’t really grasp for another 200 years. My understanding is that merchants in this epoch had to deal with labor shortages (half of the European population died), rising labor costs and violent worker strikes.
The US doesn’t have a bubonic plague (yet), but I sometimes think we will have a major economic and political crisis over the next 10 to 20 years when our record low birth rates intersect with the largest tidal wave ever of people leaving the workforce (retiring and/or dying).
I can imagine a day not too far off when the official retirement age in the US hits 72 or even 75, and not just because we’re eating better and smoking less.
Best long post I’ve read in a while. Thank you.
newbie008 – It is my understanding that banks in the past, like the Federal Reserve now, issues “notes”. They did not and do not coin money.
BTW, the Federal Reserve is a private bank wholly owned by other private banks.
excellent comment
It would take unbounded naivety to think housing has turned the corner…..
Student Debt Age 30-39
http://4.bp.blogspot.com/-e8_ZQS9uCSw/ULws48gurOI/AAAAAAAAS1U/Gxo7vXn2u5M/s1600/NY%2BFed%2BStudent%2BLoan3.png
Any huge problem is the high cost of FHA financing I covered on Friday. First-time homebuyers are over-indebted and facing high financing costs.
The flip side to low interest rates is that it really punishes people who have saved a lifetime, especially widows. Take a senior citizen who has $50,000 in savings and now gets 1% return ($500 per year) vs. 5% a while back ($2,500 per year). The difference in those two income amounts could represent utility costs or an occational outing with her senior friends. Maybe we have to keep interest rates artificially low in order to bail out the economy for a while…but let there be no doubt about the cost of this policy…
I wonder how many of these foreclosures are caused by the federal reserve’s policy of stealing from seniors to save the banks?
Excellent point. It is a bad time to be retired and parking your money in ‘risk free’ return vehicles.
Centrally planned interest rates, especially Zero Interest Rate Policy, are placing ZERO time value on our past productivity. When factoring in REAL interest rates, which are negative, centrally planned interest rates are placing LESS THAN ZERO value on your past productivity (hours of your life). The individual is sacrificed for the whole.
Welcome to collectivism, where the individual has no value and everyone must live at the mercy of the voting mob.
Foreclosures and high unemployment are symptoms of the greater diseases known as collectivism, central planning, and currency devaluation. I pity those on fixed income.
Seniors on fixed incomes are certainly getting hosed. I hope they take great comfort in the cost of living adjustments they get from social security. Of course, with the way the CPI is manipulated, I doubt that is much comfort to them.
Just wait till the point is reached where US banks set negative interest rates for cash accounts.
Us old folks, ex producers/savers, are now pure consumers. You might say our new job is to spend money into circulation. When a person becomes old they get an allowance from the printing press. It is ludicrous to suggest that most people who make it to their 80′s and 90′s would be alive any other way. Unless you are planning on dying young, or your biological children are happy to feed you and change your diapers, or you are in the top 1%, you better be on board and part of the USA senior franchise. The bankers still exist because they know this and are exploiting it.
I was going to say. It’s a bit unfair of you to criticize seniors for borrowing too much, when their savings have been mercilessly pillaged for the past five years — and the next four, at least — to pay of Democratic political donors (public employee unions, colleges, Wall Street banks). What else were they going to do?
Honestly, in this environment, anyone who saves at effective real interest rate of -5% or so (the nominal interest rate less the real rate of inflation) instead of borrowing at the effective real reate of -1% or so is committing fiduciary malpractice. A person might well do it because he just hates debt morally, or because he (ludicrously) still thinks a deflationary spiral is possible, but any decent understanding of the macroeconomics signals right now says saving is for suckers. You might as well be a German Hausfrau in 1920 squirreling away your pfennigs. It’s NOT going to end with the grasshoppers sorry and the ants triumphant.
Yes. They manipulate interest rates to control people’s financial decisions. This IS the massive misallocation of capital and market distortion the austrians speak of.
Old farts should be making 10% on their life savings in 10 yr treasuries; however, since free men have handed the government over to spineless collectivist/statist/socialist/communist cockroaches we rely on the heavy hand of the state for economic salvation.
Everyone fears failure and believes the state can prevent it; thus, everyone will fail by way of a currency crisis. And, a lot of people and corporations are in cash and treasuries, epic folly.
NY Fed Mortgage Debt Data Says No US Recovery
an economic recovery in the US is not possible when households still have to deleverage to the tune of $2-3 trillion. And no, it’s not different here, or this time, and no, Americans cannot carry a 40% mortgage debt increase in 10 years either, so another $2 trillion move SOUTH is really the minimum.
http://theautomaticearth.com/Finance/ny-fed-mortgage-debt-data-says-no-us-recovery.html
The only counter argument is that a 50% decline in interest rates have made this debt serviceable. At least that’s what the federal reserve is hoping is true…
Lots of good reading today….
**compares the official CPI-U to the pre-1980 methodology for computing the CPI-U. It shows that without the government’s manipulation of the methodology for computing the CPI, current inflation would be nearly 10%.
http://www.marketshadows.com/2012/12/03/washingtons-biggest-lie-and-why-it-continues-to-be-told/
——————————————————————————————————–
Let’s review 2012; thru Q3
* true inflation 9.9%
* C/S LA/OC Sep home prices: up 4% YoY (LOL, easy comps)
* adjusted price increase is -5.9%
Most readers of this blog will secretly scoff at your distrust of CPI numbers. They believe in the benevolence of the state’s heavy hand.
What happens to GDP growth when inflation adjusted using honest numbers? “Recovery”.
They love their serfdom.
I was scoffing more at his use of the Case Shiller index.
I am very glad I have defaulted on my house….TWICE. I am also glad that a portion of the mortgage will be forgiven….IF I care to keep the house (I won’t, I’ll stay until I retire and default again). You guys voted the system in place with your lincoln club buddies and defacrats, so accept what YOU voted for. Not happy about it? Stop voting for the same two parties. In the meantime, thank you for subsidizing my hom payment that is now less than rent WITH a tax deduction.
Don’t hate the player, hate yourselves….for voting in the politicians who make the game.
I choose to hate both.
Unfortunately, we weren’t offered an alternative in the last election. Romney got most of his campaign money from financial firms, so the likelihood of him doing anything to regulate them was zero. The best case for big finance is to have a liberal in their pocket. That’s what they have with Obama.
You can vote Libertarian.
Neither party would have swung it the other way. There is no real “choice” during elections. Just pick your poison. No amount of voting one way or the other could have saved us from you being a douchebag.
I’m curious, IR. You regularly curse the bankers who made loans to people the bankers had good reason to think were making foolish and self-destructive choices.
So where do you stand on the War on Drugs? It’s the same kind of moral issue, you know. Businessmen selling crack and grass to 17-year-olds, or maybe 25-year-olds, are very often aware the druggee is making a foolish and self-destructive choice.
One gathers you would support very strict regulation of to whom lenders can lend, to protect the borrowers from their own choices. Maybe you’d favor throwing “predatory” bankers into jail. Does that also mean you support our current strict regulation of to whom people can sell drugs like weed and cocaine? And our current laws that throw drug sellers in jail, et cetera?
If not…where’s the difference?
Interesting question. I have always opposed the war on drugs because the regulation of supply usually isn’t very effective. I’ve always believed the problem with drugs is overblown, but what problem we have is better dealt with by drug treatment and greater penalties for users.
Part of why I write is to educate users of financial products to the evils of them. I advocate foreclosure as a penalty for users who try and fail. I would like to see demand for these products reduced, but our current system of reflating the housing bubble, loan modifications, and principal reduction as encouraging more of the same.
The big difference I see between the two is the way Ponzis can now steal directly from the coffers of the US government. Drug lords and drug users haven’t figured out how to do that yet.
The problem, in both banking and drugs, is too much regulation. I can hear the retort, “but, but, but they took away glass steagall… proof deregulation was the culprit”. Get real people. We have government backed banks, government backed mortgages, and government backed interest rates. We are up to our ears in regulation; but i prefer to call it meddling or manipulating. Many view the word ‘regulation’ as benign and benevolent. bullshit. government is 1.) corruptible and 2.) unable to be everywhere all the time.
With drugs, all you need to do is look at prohibition of alcohol and the raging success that was. We got the mob and mexican border towns blossomed as ‘vice’ towns. There are unintended consequences of nannying people over what they choose to put into their bodies as well as the lending/borrowing of money.
With banking, you simply remove FDIC insurance and let banks compete for citizens’ savings based on solvency. Let a few banks and depositors lose big and the market would self regulate rather quickly. Obama would come in and say “but, but, but, if we didnt regulate beef, everyone would eat green meat”. That is the logic of a collectivist and an anti-capitalist. It shows an inherent distrust in both the individual and the entrepreneur. The shady businessman will run himself out of business, especially in this day and age of the internet. Plenty of laws exist against fraud/deceit. We do not need more regulation, we need to enforce the rule of law.
“Why would a lender underwrite a 30-year mortgage to someone who statistically has far fewer than 30 years to live?”
As long as somebody meets the minimum age to enter into a contract (age 18), you can’t discriminate against them based on age. If all other underwriting standards are met (DTI, LTV, etc.), it shouldn’t matter anyway.
So if that mobile home had a 140k mortgage and they used a down payment from selling the previous residence, what did they pay for that place?
Based on when the loan was written, I suspect they put nothing down. Based on the price and location, it was probably a $140,000 purchase that was 100% debt.
This country is doomed as long as the populace thinks that they should vote for the candidate who can win, the candidate who will win, the one they like the most, the one with the most charisma, the one who agrees with them, or the one who has the best take on the “issues”, or any other number of seemingly intelligent reasons, rather the candidate who will best uphold The Constitution.