COMMENTS: 39
Keep it Simple: Stop the Foreclosure Crisis with the Right to Rent
November 19, 2008 |
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Politicians often prefer complex solutions to simple problems. Nowhere is this more apparent than with the long list of complicated and convoluted proposals to address the country's foreclosure crisis.
Millions of people face the loss of their homes over the next few years. While the politicians in Congress have developed a wide variety of complex schemes in order to hold back this flood of foreclosures, including one passed into law last summer that provided up to $300 billion guarantees for new mortgages on homes facing foreclosure, none have had much impact thus far.
The unavoidable problem with these schemes is that it is difficult to design a plan that aids families facing foreclosure without giving an incentive to other homeowners to also default on their mortgage. In addition, it is hard to justify taxing the people who are struggling to keep up with their own mortgages in order to help those who default. It is even harder to justify taxing ordinary people to help out the bank executives, who issued hundreds of billions of dollars of bad loans.
As a result, to date these programs have not prevented a tidal wave of foreclosures and evictions. The number of foreclosure filings (there are typically two or more filing for every actual foreclosure) is now approaching 300,000 per month.
For those not offended by simplicity, there is an easy solution. Congress can temporarily modify the rules on foreclosure to give families facing foreclosure the right to rent their homes at the market rate for a substantial period of time. Rep. Raul Grijalva proposed such a change in the Saving Family Homes Act, which would allow homeowners the option to remain as renters for up to 20 years following a foreclosure.
This bill would immediately give families security in their home, so that if they like the home, the neighborhood, the school for their kids, they would have the option to stay in the house for a substantial period of time. This also has the great benefit for the neighborhood that homes will remain occupied.
Perhaps more importantly, this change in foreclosure rules will give banks a real incentive to negotiate conditions under which homeowners can stay in their homes as owners. Banks do not want to become landlords. The bank will own the house after a foreclosure, but a house with a renter is worth much less to them than a house over which it has complete control.
Giving the homeowner the right to stay as a renter hugely increases their bargaining power with the bank. The result of this change in foreclosure rules is that far more homeowners are likely to remain in their homes as owners.
The beauty of this sort of proposal is that it is simple, can take effect immediately, it requires no taxpayer dollars and no new bureaucracy. It also is not giving anyone a big bonanza. Homeowners are not likely to line up for a process that could end up with them being renters. And the banks will obviously not be thrilled about a rule change that will leave them worse off in trying to squeeze money out of homeowners.
While the basic point of the right to rent is simple, it can be extended in various ways to further aid homeowners. Bernard Wasow, at the Century Foundation, has proposed some additional measures to facilitate the transition to rental status or possibly a return to ownership. Daniel Alpert, of Westwood Capital, has a somewhat different version that creates a mechanism for homeowners to buy back their homes after five years.
In short, if people want to add bells and whistles, it is easy to do so. But, the key to stopping people from being thrown out of their homes is simply to change the law that allows people to be thrown out of their homes. That one is so simple that even a policy wonk should be able to understand it.
Dean Baker is co-director of the Center for Economic and Policy Research.
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Terrible Solution ...
Posted by: mmckinl on Nov 19, 2008 12:44 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: mmckinl on Nov 19, 2008 12:44 AM
Current rating: 4 [1 = poor; 5 = excellent]
The right to rent for 20 years? Whose gonna be the landlord ?
What we need are cramdowns that have bankruptcy judges lower the principal of the loans then have the government step in and offer a loan at decent rates with the caveat that the property never be encumbered by any other loan.
With bankruptcy the persons auto and credit card debt can also be lowered. Through bankruptcy protection the person can get a whole new start albeit and necessarily with a lot less access to credit.
With bankruptcy provisions allowed the banks will be a lot more eager to give mortgage holders a good deal right away to avoid the procedure!
What we need are cramdowns that have bankruptcy judges lower the principal of the loans then have the government step in and offer a loan at decent rates with the caveat that the property never be encumbered by any other loan.
With bankruptcy the persons auto and credit card debt can also be lowered. Through bankruptcy protection the person can get a whole new start albeit and necessarily with a lot less access to credit.
With bankruptcy provisions allowed the banks will be a lot more eager to give mortgage holders a good deal right away to avoid the procedure!
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» Great Solution ...
Posted by: ProgressiveManiac
» RE: Great Solution ...
Posted by: suprmark
» RE: Great Solution ...
Posted by: opmoc
» RE: Great Solution ...
Posted by: mmckinl
» RE: How can ...
Posted by: ProgressiveManiac
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Fair housing for all? Here is a step to be considered.
Posted by: aouie01 on Nov 19, 2008 12:54 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Posted by: aouie01 on Nov 19, 2008 12:54 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
As many have pointed out before, there are many renters who simply could not afford to buy the expensive homes. Many who are going through foreclosures should not be entitled to pay the market rent on those houses any more so than those who were waiting for the rental or sale prices to be more affordable on the houses.
Given that there are people in need of houses and increasing houselessness (whether or not they consider selves homeless) is a concern, here is another (rough) idea. (To be further bloated and refined for all sorts of things, like remodeling time limits, etc.)
No entity can have a home for more than EmptyConsecLimit (say 120) days without the home being occupied.
No entity can have a home that has been unoccupied for EmptyYearLimit (say 120 (which makes the above rule redundant)) days in any yearly period, or NewOwnerEmptyYearAllowance (EmptyYearLimit+ say 30 = 150) days if the house was bought in the last year.
The counting of the years would begin on or after the date of the passage of the bill. (i.e. states can't confiscate houses right away).
The above two rules would force people and banks to rent or sell the homes at the best offered prices, as in the absence the state would confiscate the houses. This would be a good solution to the housing crisis towards housing people. The confiscated homes, if any, can be used to house the houseless who want to be housed (those who want to live free in the open, should not be forced to live in a concrete or wood enclosure).
Note that the new owner would be expected to leave the newly acquired house empty for no more than 30 days if the house already had 119 days of vacancy, and no more than 1 day if the house had switched hands in the last year and had 149 days of vacancy in the last year. Banks would not benefit from merely tossing the houses around amongst themselves.
People with multiple homes would be pressured to sell or rent out the extra homes.
This can be developed further into limiting the number of rooms allowed per individual (a single person in a 4+ bedroom house could be required to rent out at least two rooms (or sell the place and move to a two bedroom house), thus making more space for over-crowded families).
The above solutions aren't ideal fair sharing, but will work its way towards much fairer sharing of the housing resources by all in the country.
Sincerely,
Aouie
Given that there are people in need of houses and increasing houselessness (whether or not they consider selves homeless) is a concern, here is another (rough) idea. (To be further bloated and refined for all sorts of things, like remodeling time limits, etc.)
No entity can have a home for more than EmptyConsecLimit (say 120) days without the home being occupied.
No entity can have a home that has been unoccupied for EmptyYearLimit (say 120 (which makes the above rule redundant)) days in any yearly period, or NewOwnerEmptyYearAllowance (EmptyYearLimit+ say 30 = 150) days if the house was bought in the last year.
The counting of the years would begin on or after the date of the passage of the bill. (i.e. states can't confiscate houses right away).
The above two rules would force people and banks to rent or sell the homes at the best offered prices, as in the absence the state would confiscate the houses. This would be a good solution to the housing crisis towards housing people. The confiscated homes, if any, can be used to house the houseless who want to be housed (those who want to live free in the open, should not be forced to live in a concrete or wood enclosure).
Note that the new owner would be expected to leave the newly acquired house empty for no more than 30 days if the house already had 119 days of vacancy, and no more than 1 day if the house had switched hands in the last year and had 149 days of vacancy in the last year. Banks would not benefit from merely tossing the houses around amongst themselves.
People with multiple homes would be pressured to sell or rent out the extra homes.
This can be developed further into limiting the number of rooms allowed per individual (a single person in a 4+ bedroom house could be required to rent out at least two rooms (or sell the place and move to a two bedroom house), thus making more space for over-crowded families).
The above solutions aren't ideal fair sharing, but will work its way towards much fairer sharing of the housing resources by all in the country.
Sincerely,
Aouie
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Not a bad thought
Posted by: FreeAmerica on Nov 19, 2008 1:12 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: FreeAmerica on Nov 19, 2008 1:12 AM
Current rating: 4 [1 = poor; 5 = excellent]
Not a bad thought. With the right fine tuning it might actually help the problem.
In theory, it would cause a few more occupied homes, keeping values up in the neighborhood and keeping other people from running on mortgages on homes that lost value.
The downside is that it would slam lender's doors shut for a lot of people. They look at a loan proposal, and think, jeez, I am going to be stuck with this guy and this house for 20-30 years no matter what.
There is no way to liquidate this investment without taking a big (50%)beating due to an un-creditworthy renter that goes with the house by law.
The increased risk presented would make the banker need a huge down payment, or more likely, the bank will look at loaning the money in the commercial market where there is no forced rental risk.
Surf through those issues, and it might work..
In theory, it would cause a few more occupied homes, keeping values up in the neighborhood and keeping other people from running on mortgages on homes that lost value.
The downside is that it would slam lender's doors shut for a lot of people. They look at a loan proposal, and think, jeez, I am going to be stuck with this guy and this house for 20-30 years no matter what.
There is no way to liquidate this investment without taking a big (50%)beating due to an un-creditworthy renter that goes with the house by law.
The increased risk presented would make the banker need a huge down payment, or more likely, the bank will look at loaning the money in the commercial market where there is no forced rental risk.
Surf through those issues, and it might work..
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An Even Simpler Idea...
Posted by: Nodarse on Nov 19, 2008 1:57 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: Nodarse on Nov 19, 2008 1:57 AM
Current rating: 4 [1 = poor; 5 = excellent]
How about cutting "EVERY" mortgage in the United States in half?
All these mortgages were loaned out with imaginary money anyway, using a reserve system. This means with every dollar sitting in a Banks' coffer, the Bank could loan 10 dollars plus interest.
Banks lend out "imaginary" money, and borrowers must pay it back with "real" money (or real assets).
Does this sound fair to anybody?
Why should people lose their homes for not repaying money that never existed in the first place?
All these mortgages were loaned out with imaginary money anyway, using a reserve system. This means with every dollar sitting in a Banks' coffer, the Bank could loan 10 dollars plus interest.
Banks lend out "imaginary" money, and borrowers must pay it back with "real" money (or real assets).
Does this sound fair to anybody?
Why should people lose their homes for not repaying money that never existed in the first place?
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Looking Through The Prism
Posted by: bryangalt on Nov 19, 2008 2:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: bryangalt on Nov 19, 2008 2:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
The housing price collapse and the subsequent finger pointing by banks, politicians and homeowners reminds me of a ray of light after it has passed through a prism. It comes out the other side broken into the constituent parts of the original light, still beautiful to behold but not as bright.
In the early 2000's, my uncle (a lawyer by trade and a former DA for my county) mentioned that the real estate market was heading for a catastrophic collapse because it was not possible for the prices of housing to increase 25% a year or more while wages stayed at 2% to 4%. Of course, he also mentioned the word bubble but no one would have thought it possible then.
I knew he was right though. In Fresno County in 1999, my brother bought his 3-bd, 2-ba, family/living room with 2-car garage for $139,000 (about 1700ft2). By 2004, this same house was being appraised at $280,000, a 50% increase. He mentioned to me that he could not buy this same house in 2004 even though he was making $95,000 a year.
What I noticed was that people were cashing in their equity if they already owned something and using their massive down payments to move to much larger and more expensive homes. This 'upgrading' effect created a large demand for upscale housing as the middle class lurched forward. However, the side effect of the runaway housing prices was that people in the "under $50K" salary ranges were being forced out of home purchases, which meant that the crunch had to come soon. When there are no buyers left, then everyone's train runs off the tracks.
The banks, realtors, brokers, appraisers, everyone participated in doing everything possible to keep the good times rolling. Like heroin addicts looking for their next fix, the industry reacted by making loans so easy to get, your unemployed cousing from Orange County could qualify.
And, in typical Americana, the banks drew in these poor souls who genuinely needed a home of their own with promises of low payments and low interest. But, the banks also put in those insidious conversion interest rates that they knew would blow up in their faces if the home values stopped rising and the homeowners had to stop borrowing on equity.
Is this the citizen's fault for trying to provide a roof over the head of his family? Or, is it the banking system to blame for writing in a loan rate that would have made a mobster blush? Let's not forget the realtors, and the brokers who would browbeat the appraisers into coming in with the "right numbers" to close the deal.
Yes, just like that light in the prism, what went in as a strong and cohesive light came out broken into its constituent parts and the fact remains that they will never be the same from the trauma.
Let's stop putting the blame in front of solving the problem, and stop greasing the banks. Let's look at the fact that the banks were never going to lose any money on a mortgage of any size before feeling any sypmathy for them:
Home = $100,000
Interest Payments at noted Rate for 30 yr fixed mortage:
3% = $51,777
4% = $71,869
5% = $93,255
6% = $115,838
Screw thy neighbors has cost us all
In the early 2000's, my uncle (a lawyer by trade and a former DA for my county) mentioned that the real estate market was heading for a catastrophic collapse because it was not possible for the prices of housing to increase 25% a year or more while wages stayed at 2% to 4%. Of course, he also mentioned the word bubble but no one would have thought it possible then.
I knew he was right though. In Fresno County in 1999, my brother bought his 3-bd, 2-ba, family/living room with 2-car garage for $139,000 (about 1700ft2). By 2004, this same house was being appraised at $280,000, a 50% increase. He mentioned to me that he could not buy this same house in 2004 even though he was making $95,000 a year.
What I noticed was that people were cashing in their equity if they already owned something and using their massive down payments to move to much larger and more expensive homes. This 'upgrading' effect created a large demand for upscale housing as the middle class lurched forward. However, the side effect of the runaway housing prices was that people in the "under $50K" salary ranges were being forced out of home purchases, which meant that the crunch had to come soon. When there are no buyers left, then everyone's train runs off the tracks.
The banks, realtors, brokers, appraisers, everyone participated in doing everything possible to keep the good times rolling. Like heroin addicts looking for their next fix, the industry reacted by making loans so easy to get, your unemployed cousing from Orange County could qualify.
And, in typical Americana, the banks drew in these poor souls who genuinely needed a home of their own with promises of low payments and low interest. But, the banks also put in those insidious conversion interest rates that they knew would blow up in their faces if the home values stopped rising and the homeowners had to stop borrowing on equity.
Is this the citizen's fault for trying to provide a roof over the head of his family? Or, is it the banking system to blame for writing in a loan rate that would have made a mobster blush? Let's not forget the realtors, and the brokers who would browbeat the appraisers into coming in with the "right numbers" to close the deal.
Yes, just like that light in the prism, what went in as a strong and cohesive light came out broken into its constituent parts and the fact remains that they will never be the same from the trauma.
Let's stop putting the blame in front of solving the problem, and stop greasing the banks. Let's look at the fact that the banks were never going to lose any money on a mortgage of any size before feeling any sypmathy for them:
Home = $100,000
Interest Payments at noted Rate for 30 yr fixed mortage:
3% = $51,777
4% = $71,869
5% = $93,255
6% = $115,838
Screw thy neighbors has cost us all
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Folks brainwashed into buying homes
Posted by: xvictor on Nov 19, 2008 5:11 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: xvictor on Nov 19, 2008 5:11 AM
Current rating: 4 [1 = poor; 5 = excellent]
There's been some kinda of mantra over the last couple of decades or so that homeownershp is the way to go. As a long time apartment renter I was always puzzled as to why that is. There's really no outstanding benefit that differentiates homeowners from renters. The claim that homeowners receive nice income tax deductions is not a big deal when they still have to pay water, school, property and other taxes and fees.
Why those folks are receiving unjustified tax deductions in the first place for home ownership is a valid question for another day. I live in NYC and there's talk about granting homeowners in the city a 400 dollar tax break. Why? And why not for renters as well. Renters pay monthly shelter costs just like homeowners. There's something suspiciously discriminatory about that.
Another reason given for the benefits of homeownership is that you can borrow money against your home for whatever reason. I've heard that for a long time. And many homeowners have done just that, using that equity or refinanced money mostly to party, figuring that they'll get it all back in the end, with ever rising home prices. Well, we all saw how that went. And using their homes as ATM machines artificially inflated annual GDP for many years, making the Bush Misadminstration and his hypocritical Repug cohorts look unjustifiably good throughout that period, up until a year or so ago. Thx a lot, homeowners.
You can still live your life out of rentals. Nothing says that owning a home makes you a better person or a better american. I don't feel a homeowner is better than me. Sure, they may pay off their mortgage after a time and save some money. But do they really?? If a roof, boiler, plumbing, etc needs repair or replacement, no super is going to look at it. It all comes out of the homeowner's pocket. Not to mention the grief and frustration that is accompanied by shelling out so many bucks.
And there are those who need to work two jobs just to support a bought home. Guess what? I prefer to live in a relatively cheap apartment that's within my means, work one job, and live my life.
One another thing, I really don't understand why folks want BIG houses. And they also want a green lawn and a backyard. Why? It costs more to heat and air-condition a big house. Maintaining a yard and lawn is a lot of work and expense. And a big house is more work to clean and keep up. U say u need room for more kids? Solution: don't have more kids, and be content with living in a reasonably small apartment with a nice small family.
In any event, certainly, the foreclosed homeowner is not to blame for the Wall Street debacle. While it's a part of a problem, it's not the major problem. Actually, the foreclosures was just a smoke screen for the real fault. Credit default swaps and other derivative instruments tottering on the edge, along with an established greed by the wall street types, should receive the hefty lion's share of the blame. That's where that bailout money is all going to, to cover the ever mounting lost financial bets. You homeowners got taken real good.
Of course, I'm not castigating all homeowners. If they feel buying a home is the way to go for them, fine, that's your bag. Just don't brag about its really non-existent benefits.
One more thing, when is the renter going to get some? Seems like everyone else is. Many of us may not be in the so sad shape a lot of you homeowners are in, but renters can be evicted as well when they lose their jobs and can't make the monthly rent, so we like some credit too.
Why those folks are receiving unjustified tax deductions in the first place for home ownership is a valid question for another day. I live in NYC and there's talk about granting homeowners in the city a 400 dollar tax break. Why? And why not for renters as well. Renters pay monthly shelter costs just like homeowners. There's something suspiciously discriminatory about that.
Another reason given for the benefits of homeownership is that you can borrow money against your home for whatever reason. I've heard that for a long time. And many homeowners have done just that, using that equity or refinanced money mostly to party, figuring that they'll get it all back in the end, with ever rising home prices. Well, we all saw how that went. And using their homes as ATM machines artificially inflated annual GDP for many years, making the Bush Misadminstration and his hypocritical Repug cohorts look unjustifiably good throughout that period, up until a year or so ago. Thx a lot, homeowners.
You can still live your life out of rentals. Nothing says that owning a home makes you a better person or a better american. I don't feel a homeowner is better than me. Sure, they may pay off their mortgage after a time and save some money. But do they really?? If a roof, boiler, plumbing, etc needs repair or replacement, no super is going to look at it. It all comes out of the homeowner's pocket. Not to mention the grief and frustration that is accompanied by shelling out so many bucks.
And there are those who need to work two jobs just to support a bought home. Guess what? I prefer to live in a relatively cheap apartment that's within my means, work one job, and live my life.
One another thing, I really don't understand why folks want BIG houses. And they also want a green lawn and a backyard. Why? It costs more to heat and air-condition a big house. Maintaining a yard and lawn is a lot of work and expense. And a big house is more work to clean and keep up. U say u need room for more kids? Solution: don't have more kids, and be content with living in a reasonably small apartment with a nice small family.
In any event, certainly, the foreclosed homeowner is not to blame for the Wall Street debacle. While it's a part of a problem, it's not the major problem. Actually, the foreclosures was just a smoke screen for the real fault. Credit default swaps and other derivative instruments tottering on the edge, along with an established greed by the wall street types, should receive the hefty lion's share of the blame. That's where that bailout money is all going to, to cover the ever mounting lost financial bets. You homeowners got taken real good.
Of course, I'm not castigating all homeowners. If they feel buying a home is the way to go for them, fine, that's your bag. Just don't brag about its really non-existent benefits.
One more thing, when is the renter going to get some? Seems like everyone else is. Many of us may not be in the so sad shape a lot of you homeowners are in, but renters can be evicted as well when they lose their jobs and can't make the monthly rent, so we like some credit too.
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» Synchronicity!
Posted by: westomoon
» Thank you!
Posted by: NoKidding
» RE: Thank you! and than YOU
Posted by: left_libertarian
» YAY!!
Posted by: EcoFemme
» RE: Folks brainwashed into buying homes
Posted by: jvaljon1
» RE: Folks brainwashed into buying homes
Posted by: Sedona96
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Death to "The Ownership Society"
Posted by: westomoon on Nov 19, 2008 5:21 AM
Current rating: 3 [1 = poor; 5 = excellent]
Posted by: westomoon on Nov 19, 2008 5:21 AM
Current rating: 3 [1 = poor; 5 = excellent]
The "ownership society" is a neocon article of faith that has been in place so long we no longer question it. Before Ronald Reagan, there was lots of rental housing. Many people rented all their lives perfectly happily. There was lots of choice, and the competition for tenants tended to keep rents reasonable.
We've all seen the voice-in-the-wilderness pieces that point out -- and prove -- that other types of investing actually yield a much better return over 30 years, even with the tax subsidy for mortgage debt and the series of housing bubbles that has characterised the past 50 years.
Home ownership doesn't suit everyone's temperament, skills, or capabilities, much less their finances. While this article's proposal seems a bit simplistic -- forcing "the bank" into wholesale landlordship, when who owns a mortgage has become so tenuous and abstract that homeowners in trouble can't even find out who to negotiate with -- the underlying premise, that maybe universal home ownership doesn't make sense, deserves a lot more airing.
We've all seen the voice-in-the-wilderness pieces that point out -- and prove -- that other types of investing actually yield a much better return over 30 years, even with the tax subsidy for mortgage debt and the series of housing bubbles that has characterised the past 50 years.
Home ownership doesn't suit everyone's temperament, skills, or capabilities, much less their finances. While this article's proposal seems a bit simplistic -- forcing "the bank" into wholesale landlordship, when who owns a mortgage has become so tenuous and abstract that homeowners in trouble can't even find out who to negotiate with -- the underlying premise, that maybe universal home ownership doesn't make sense, deserves a lot more airing.
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Not all places are great for renting. In fact,
Posted by: maxpayne on Nov 19, 2008 5:59 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: maxpayne on Nov 19, 2008 5:59 AM
Current rating: 5 [1 = poor; 5 = excellent]
in lots of suburbs, it costs more to rent than to buy a home and there's no tax deduction for renting anyway. In the end, it all depends on where you live.
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The new era of the absentee landlord...
Posted by: gunboat diplomat on Nov 19, 2008 6:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: gunboat diplomat on Nov 19, 2008 6:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
At this point, some 20% of U.S. "homeowners" owe more on their homes than their homes are worth. However, they are in a slightly better position than renters, who can be tossed out with 30 days notice, unless they have signed a lease.
The quickest way to solve the adjustable rate mortgage problem is to simply use the $700 billion bailout to buy up all adjustable rate subprime mortgages, convert them to standard rate mortgages, and let the banks and shareholders and homeowners share the pain when they buy them back. Or, the government will suddenly end up owning a lot of property - not necessarily a bad situation, as long as it is mostly temporary.
The securitization of credit should have never been allowed, and re-regulation is needed. The net worth of the Forbes 500 could also do with a 50-75% reduction - money is like food. Pile too much up in one place, and the whole pile rots.
What's been done instead is to rescue the banks and shareholders, while allowing the foreclosures to continue at record rates, meaning that instead of homeowners, you'll have large-scale absentee landlords controlling entire communities, especially in minority neighborhoods. What does this mean for the civil rights struggle? We've got a president who is obviously of African descent, as well as European descent, Harvard-educated - at a time when the economic prospects for minorities are looking bleaker than ever. However, the new axis isn't so much black-white as it is aristocrat-peasant. Reinstating the estate tax is also needed, to prevent the problem of inherited wealth (but not inherited skill or character, right?).
Why does the rate of homeownership matter to a democracy? Here you go: Despotism and Democracy, 1946
The quickest way to solve the adjustable rate mortgage problem is to simply use the $700 billion bailout to buy up all adjustable rate subprime mortgages, convert them to standard rate mortgages, and let the banks and shareholders and homeowners share the pain when they buy them back. Or, the government will suddenly end up owning a lot of property - not necessarily a bad situation, as long as it is mostly temporary.
The securitization of credit should have never been allowed, and re-regulation is needed. The net worth of the Forbes 500 could also do with a 50-75% reduction - money is like food. Pile too much up in one place, and the whole pile rots.
What's been done instead is to rescue the banks and shareholders, while allowing the foreclosures to continue at record rates, meaning that instead of homeowners, you'll have large-scale absentee landlords controlling entire communities, especially in minority neighborhoods. What does this mean for the civil rights struggle? We've got a president who is obviously of African descent, as well as European descent, Harvard-educated - at a time when the economic prospects for minorities are looking bleaker than ever. However, the new axis isn't so much black-white as it is aristocrat-peasant. Reinstating the estate tax is also needed, to prevent the problem of inherited wealth (but not inherited skill or character, right?).
Why does the rate of homeownership matter to a democracy? Here you go: Despotism and Democracy, 1946
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Devalue the money and erase the debt
Posted by: NthnBrazil on Nov 19, 2008 7:14 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: NthnBrazil on Nov 19, 2008 7:14 AM
Current rating: 5 [1 = poor; 5 = excellent]
The reserve system coupled with securitization of debt and rampant creation of new and more complicated derivative products has effectively grown the pot of global money beyond the physical asset base it allegedly represents. If you can't produce the raw materials that make up a derivative product's total volume (i.e. if the total of all mortgage backed securities exceeds the total outstanding mortgage debt in the country) than it's time to call a do-over.
A joint international effort to globally reduce the value of all currencies simultaneously could effectively push the reset button - in other words it would erase a huge percentage of debts and baseline assett values at a point in time.
The problem with this idea is that it destroys savings and investment. A "bailout" package that provided a one time credit to all deposit and retirement accounts to account for this inflation spike would eliminate this problem.
So why isn't it being talked about except by market nuts who want to sell you gold bars to hide in your basement?
A joint international effort to globally reduce the value of all currencies simultaneously could effectively push the reset button - in other words it would erase a huge percentage of debts and baseline assett values at a point in time.
The problem with this idea is that it destroys savings and investment. A "bailout" package that provided a one time credit to all deposit and retirement accounts to account for this inflation spike would eliminate this problem.
So why isn't it being talked about except by market nuts who want to sell you gold bars to hide in your basement?
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» RE: Devalue the money and erase the debt
Posted by: stevehamlin
» Good point
Posted by: NthnBrazil
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Bail Out America
Posted by: FSadley on Nov 19, 2008 8:07 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: FSadley on Nov 19, 2008 8:07 AM
Current rating: 5 [1 = poor; 5 = excellent]
I say give every American Citizen $100,000.00 to pay down their debt, or spend how they please. This would certainly get the economy rolling again. And, at least we haven't given it to the rich to hoard, or pay executive bonuses with. I'm so sick of hearing why we can't have social security or decent health care because we have to continue waging war, or screwing American taxpayers. It's time for a revolt.
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» RE: Bail Out America
Posted by: MausMasher54
» RE: Bail Out America
Posted by: bubbleburster04
» RE: Bail Out America
Posted by: bruceslog
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It's Immoral For Large Numbers of Houses To Be Unoccupied And Large Numbers of People To Be Homeless
Posted by: opmoc on Nov 19, 2008 9:19 AM
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Posted by: opmoc on Nov 19, 2008 9:19 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
It is also against Internationally Agreed Human Rights.
A pdf document
Housing Rights For All: Promoting And Defending Human Rights in The United States
Can be downloaded
http://www.nlchp.org/content/pubs
/2007%20Forum%20Human%20Rights%20Manual%20FINAL1.pdf
linked text
However, I don't know how housing rights work in the US.
In the UK - homeless people - even single unemployed men - have the right to be housed - and the state will pay housing costs until they gain employment and can afford to pay the costs themselves. This doesn't mean that there aren't large numbers of homeless in the UK - but that is often due to people not knowing how to obtain their rights - or choosing not to.
The homeless situation is going to get much worse both in the UK and the US.
House prices will continue to fall - until they become affordable again for the average person with an average wage.
In previous house price crashes in the UK, it has taken up to 5 years for house price falls to bottom out - and they bottom out when the average local house price is less than 3 times the average local annual wage.
Thus if the annual average wage is $20,000 in the area you live in - the average house price could well fall to around $50,000. The fact that it may be considerably higher than that now is pretty much irrelevant.
The solution to the current problem is to allow the bubble to deflate as quickly as possible - such that houses become cheap - very cheap - ie affordable by the poorest.
However sensible laws should be brought in.
For example - banks who take reposession - should be forced to put the property up for auction - almost immediately.
Property will sell at auction for what people are prepared to pay.
In order to prevent the unscrupulous buying up large numbers of houses and keeping them unoccupied - houses that remain unocuppied for more than 3 months should be taxed heavily by the local authority / state /county
Housing associations - either private (and state regulated_ - or state / county owned - should be encouraged and funded with federal bail out funds to purchase unoccupied housing at auction - to be refurbished and let as social housing at the lowest possible rental levels to cover costs (equivalent to council houses in the UK)
Action needs to be taken quickly to burst the bubble and get people back in homes.
Artifical measures to slow down the fall in house prices will simply increase the period of pain and delay the point of recovery for years.
Cheap housing shouldn't be seen as a disaster. It maybe a disaster for the banks - but they are the ones to blame and they are the ones getting all the handouts.
Cheap housing is really good for the poor.
A pdf document
Housing Rights For All: Promoting And Defending Human Rights in The United States
Can be downloaded
http://www.nlchp.org/content/pubs
/2007%20Forum%20Human%20Rights%20Manual%20FINAL1.pdf
linked text
However, I don't know how housing rights work in the US.
In the UK - homeless people - even single unemployed men - have the right to be housed - and the state will pay housing costs until they gain employment and can afford to pay the costs themselves. This doesn't mean that there aren't large numbers of homeless in the UK - but that is often due to people not knowing how to obtain their rights - or choosing not to.
The homeless situation is going to get much worse both in the UK and the US.
House prices will continue to fall - until they become affordable again for the average person with an average wage.
In previous house price crashes in the UK, it has taken up to 5 years for house price falls to bottom out - and they bottom out when the average local house price is less than 3 times the average local annual wage.
Thus if the annual average wage is $20,000 in the area you live in - the average house price could well fall to around $50,000. The fact that it may be considerably higher than that now is pretty much irrelevant.
The solution to the current problem is to allow the bubble to deflate as quickly as possible - such that houses become cheap - very cheap - ie affordable by the poorest.
However sensible laws should be brought in.
For example - banks who take reposession - should be forced to put the property up for auction - almost immediately.
Property will sell at auction for what people are prepared to pay.
In order to prevent the unscrupulous buying up large numbers of houses and keeping them unoccupied - houses that remain unocuppied for more than 3 months should be taxed heavily by the local authority / state /county
Housing associations - either private (and state regulated_ - or state / county owned - should be encouraged and funded with federal bail out funds to purchase unoccupied housing at auction - to be refurbished and let as social housing at the lowest possible rental levels to cover costs (equivalent to council houses in the UK)
Action needs to be taken quickly to burst the bubble and get people back in homes.
Artifical measures to slow down the fall in house prices will simply increase the period of pain and delay the point of recovery for years.
Cheap housing shouldn't be seen as a disaster. It maybe a disaster for the banks - but they are the ones to blame and they are the ones getting all the handouts.
Cheap housing is really good for the poor.
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» Managing housing resources.
Posted by: aouie01
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rental value of real property is the bottom of the crash anyway...
Posted by: jimmy mankind on Nov 19, 2008 9:34 AM
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Posted by: jimmy mankind on Nov 19, 2008 9:34 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
When one can buy a house and rent it out for a break-even result the decline in housing prices will stop. Investors will jump in, rent out the homes, and wait until overly optimistic home buyers start to swarm again.
(The eternal ebb and flow of market behavior.)
The guilt of the lender is rooted in their precognition of this market force. Buyers are more or less emotional sheep stampeding to their doom with "irrational exuberance". Having heard that phrase from Greenspan, tell me the big lenders weren't aware of it!
So the lenders are guilty: using in-house appraisors to facilitate their deals, taking 2-3 points on the very loans which shouldn't have been made, waiving evidence of income/employment, assets, and acting as if no credit was the same as good credit with a real track record. They enabled the sale of homes at almost double the rental value like accessories to a crime.
Of course, RE agents, title companies, loan agents, everyone who only made money if the deals closed were also puffing this craze.
Should the sellers give the money back? Fat chance.
So why should the buyers be forced to rent?
I suggest that they be allowed to have their mortgages reduced to free and fair rental value--whatever a fully rented house would earn to break even. Given that option with their current lender would be a small gift since they could be doing this anyway simply by moving out just before foreclosure and reinvesting (with nothing down) on the same street in an already foreclosed home, just before their credit is ruined.
All they would have to do is make their offer and get it ratified before the nasty professionals and "flippers" circle in.
So all we have to do is adjust the mortgages according to realistic market value.
(The eternal ebb and flow of market behavior.)
The guilt of the lender is rooted in their precognition of this market force. Buyers are more or less emotional sheep stampeding to their doom with "irrational exuberance". Having heard that phrase from Greenspan, tell me the big lenders weren't aware of it!
So the lenders are guilty: using in-house appraisors to facilitate their deals, taking 2-3 points on the very loans which shouldn't have been made, waiving evidence of income/employment, assets, and acting as if no credit was the same as good credit with a real track record. They enabled the sale of homes at almost double the rental value like accessories to a crime.
Of course, RE agents, title companies, loan agents, everyone who only made money if the deals closed were also puffing this craze.
Should the sellers give the money back? Fat chance.
So why should the buyers be forced to rent?
I suggest that they be allowed to have their mortgages reduced to free and fair rental value--whatever a fully rented house would earn to break even. Given that option with their current lender would be a small gift since they could be doing this anyway simply by moving out just before foreclosure and reinvesting (with nothing down) on the same street in an already foreclosed home, just before their credit is ruined.
All they would have to do is make their offer and get it ratified before the nasty professionals and "flippers" circle in.
So all we have to do is adjust the mortgages according to realistic market value.
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"Buy To Let" Landlords Are Being Crucified in the UK
Posted by: opmoc on Nov 19, 2008 10:51 AM
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Posted by: opmoc on Nov 19, 2008 10:51 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
5+ years ago - every man and his dog - at least where I was working - were taking on these really cheap mortgages - to buy second, third and fourth homes to rent out and make big profits.
Most of them were young kids in their late 20's or early 30's thinking they were on a sure fire move to make loads of money.
I thought they were all incredibly Effing stupid.
They have now not only lost their jobs.
The rents - even when they managed to let - never paid the full cost of the interest on their mortgages - but they also had all the other costs - that they hadn't bargained for.
It was only ever going to be viable if house prices continued to rise forever.
They don't.
Bankruptcy on a massive scale.
Greed can be incredibly destructive.
Most of them were young kids in their late 20's or early 30's thinking they were on a sure fire move to make loads of money.
I thought they were all incredibly Effing stupid.
They have now not only lost their jobs.
The rents - even when they managed to let - never paid the full cost of the interest on their mortgages - but they also had all the other costs - that they hadn't bargained for.
It was only ever going to be viable if house prices continued to rise forever.
They don't.
Bankruptcy on a massive scale.
Greed can be incredibly destructive.
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Simple Solution Already Exists
Posted by: auio on Nov 19, 2008 4:49 PM
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Posted by: auio on Nov 19, 2008 4:49 PM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Wouldn't it actually be simpler for banks to simply renegotiate the loan terms to say, smaller payments for longer, to allow people to continue as home owners? That's a pretty well tested concept that is demonstrated to work, and nobody really loses anything. By continuing as home owners, people will take good care of their properties and feel invested in their community. And banks don't have to become landlords. Of course, it requires to the home owner to eventually pay off their mistake of buying something that was overpriced.
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» RE: Simple Solution Already Exists - I Agree
Posted by: bruceslog
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A Simple Extension To The Bill
Posted by: hgovernick on Nov 19, 2008 5:43 PM
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Posted by: hgovernick on Nov 19, 2008 5:43 PM
Current rating: Not yet rated [1 = poor; 5 = excellent]
This is one of the greatest solutions for the foreclosure crisis I've yet seen in print.
I would add to the solution by suggesting an addition to the Bill that would allocate some of the "bailout / rescue" funds for the creation of a "Taxpayers' Credit Union", from which taxpayers, while renting, could borrow from themselves, transfer distressed mortgages, etc., thereby eliminating the banks from the equation altogether.
This new "Union" would be staffed by Government Service workers on established pay rates, eliminating the tempation for greed, even at top levels.
In the final analysis, taxpayers would then be "paying themselves back", with equitable interest rates making it a venture profitable for taxpayers - not banks.
I would add to the solution by suggesting an addition to the Bill that would allocate some of the "bailout / rescue" funds for the creation of a "Taxpayers' Credit Union", from which taxpayers, while renting, could borrow from themselves, transfer distressed mortgages, etc., thereby eliminating the banks from the equation altogether.
This new "Union" would be staffed by Government Service workers on established pay rates, eliminating the tempation for greed, even at top levels.
In the final analysis, taxpayers would then be "paying themselves back", with equitable interest rates making it a venture profitable for taxpayers - not banks.
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Total Solution
Posted by: auio on Nov 19, 2008 6:59 PM
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Posted by: auio on Nov 19, 2008 6:59 PM
Current rating: Not yet rated [1 = poor; 5 = excellent]
I know! Why don't we just give all the houses to the people currently living in them for free and take them away from the evil banks. And then in 10 years after people have invested captital and built new housing, we can take all that away again. And repeat every ten years.
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Screwed either way ?
Posted by: bruceslog on Nov 19, 2008 10:25 PM
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Posted by: bruceslog on Nov 19, 2008 10:25 PM
Current rating: Not yet rated [1 = poor; 5 = excellent]
We, the People, are gonna be screwed either way.
No matter how all this shakes out, the rich are getting the 700 Billion dollar bailout money.
And WE the People will have to pay it back.
( I believe that we should not have to pay for that... Congress did not ask us, the will of the people, if we would want to lend the rich bankers and insurance folks so much of our tax money, and then We the People would get to pay it back. The government is collecting preferred stock from these banks and insurance companies in exchange for that money, the government should sell those stocks later to pay for ALL of this.... ).
Not to mention, since our government is now collecting preferred stock in so many companies, is this now a Socialist society, where the government owns company stock, and as a major shareholder, can now dictate the road a company is to take ?
Is that the end of free market capitalism ?
I don't expect ANYONE to step up and help We the People keep our homes in this crisis. All talk, no action, as usual. They'll talk till the first sign that something is improving, and then say, well, no worries now.
Automakers - begging for some of that 700 billion. Of course, they flew their Lear jets to Washington DC in a hurry to get their hands out.
They've been in bed with big oil forever. Big oil just spent years making Record profits.
In my opinion, Big Oil can bail out the automakers.
We wanted fuel cell, electric and better fuel mileage cars decades ago.
Who did Big Auto listen to ? Big Oil. Not Us.
'nough said there.
Think it'll happen that way ?
Nope, Congress will create a New bailout package for Big Auto. And say it is for the good of We, the People.
My opinion, if Big Auto can't run a business, let them die off.
THEN we can see the new start ups come in.. the ones that have been outgunned and stifled by Big Auto for decades.
And those electric cars and 100 Miles per Gallon car we've heard were possible all these years will being to be built by the thousands.. replacing the jobs that were lost when Big Auto sank. And making our air and environment so much better, and helping us to get off of the Middle East Oil kick for good.
Then there will be No need to be in Iraq for 100 years. Will there ?
The solutions are there.
The ones Congress chooses will tell how screwed we are for the rest of our lives.
Or, they could finally start working For The People they are supposed to be protecting !
No matter how all this shakes out, the rich are getting the 700 Billion dollar bailout money.
And WE the People will have to pay it back.
( I believe that we should not have to pay for that... Congress did not ask us, the will of the people, if we would want to lend the rich bankers and insurance folks so much of our tax money, and then We the People would get to pay it back. The government is collecting preferred stock from these banks and insurance companies in exchange for that money, the government should sell those stocks later to pay for ALL of this.... ).
Not to mention, since our government is now collecting preferred stock in so many companies, is this now a Socialist society, where the government owns company stock, and as a major shareholder, can now dictate the road a company is to take ?
Is that the end of free market capitalism ?
I don't expect ANYONE to step up and help We the People keep our homes in this crisis. All talk, no action, as usual. They'll talk till the first sign that something is improving, and then say, well, no worries now.
Automakers - begging for some of that 700 billion. Of course, they flew their Lear jets to Washington DC in a hurry to get their hands out.
They've been in bed with big oil forever. Big oil just spent years making Record profits.
In my opinion, Big Oil can bail out the automakers.
We wanted fuel cell, electric and better fuel mileage cars decades ago.
Who did Big Auto listen to ? Big Oil. Not Us.
'nough said there.
Think it'll happen that way ?
Nope, Congress will create a New bailout package for Big Auto. And say it is for the good of We, the People.
My opinion, if Big Auto can't run a business, let them die off.
THEN we can see the new start ups come in.. the ones that have been outgunned and stifled by Big Auto for decades.
And those electric cars and 100 Miles per Gallon car we've heard were possible all these years will being to be built by the thousands.. replacing the jobs that were lost when Big Auto sank. And making our air and environment so much better, and helping us to get off of the Middle East Oil kick for good.
Then there will be No need to be in Iraq for 100 years. Will there ?
The solutions are there.
The ones Congress chooses will tell how screwed we are for the rest of our lives.
Or, they could finally start working For The People they are supposed to be protecting !
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hand wave in air... question...
Posted by: ellie on Nov 20, 2008 5:15 AM
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Posted by: ellie on Nov 20, 2008 5:15 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
if all these homes are being foreclosed on and people are being kicked out by the sheriff, where are they going???
rentals here are begging for tenants... if you have decent credit, which after a foreclosure the answer is NOT... bad credit? don't see rising occupancies in 'you got the cash, you got the apt' areas either...
anyone have ideas???
rentals here are begging for tenants... if you have decent credit, which after a foreclosure the answer is NOT... bad credit? don't see rising occupancies in 'you got the cash, you got the apt' areas either...
anyone have ideas???
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» Doubling up of course.
Posted by: pangolin
Alternet Comments:
» Great Solution ...
Posted by: ProgressiveManiac
» RE: Great Solution ...
Posted by: suprmark
» RE: Great Solution ...
Posted by: opmoc
» RE: Great Solution ...
Posted by: mmckinl
» RE: How can ...
Posted by: ProgressiveManiac
» Synchronicity!
Posted by: westomoon
» Thank you!
Posted by: NoKidding
» RE: Thank you! and than YOU
Posted by: left_libertarian
» YAY!!
Posted by: EcoFemme
» RE: Folks brainwashed into buying homes
Posted by: jvaljon1
» RE: Folks brainwashed into buying homes
Posted by: Sedona96
» RE: Devalue the money and erase the debt
Posted by: stevehamlin
» Good point
Posted by: NthnBrazil
» RE: Bail Out America
Posted by: MausMasher54
» RE: Bail Out America
Posted by: bubbleburster04
» RE: Bail Out America
Posted by: bruceslog
» Managing housing resources.
Posted by: aouie01
» RE: Simple Solution Already Exists - I Agree
Posted by: bruceslog
» Doubling up of course.
Posted by: pangolin
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Terrible Solution ...
Posted by: mmckinl on Nov 19, 2008 12:44 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: mmckinl on Nov 19, 2008 12:44 AM
Current rating: 4 [1 = poor; 5 = excellent]
The right to rent for 20 years? Whose gonna be the landlord ?
What we need are cramdowns that have bankruptcy judges lower the principal of the loans then have the government step in and offer a loan at decent rates with the caveat that the property never be encumbered by any other loan.
With bankruptcy the persons auto and credit card debt can also be lowered. Through bankruptcy protection the person can get a whole new start albeit and necessarily with a lot less access to credit.
With bankruptcy provisions allowed the banks will be a lot more eager to give mortgage holders a good deal right away to avoid the procedure!
What we need are cramdowns that have bankruptcy judges lower the principal of the loans then have the government step in and offer a loan at decent rates with the caveat that the property never be encumbered by any other loan.
With bankruptcy the persons auto and credit card debt can also be lowered. Through bankruptcy protection the person can get a whole new start albeit and necessarily with a lot less access to credit.
With bankruptcy provisions allowed the banks will be a lot more eager to give mortgage holders a good deal right away to avoid the procedure!
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» Great Solution ...
Posted by: ProgressiveManiac
» RE: Great Solution ...
Posted by: suprmark
» RE: Great Solution ...
Posted by: opmoc
» RE: Great Solution ...
Posted by: mmckinl
» RE: How can ...
Posted by: ProgressiveManiac
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Fair housing for all? Here is a step to be considered.
Posted by: aouie01 on Nov 19, 2008 12:54 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Posted by: aouie01 on Nov 19, 2008 12:54 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
As many have pointed out before, there are many renters who simply could not afford to buy the expensive homes. Many who are going through foreclosures should not be entitled to pay the market rent on those houses any more so than those who were waiting for the rental or sale prices to be more affordable on the houses.
Given that there are people in need of houses and increasing houselessness (whether or not they consider selves homeless) is a concern, here is another (rough) idea. (To be further bloated and refined for all sorts of things, like remodeling time limits, etc.)
No entity can have a home for more than EmptyConsecLimit (say 120) days without the home being occupied.
No entity can have a home that has been unoccupied for EmptyYearLimit (say 120 (which makes the above rule redundant)) days in any yearly period, or NewOwnerEmptyYearAllowance (EmptyYearLimit+ say 30 = 150) days if the house was bought in the last year.
The counting of the years would begin on or after the date of the passage of the bill. (i.e. states can't confiscate houses right away).
The above two rules would force people and banks to rent or sell the homes at the best offered prices, as in the absence the state would confiscate the houses. This would be a good solution to the housing crisis towards housing people. The confiscated homes, if any, can be used to house the houseless who want to be housed (those who want to live free in the open, should not be forced to live in a concrete or wood enclosure).
Note that the new owner would be expected to leave the newly acquired house empty for no more than 30 days if the house already had 119 days of vacancy, and no more than 1 day if the house had switched hands in the last year and had 149 days of vacancy in the last year. Banks would not benefit from merely tossing the houses around amongst themselves.
People with multiple homes would be pressured to sell or rent out the extra homes.
This can be developed further into limiting the number of rooms allowed per individual (a single person in a 4+ bedroom house could be required to rent out at least two rooms (or sell the place and move to a two bedroom house), thus making more space for over-crowded families).
The above solutions aren't ideal fair sharing, but will work its way towards much fairer sharing of the housing resources by all in the country.
Sincerely,
Aouie
Given that there are people in need of houses and increasing houselessness (whether or not they consider selves homeless) is a concern, here is another (rough) idea. (To be further bloated and refined for all sorts of things, like remodeling time limits, etc.)
No entity can have a home for more than EmptyConsecLimit (say 120) days without the home being occupied.
No entity can have a home that has been unoccupied for EmptyYearLimit (say 120 (which makes the above rule redundant)) days in any yearly period, or NewOwnerEmptyYearAllowance (EmptyYearLimit+ say 30 = 150) days if the house was bought in the last year.
The counting of the years would begin on or after the date of the passage of the bill. (i.e. states can't confiscate houses right away).
The above two rules would force people and banks to rent or sell the homes at the best offered prices, as in the absence the state would confiscate the houses. This would be a good solution to the housing crisis towards housing people. The confiscated homes, if any, can be used to house the houseless who want to be housed (those who want to live free in the open, should not be forced to live in a concrete or wood enclosure).
Note that the new owner would be expected to leave the newly acquired house empty for no more than 30 days if the house already had 119 days of vacancy, and no more than 1 day if the house had switched hands in the last year and had 149 days of vacancy in the last year. Banks would not benefit from merely tossing the houses around amongst themselves.
People with multiple homes would be pressured to sell or rent out the extra homes.
This can be developed further into limiting the number of rooms allowed per individual (a single person in a 4+ bedroom house could be required to rent out at least two rooms (or sell the place and move to a two bedroom house), thus making more space for over-crowded families).
The above solutions aren't ideal fair sharing, but will work its way towards much fairer sharing of the housing resources by all in the country.
Sincerely,
Aouie
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Not a bad thought
Posted by: FreeAmerica on Nov 19, 2008 1:12 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: FreeAmerica on Nov 19, 2008 1:12 AM
Current rating: 4 [1 = poor; 5 = excellent]
Not a bad thought. With the right fine tuning it might actually help the problem.
In theory, it would cause a few more occupied homes, keeping values up in the neighborhood and keeping other people from running on mortgages on homes that lost value.
The downside is that it would slam lender's doors shut for a lot of people. They look at a loan proposal, and think, jeez, I am going to be stuck with this guy and this house for 20-30 years no matter what.
There is no way to liquidate this investment without taking a big (50%)beating due to an un-creditworthy renter that goes with the house by law.
The increased risk presented would make the banker need a huge down payment, or more likely, the bank will look at loaning the money in the commercial market where there is no forced rental risk.
Surf through those issues, and it might work..
In theory, it would cause a few more occupied homes, keeping values up in the neighborhood and keeping other people from running on mortgages on homes that lost value.
The downside is that it would slam lender's doors shut for a lot of people. They look at a loan proposal, and think, jeez, I am going to be stuck with this guy and this house for 20-30 years no matter what.
There is no way to liquidate this investment without taking a big (50%)beating due to an un-creditworthy renter that goes with the house by law.
The increased risk presented would make the banker need a huge down payment, or more likely, the bank will look at loaning the money in the commercial market where there is no forced rental risk.
Surf through those issues, and it might work..
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An Even Simpler Idea...
Posted by: Nodarse on Nov 19, 2008 1:57 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: Nodarse on Nov 19, 2008 1:57 AM
Current rating: 4 [1 = poor; 5 = excellent]
How about cutting "EVERY" mortgage in the United States in half?
All these mortgages were loaned out with imaginary money anyway, using a reserve system. This means with every dollar sitting in a Banks' coffer, the Bank could loan 10 dollars plus interest.
Banks lend out "imaginary" money, and borrowers must pay it back with "real" money (or real assets).
Does this sound fair to anybody?
Why should people lose their homes for not repaying money that never existed in the first place?
All these mortgages were loaned out with imaginary money anyway, using a reserve system. This means with every dollar sitting in a Banks' coffer, the Bank could loan 10 dollars plus interest.
Banks lend out "imaginary" money, and borrowers must pay it back with "real" money (or real assets).
Does this sound fair to anybody?
Why should people lose their homes for not repaying money that never existed in the first place?
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Looking Through The Prism
Posted by: bryangalt on Nov 19, 2008 2:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: bryangalt on Nov 19, 2008 2:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
The housing price collapse and the subsequent finger pointing by banks, politicians and homeowners reminds me of a ray of light after it has passed through a prism. It comes out the other side broken into the constituent parts of the original light, still beautiful to behold but not as bright.
In the early 2000's, my uncle (a lawyer by trade and a former DA for my county) mentioned that the real estate market was heading for a catastrophic collapse because it was not possible for the prices of housing to increase 25% a year or more while wages stayed at 2% to 4%. Of course, he also mentioned the word bubble but no one would have thought it possible then.
I knew he was right though. In Fresno County in 1999, my brother bought his 3-bd, 2-ba, family/living room with 2-car garage for $139,000 (about 1700ft2). By 2004, this same house was being appraised at $280,000, a 50% increase. He mentioned to me that he could not buy this same house in 2004 even though he was making $95,000 a year.
What I noticed was that people were cashing in their equity if they already owned something and using their massive down payments to move to much larger and more expensive homes. This 'upgrading' effect created a large demand for upscale housing as the middle class lurched forward. However, the side effect of the runaway housing prices was that people in the "under $50K" salary ranges were being forced out of home purchases, which meant that the crunch had to come soon. When there are no buyers left, then everyone's train runs off the tracks.
The banks, realtors, brokers, appraisers, everyone participated in doing everything possible to keep the good times rolling. Like heroin addicts looking for their next fix, the industry reacted by making loans so easy to get, your unemployed cousing from Orange County could qualify.
And, in typical Americana, the banks drew in these poor souls who genuinely needed a home of their own with promises of low payments and low interest. But, the banks also put in those insidious conversion interest rates that they knew would blow up in their faces if the home values stopped rising and the homeowners had to stop borrowing on equity.
Is this the citizen's fault for trying to provide a roof over the head of his family? Or, is it the banking system to blame for writing in a loan rate that would have made a mobster blush? Let's not forget the realtors, and the brokers who would browbeat the appraisers into coming in with the "right numbers" to close the deal.
Yes, just like that light in the prism, what went in as a strong and cohesive light came out broken into its constituent parts and the fact remains that they will never be the same from the trauma.
Let's stop putting the blame in front of solving the problem, and stop greasing the banks. Let's look at the fact that the banks were never going to lose any money on a mortgage of any size before feeling any sypmathy for them:
Home = $100,000
Interest Payments at noted Rate for 30 yr fixed mortage:
3% = $51,777
4% = $71,869
5% = $93,255
6% = $115,838
Screw thy neighbors has cost us all
In the early 2000's, my uncle (a lawyer by trade and a former DA for my county) mentioned that the real estate market was heading for a catastrophic collapse because it was not possible for the prices of housing to increase 25% a year or more while wages stayed at 2% to 4%. Of course, he also mentioned the word bubble but no one would have thought it possible then.
I knew he was right though. In Fresno County in 1999, my brother bought his 3-bd, 2-ba, family/living room with 2-car garage for $139,000 (about 1700ft2). By 2004, this same house was being appraised at $280,000, a 50% increase. He mentioned to me that he could not buy this same house in 2004 even though he was making $95,000 a year.
What I noticed was that people were cashing in their equity if they already owned something and using their massive down payments to move to much larger and more expensive homes. This 'upgrading' effect created a large demand for upscale housing as the middle class lurched forward. However, the side effect of the runaway housing prices was that people in the "under $50K" salary ranges were being forced out of home purchases, which meant that the crunch had to come soon. When there are no buyers left, then everyone's train runs off the tracks.
The banks, realtors, brokers, appraisers, everyone participated in doing everything possible to keep the good times rolling. Like heroin addicts looking for their next fix, the industry reacted by making loans so easy to get, your unemployed cousing from Orange County could qualify.
And, in typical Americana, the banks drew in these poor souls who genuinely needed a home of their own with promises of low payments and low interest. But, the banks also put in those insidious conversion interest rates that they knew would blow up in their faces if the home values stopped rising and the homeowners had to stop borrowing on equity.
Is this the citizen's fault for trying to provide a roof over the head of his family? Or, is it the banking system to blame for writing in a loan rate that would have made a mobster blush? Let's not forget the realtors, and the brokers who would browbeat the appraisers into coming in with the "right numbers" to close the deal.
Yes, just like that light in the prism, what went in as a strong and cohesive light came out broken into its constituent parts and the fact remains that they will never be the same from the trauma.
Let's stop putting the blame in front of solving the problem, and stop greasing the banks. Let's look at the fact that the banks were never going to lose any money on a mortgage of any size before feeling any sypmathy for them:
Home = $100,000
Interest Payments at noted Rate for 30 yr fixed mortage:
3% = $51,777
4% = $71,869
5% = $93,255
6% = $115,838
Screw thy neighbors has cost us all
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Folks brainwashed into buying homes
Posted by: xvictor on Nov 19, 2008 5:11 AM
Current rating: 4 [1 = poor; 5 = excellent]
Posted by: xvictor on Nov 19, 2008 5:11 AM
Current rating: 4 [1 = poor; 5 = excellent]
There's been some kinda of mantra over the last couple of decades or so that homeownershp is the way to go. As a long time apartment renter I was always puzzled as to why that is. There's really no outstanding benefit that differentiates homeowners from renters. The claim that homeowners receive nice income tax deductions is not a big deal when they still have to pay water, school, property and other taxes and fees.
Why those folks are receiving unjustified tax deductions in the first place for home ownership is a valid question for another day. I live in NYC and there's talk about granting homeowners in the city a 400 dollar tax break. Why? And why not for renters as well. Renters pay monthly shelter costs just like homeowners. There's something suspiciously discriminatory about that.
Another reason given for the benefits of homeownership is that you can borrow money against your home for whatever reason. I've heard that for a long time. And many homeowners have done just that, using that equity or refinanced money mostly to party, figuring that they'll get it all back in the end, with ever rising home prices. Well, we all saw how that went. And using their homes as ATM machines artificially inflated annual GDP for many years, making the Bush Misadminstration and his hypocritical Repug cohorts look unjustifiably good throughout that period, up until a year or so ago. Thx a lot, homeowners.
You can still live your life out of rentals. Nothing says that owning a home makes you a better person or a better american. I don't feel a homeowner is better than me. Sure, they may pay off their mortgage after a time and save some money. But do they really?? If a roof, boiler, plumbing, etc needs repair or replacement, no super is going to look at it. It all comes out of the homeowner's pocket. Not to mention the grief and frustration that is accompanied by shelling out so many bucks.
And there are those who need to work two jobs just to support a bought home. Guess what? I prefer to live in a relatively cheap apartment that's within my means, work one job, and live my life.
One another thing, I really don't understand why folks want BIG houses. And they also want a green lawn and a backyard. Why? It costs more to heat and air-condition a big house. Maintaining a yard and lawn is a lot of work and expense. And a big house is more work to clean and keep up. U say u need room for more kids? Solution: don't have more kids, and be content with living in a reasonably small apartment with a nice small family.
In any event, certainly, the foreclosed homeowner is not to blame for the Wall Street debacle. While it's a part of a problem, it's not the major problem. Actually, the foreclosures was just a smoke screen for the real fault. Credit default swaps and other derivative instruments tottering on the edge, along with an established greed by the wall street types, should receive the hefty lion's share of the blame. That's where that bailout money is all going to, to cover the ever mounting lost financial bets. You homeowners got taken real good.
Of course, I'm not castigating all homeowners. If they feel buying a home is the way to go for them, fine, that's your bag. Just don't brag about its really non-existent benefits.
One more thing, when is the renter going to get some? Seems like everyone else is. Many of us may not be in the so sad shape a lot of you homeowners are in, but renters can be evicted as well when they lose their jobs and can't make the monthly rent, so we like some credit too.
Why those folks are receiving unjustified tax deductions in the first place for home ownership is a valid question for another day. I live in NYC and there's talk about granting homeowners in the city a 400 dollar tax break. Why? And why not for renters as well. Renters pay monthly shelter costs just like homeowners. There's something suspiciously discriminatory about that.
Another reason given for the benefits of homeownership is that you can borrow money against your home for whatever reason. I've heard that for a long time. And many homeowners have done just that, using that equity or refinanced money mostly to party, figuring that they'll get it all back in the end, with ever rising home prices. Well, we all saw how that went. And using their homes as ATM machines artificially inflated annual GDP for many years, making the Bush Misadminstration and his hypocritical Repug cohorts look unjustifiably good throughout that period, up until a year or so ago. Thx a lot, homeowners.
You can still live your life out of rentals. Nothing says that owning a home makes you a better person or a better american. I don't feel a homeowner is better than me. Sure, they may pay off their mortgage after a time and save some money. But do they really?? If a roof, boiler, plumbing, etc needs repair or replacement, no super is going to look at it. It all comes out of the homeowner's pocket. Not to mention the grief and frustration that is accompanied by shelling out so many bucks.
And there are those who need to work two jobs just to support a bought home. Guess what? I prefer to live in a relatively cheap apartment that's within my means, work one job, and live my life.
One another thing, I really don't understand why folks want BIG houses. And they also want a green lawn and a backyard. Why? It costs more to heat and air-condition a big house. Maintaining a yard and lawn is a lot of work and expense. And a big house is more work to clean and keep up. U say u need room for more kids? Solution: don't have more kids, and be content with living in a reasonably small apartment with a nice small family.
In any event, certainly, the foreclosed homeowner is not to blame for the Wall Street debacle. While it's a part of a problem, it's not the major problem. Actually, the foreclosures was just a smoke screen for the real fault. Credit default swaps and other derivative instruments tottering on the edge, along with an established greed by the wall street types, should receive the hefty lion's share of the blame. That's where that bailout money is all going to, to cover the ever mounting lost financial bets. You homeowners got taken real good.
Of course, I'm not castigating all homeowners. If they feel buying a home is the way to go for them, fine, that's your bag. Just don't brag about its really non-existent benefits.
One more thing, when is the renter going to get some? Seems like everyone else is. Many of us may not be in the so sad shape a lot of you homeowners are in, but renters can be evicted as well when they lose their jobs and can't make the monthly rent, so we like some credit too.
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» Synchronicity!
Posted by: westomoon
» Thank you!
Posted by: NoKidding
» RE: Thank you! and than YOU
Posted by: left_libertarian
» YAY!!
Posted by: EcoFemme
» RE: Folks brainwashed into buying homes
Posted by: jvaljon1
» RE: Folks brainwashed into buying homes
Posted by: Sedona96
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Death to "The Ownership Society"
Posted by: westomoon on Nov 19, 2008 5:21 AM
Current rating: 3 [1 = poor; 5 = excellent]
Posted by: westomoon on Nov 19, 2008 5:21 AM
Current rating: 3 [1 = poor; 5 = excellent]
The "ownership society" is a neocon article of faith that has been in place so long we no longer question it. Before Ronald Reagan, there was lots of rental housing. Many people rented all their lives perfectly happily. There was lots of choice, and the competition for tenants tended to keep rents reasonable.
We've all seen the voice-in-the-wilderness pieces that point out -- and prove -- that other types of investing actually yield a much better return over 30 years, even with the tax subsidy for mortgage debt and the series of housing bubbles that has characterised the past 50 years.
Home ownership doesn't suit everyone's temperament, skills, or capabilities, much less their finances. While this article's proposal seems a bit simplistic -- forcing "the bank" into wholesale landlordship, when who owns a mortgage has become so tenuous and abstract that homeowners in trouble can't even find out who to negotiate with -- the underlying premise, that maybe universal home ownership doesn't make sense, deserves a lot more airing.
We've all seen the voice-in-the-wilderness pieces that point out -- and prove -- that other types of investing actually yield a much better return over 30 years, even with the tax subsidy for mortgage debt and the series of housing bubbles that has characterised the past 50 years.
Home ownership doesn't suit everyone's temperament, skills, or capabilities, much less their finances. While this article's proposal seems a bit simplistic -- forcing "the bank" into wholesale landlordship, when who owns a mortgage has become so tenuous and abstract that homeowners in trouble can't even find out who to negotiate with -- the underlying premise, that maybe universal home ownership doesn't make sense, deserves a lot more airing.
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Not all places are great for renting. In fact,
Posted by: maxpayne on Nov 19, 2008 5:59 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: maxpayne on Nov 19, 2008 5:59 AM
Current rating: 5 [1 = poor; 5 = excellent]
in lots of suburbs, it costs more to rent than to buy a home and there's no tax deduction for renting anyway. In the end, it all depends on where you live.
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The new era of the absentee landlord...
Posted by: gunboat diplomat on Nov 19, 2008 6:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: gunboat diplomat on Nov 19, 2008 6:15 AM
Current rating: 5 [1 = poor; 5 = excellent]
At this point, some 20% of U.S. "homeowners" owe more on their homes than their homes are worth. However, they are in a slightly better position than renters, who can be tossed out with 30 days notice, unless they have signed a lease.
The quickest way to solve the adjustable rate mortgage problem is to simply use the $700 billion bailout to buy up all adjustable rate subprime mortgages, convert them to standard rate mortgages, and let the banks and shareholders and homeowners share the pain when they buy them back. Or, the government will suddenly end up owning a lot of property - not necessarily a bad situation, as long as it is mostly temporary.
The securitization of credit should have never been allowed, and re-regulation is needed. The net worth of the Forbes 500 could also do with a 50-75% reduction - money is like food. Pile too much up in one place, and the whole pile rots.
What's been done instead is to rescue the banks and shareholders, while allowing the foreclosures to continue at record rates, meaning that instead of homeowners, you'll have large-scale absentee landlords controlling entire communities, especially in minority neighborhoods. What does this mean for the civil rights struggle? We've got a president who is obviously of African descent, as well as European descent, Harvard-educated - at a time when the economic prospects for minorities are looking bleaker than ever. However, the new axis isn't so much black-white as it is aristocrat-peasant. Reinstating the estate tax is also needed, to prevent the problem of inherited wealth (but not inherited skill or character, right?).
Why does the rate of homeownership matter to a democracy? Here you go: Despotism and Democracy, 1946
The quickest way to solve the adjustable rate mortgage problem is to simply use the $700 billion bailout to buy up all adjustable rate subprime mortgages, convert them to standard rate mortgages, and let the banks and shareholders and homeowners share the pain when they buy them back. Or, the government will suddenly end up owning a lot of property - not necessarily a bad situation, as long as it is mostly temporary.
The securitization of credit should have never been allowed, and re-regulation is needed. The net worth of the Forbes 500 could also do with a 50-75% reduction - money is like food. Pile too much up in one place, and the whole pile rots.
What's been done instead is to rescue the banks and shareholders, while allowing the foreclosures to continue at record rates, meaning that instead of homeowners, you'll have large-scale absentee landlords controlling entire communities, especially in minority neighborhoods. What does this mean for the civil rights struggle? We've got a president who is obviously of African descent, as well as European descent, Harvard-educated - at a time when the economic prospects for minorities are looking bleaker than ever. However, the new axis isn't so much black-white as it is aristocrat-peasant. Reinstating the estate tax is also needed, to prevent the problem of inherited wealth (but not inherited skill or character, right?).
Why does the rate of homeownership matter to a democracy? Here you go: Despotism and Democracy, 1946
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Devalue the money and erase the debt
Posted by: NthnBrazil on Nov 19, 2008 7:14 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: NthnBrazil on Nov 19, 2008 7:14 AM
Current rating: 5 [1 = poor; 5 = excellent]
The reserve system coupled with securitization of debt and rampant creation of new and more complicated derivative products has effectively grown the pot of global money beyond the physical asset base it allegedly represents. If you can't produce the raw materials that make up a derivative product's total volume (i.e. if the total of all mortgage backed securities exceeds the total outstanding mortgage debt in the country) than it's time to call a do-over.
A joint international effort to globally reduce the value of all currencies simultaneously could effectively push the reset button - in other words it would erase a huge percentage of debts and baseline assett values at a point in time.
The problem with this idea is that it destroys savings and investment. A "bailout" package that provided a one time credit to all deposit and retirement accounts to account for this inflation spike would eliminate this problem.
So why isn't it being talked about except by market nuts who want to sell you gold bars to hide in your basement?
A joint international effort to globally reduce the value of all currencies simultaneously could effectively push the reset button - in other words it would erase a huge percentage of debts and baseline assett values at a point in time.
The problem with this idea is that it destroys savings and investment. A "bailout" package that provided a one time credit to all deposit and retirement accounts to account for this inflation spike would eliminate this problem.
So why isn't it being talked about except by market nuts who want to sell you gold bars to hide in your basement?
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» RE: Devalue the money and erase the debt
Posted by: stevehamlin
» Good point
Posted by: NthnBrazil
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Bail Out America
Posted by: FSadley on Nov 19, 2008 8:07 AM
Current rating: 5 [1 = poor; 5 = excellent]
Posted by: FSadley on Nov 19, 2008 8:07 AM
Current rating: 5 [1 = poor; 5 = excellent]
I say give every American Citizen $100,000.00 to pay down their debt, or spend how they please. This would certainly get the economy rolling again. And, at least we haven't given it to the rich to hoard, or pay executive bonuses with. I'm so sick of hearing why we can't have social security or decent health care because we have to continue waging war, or screwing American taxpayers. It's time for a revolt.
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» RE: Bail Out America
Posted by: MausMasher54
» RE: Bail Out America
Posted by: bubbleburster04
» RE: Bail Out America
Posted by: bruceslog
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It's Immoral For Large Numbers of Houses To Be Unoccupied And Large Numbers of People To Be Homeless
Posted by: opmoc on Nov 19, 2008 9:19 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Posted by: opmoc on Nov 19, 2008 9:19 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
It is also against Internationally Agreed Human Rights.
A pdf document
Housing Rights For All: Promoting And Defending Human Rights in The United States
Can be downloaded
http://www.nlchp.org/content/pubs
/2007%20Forum%20Human%20Rights%20Manual%20FINAL1.pdf
linked text
However, I don't know how housing rights work in the US.
In the UK - homeless people - even single unemployed men - have the right to be housed - and the state will pay housing costs until they gain employment and can afford to pay the costs themselves. This doesn't mean that there aren't large numbers of homeless in the UK - but that is often due to people not knowing how to obtain their rights - or choosing not to.
The homeless situation is going to get much worse both in the UK and the US.
House prices will continue to fall - until they become affordable again for the average person with an average wage.
In previous house price crashes in the UK, it has taken up to 5 years for house price falls to bottom out - and they bottom out when the average local house price is less than 3 times the average local annual wage.
Thus if the annual average wage is $20,000 in the area you live in - the average house price could well fall to around $50,000. The fact that it may be considerably higher than that now is pretty much irrelevant.
The solution to the current problem is to allow the bubble to deflate as quickly as possible - such that houses become cheap - very cheap - ie affordable by the poorest.
However sensible laws should be brought in.
For example - banks who take reposession - should be forced to put the property up for auction - almost immediately.
Property will sell at auction for what people are prepared to pay.
In order to prevent the unscrupulous buying up large numbers of houses and keeping them unoccupied - houses that remain unocuppied for more than 3 months should be taxed heavily by the local authority / state /county
Housing associations - either private (and state regulated_ - or state / county owned - should be encouraged and funded with federal bail out funds to purchase unoccupied housing at auction - to be refurbished and let as social housing at the lowest possible rental levels to cover costs (equivalent to council houses in the UK)
Action needs to be taken quickly to burst the bubble and get people back in homes.
Artifical measures to slow down the fall in house prices will simply increase the period of pain and delay the point of recovery for years.
Cheap housing shouldn't be seen as a disaster. It maybe a disaster for the banks - but they are the ones to blame and they are the ones getting all the handouts.
Cheap housing is really good for the poor.
A pdf document
Housing Rights For All: Promoting And Defending Human Rights in The United States
Can be downloaded
http://www.nlchp.org/content/pubs
/2007%20Forum%20Human%20Rights%20Manual%20FINAL1.pdf
linked text
However, I don't know how housing rights work in the US.
In the UK - homeless people - even single unemployed men - have the right to be housed - and the state will pay housing costs until they gain employment and can afford to pay the costs themselves. This doesn't mean that there aren't large numbers of homeless in the UK - but that is often due to people not knowing how to obtain their rights - or choosing not to.
The homeless situation is going to get much worse both in the UK and the US.
House prices will continue to fall - until they become affordable again for the average person with an average wage.
In previous house price crashes in the UK, it has taken up to 5 years for house price falls to bottom out - and they bottom out when the average local house price is less than 3 times the average local annual wage.
Thus if the annual average wage is $20,000 in the area you live in - the average house price could well fall to around $50,000. The fact that it may be considerably higher than that now is pretty much irrelevant.
The solution to the current problem is to allow the bubble to deflate as quickly as possible - such that houses become cheap - very cheap - ie affordable by the poorest.
However sensible laws should be brought in.
For example - banks who take reposession - should be forced to put the property up for auction - almost immediately.
Property will sell at auction for what people are prepared to pay.
In order to prevent the unscrupulous buying up large numbers of houses and keeping them unoccupied - houses that remain unocuppied for more than 3 months should be taxed heavily by the local authority / state /county
Housing associations - either private (and state regulated_ - or state / county owned - should be encouraged and funded with federal bail out funds to purchase unoccupied housing at auction - to be refurbished and let as social housing at the lowest possible rental levels to cover costs (equivalent to council houses in the UK)
Action needs to be taken quickly to burst the bubble and get people back in homes.
Artifical measures to slow down the fall in house prices will simply increase the period of pain and delay the point of recovery for years.
Cheap housing shouldn't be seen as a disaster. It maybe a disaster for the banks - but they are the ones to blame and they are the ones getting all the handouts.
Cheap housing is really good for the poor.
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» Managing housing resources.
Posted by: aouie01
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rental value of real property is the bottom of the crash anyway...
Posted by: jimmy mankind on Nov 19, 2008 9:34 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Posted by: jimmy mankind on Nov 19, 2008 9:34 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
When one can buy a house and rent it out for a break-even result the decline in housing prices will stop. Investors will jump in, rent out the homes, and wait until overly optimistic home buyers start to swarm again.
(The eternal ebb and flow of market behavior.)
The guilt of the lender is rooted in their precognition of this market force. Buyers are more or less emotional sheep stampeding to their doom with "irrational exuberance". Having heard that phrase from Greenspan, tell me the big lenders weren't aware of it!
So the lenders are guilty: using in-house appraisors to facilitate their deals, taking 2-3 points on the very loans which shouldn't have been made, waiving evidence of income/employment, assets, and acting as if no credit was the same as good credit with a real track record. They enabled the sale of homes at almost double the rental value like accessories to a crime.
Of course, RE agents, title companies, loan agents, everyone who only made money if the deals closed were also puffing this craze.
Should the sellers give the money back? Fat chance.
So why should the buyers be forced to rent?
I suggest that they be allowed to have their mortgages reduced to free and fair rental value--whatever a fully rented house would earn to break even. Given that option with their current lender would be a small gift since they could be doing this anyway simply by moving out just before foreclosure and reinvesting (with nothing down) on the same street in an already foreclosed home, just before their credit is ruined.
All they would have to do is make their offer and get it ratified before the nasty professionals and "flippers" circle in.
So all we have to do is adjust the mortgages according to realistic market value.
(The eternal ebb and flow of market behavior.)
The guilt of the lender is rooted in their precognition of this market force. Buyers are more or less emotional sheep stampeding to their doom with "irrational exuberance". Having heard that phrase from Greenspan, tell me the big lenders weren't aware of it!
So the lenders are guilty: using in-house appraisors to facilitate their deals, taking 2-3 points on the very loans which shouldn't have been made, waiving evidence of income/employment, assets, and acting as if no credit was the same as good credit with a real track record. They enabled the sale of homes at almost double the rental value like accessories to a crime.
Of course, RE agents, title companies, loan agents, everyone who only made money if the deals closed were also puffing this craze.
Should the sellers give the money back? Fat chance.
So why should the buyers be forced to rent?
I suggest that they be allowed to have their mortgages reduced to free and fair rental value--whatever a fully rented house would earn to break even. Given that option with their current lender would be a small gift since they could be doing this anyway simply by moving out just before foreclosure and reinvesting (with nothing down) on the same street in an already foreclosed home, just before their credit is ruined.
All they would have to do is make their offer and get it ratified before the nasty professionals and "flippers" circle in.
So all we have to do is adjust the mortgages according to realistic market value.
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"Buy To Let" Landlords Are Being Crucified in the UK
Posted by: opmoc on Nov 19, 2008 10:51 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
Posted by: opmoc on Nov 19, 2008 10:51 AM
Current rating: Not yet rated [1 = poor; 5 = excellent]
5+ years ago - every man and his dog - at least where I was working - were taking on these really cheap mortgages - to buy second, third and fourth homes to rent out and make big profits.
Most of them were young kids in their late 20's or early 30's thinking they were on a sure fire move to make loads of money.
I thought they were all incredibly Effing stupid.
They have now not only lost their jobs.
The rents - even when they managed to let - never paid the full cost of the interest on their mortgages - but they also had all the other costs - that they hadn't bargained for.
It was only ever going to be viable if house prices continued to rise forever.
They don't.
Bankruptcy on a massive scale.
Greed can be incredibly destructive.
Most of them were young kids in their late 20's or early 30's thinking they were on a sure fire move to make loads of money.
I thought they were all incredibly Effing stupid.
They have now not only lost their jobs.
The rents - even when they managed to let - never paid the full cost of the interest on their mortgages - but they also had all the other costs - that they hadn't bargained for.
It was only ever going to be viable if house prices continued to rise forever.
They don't.
Bankruptcy on a massive scale.
Greed can be incredibly destructive.
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Simple Solution Already Exists
Posted by: auio on Nov 19, 2008 4:49 PM
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Posted by: auio on Nov 19, 2008 4:49 PM
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Wouldn't it actually be simpler for banks to simply renegotiate the loan terms to say, smaller payments for longer, to allow people to continue as home owners? That's a pretty well tested concept that is demonstrated to work, and nobody really loses anything. By continuing as home owners, people will take good care of their properties and feel invested in their community. And banks don't have to become landlords. Of course, it requires to the home owner to eventually pay off their mistake of buying something that was overpriced.
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» RE: Simple Solution Already Exists - I Agree
Posted by: bruceslog
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A Simple Extension To The Bill
Posted by: hgovernick on Nov 19, 2008 5:43 PM
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Posted by: hgovernick on Nov 19, 2008 5:43 PM
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This is one of the greatest solutions for the foreclosure crisis I've yet seen in print.
I would add to the solution by suggesting an addition to the Bill that would allocate some of the "bailout / rescue" funds for the creation of a "Taxpayers' Credit Union", from which taxpayers, while renting, could borrow from themselves, transfer distressed mortgages, etc., thereby eliminating the banks from the equation altogether.
This new "Union" would be staffed by Government Service workers on established pay rates, eliminating the tempation for greed, even at top levels.
In the final analysis, taxpayers would then be "paying themselves back", with equitable interest rates making it a venture profitable for taxpayers - not banks.
I would add to the solution by suggesting an addition to the Bill that would allocate some of the "bailout / rescue" funds for the creation of a "Taxpayers' Credit Union", from which taxpayers, while renting, could borrow from themselves, transfer distressed mortgages, etc., thereby eliminating the banks from the equation altogether.
This new "Union" would be staffed by Government Service workers on established pay rates, eliminating the tempation for greed, even at top levels.
In the final analysis, taxpayers would then be "paying themselves back", with equitable interest rates making it a venture profitable for taxpayers - not banks.
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Total Solution
Posted by: auio on Nov 19, 2008 6:59 PM
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Posted by: auio on Nov 19, 2008 6:59 PM
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I know! Why don't we just give all the houses to the people currently living in them for free and take them away from the evil banks. And then in 10 years after people have invested captital and built new housing, we can take all that away again. And repeat every ten years.
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Screwed either way ?
Posted by: bruceslog on Nov 19, 2008 10:25 PM
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Posted by: bruceslog on Nov 19, 2008 10:25 PM
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We, the People, are gonna be screwed either way.
No matter how all this shakes out, the rich are getting the 700 Billion dollar bailout money.
And WE the People will have to pay it back.
( I believe that we should not have to pay for that... Congress did not ask us, the will of the people, if we would want to lend the rich bankers and insurance folks so much of our tax money, and then We the People would get to pay it back. The government is collecting preferred stock from these banks and insurance companies in exchange for that money, the government should sell those stocks later to pay for ALL of this.... ).
Not to mention, since our government is now collecting preferred stock in so many companies, is this now a Socialist society, where the government owns company stock, and as a major shareholder, can now dictate the road a company is to take ?
Is that the end of free market capitalism ?
I don't expect ANYONE to step up and help We the People keep our homes in this crisis. All talk, no action, as usual. They'll talk till the first sign that something is improving, and then say, well, no worries now.
Automakers - begging for some of that 700 billion. Of course, they flew their Lear jets to Washington DC in a hurry to get their hands out.
They've been in bed with big oil forever. Big oil just spent years making Record profits.
In my opinion, Big Oil can bail out the automakers.
We wanted fuel cell, electric and better fuel mileage cars decades ago.
Who did Big Auto listen to ? Big Oil. Not Us.
'nough said there.
Think it'll happen that way ?
Nope, Congress will create a New bailout package for Big Auto. And say it is for the good of We, the People.
My opinion, if Big Auto can't run a business, let them die off.
THEN we can see the new start ups come in.. the ones that have been outgunned and stifled by Big Auto for decades.
And those electric cars and 100 Miles per Gallon car we've heard were possible all these years will being to be built by the thousands.. replacing the jobs that were lost when Big Auto sank. And making our air and environment so much better, and helping us to get off of the Middle East Oil kick for good.
Then there will be No need to be in Iraq for 100 years. Will there ?
The solutions are there.
The ones Congress chooses will tell how screwed we are for the rest of our lives.
Or, they could finally start working For The People they are supposed to be protecting !
No matter how all this shakes out, the rich are getting the 700 Billion dollar bailout money.
And WE the People will have to pay it back.
( I believe that we should not have to pay for that... Congress did not ask us, the will of the people, if we would want to lend the rich bankers and insurance folks so much of our tax money, and then We the People would get to pay it back. The government is collecting preferred stock from these banks and insurance companies in exchange for that money, the government should sell those stocks later to pay for ALL of this.... ).
Not to mention, since our government is now collecting preferred stock in so many companies, is this now a Socialist society, where the government owns company stock, and as a major shareholder, can now dictate the road a company is to take ?
Is that the end of free market capitalism ?
I don't expect ANYONE to step up and help We the People keep our homes in this crisis. All talk, no action, as usual. They'll talk till the first sign that something is improving, and then say, well, no worries now.
Automakers - begging for some of that 700 billion. Of course, they flew their Lear jets to Washington DC in a hurry to get their hands out.
They've been in bed with big oil forever. Big oil just spent years making Record profits.
In my opinion, Big Oil can bail out the automakers.
We wanted fuel cell, electric and better fuel mileage cars decades ago.
Who did Big Auto listen to ? Big Oil. Not Us.
'nough said there.
Think it'll happen that way ?
Nope, Congress will create a New bailout package for Big Auto. And say it is for the good of We, the People.
My opinion, if Big Auto can't run a business, let them die off.
THEN we can see the new start ups come in.. the ones that have been outgunned and stifled by Big Auto for decades.
And those electric cars and 100 Miles per Gallon car we've heard were possible all these years will being to be built by the thousands.. replacing the jobs that were lost when Big Auto sank. And making our air and environment so much better, and helping us to get off of the Middle East Oil kick for good.
Then there will be No need to be in Iraq for 100 years. Will there ?
The solutions are there.
The ones Congress chooses will tell how screwed we are for the rest of our lives.
Or, they could finally start working For The People they are supposed to be protecting !
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hand wave in air... question...
Posted by: ellie on Nov 20, 2008 5:15 AM
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Posted by: ellie on Nov 20, 2008 5:15 AM
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if all these homes are being foreclosed on and people are being kicked out by the sheriff, where are they going???
rentals here are begging for tenants... if you have decent credit, which after a foreclosure the answer is NOT... bad credit? don't see rising occupancies in 'you got the cash, you got the apt' areas either...
anyone have ideas???
rentals here are begging for tenants... if you have decent credit, which after a foreclosure the answer is NOT... bad credit? don't see rising occupancies in 'you got the cash, you got the apt' areas either...
anyone have ideas???
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» Doubling up of course.
Posted by: pangolin
PROGRESSIVE WIRE
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