Opinion Talk

By KC

March 6, 2008 9:49 AM | Link to this

Two words will ultimately cure the current mortgage crisis - “Laissez-faire” or leave it be. Our government has already disrupted the mortgage market by restricting banks and authorizing risky lending policy. (Example: banks are “obligated” to make loans to borrowers assuming they meet minimum lending criteria. Lenders fear discrimination charges if they turn down a loan to a minority.

Another problem was the number of lenders (World Lending Group, as an example) that preached “interest-only” loans to the masses like Billy Graham preached salvation on Easter Sunday. These mortgage hybrids are certainly not for everyone. A responsible loan officer will recommend a loan product that best suits his clients needs, not his own pocket.

Lastly, the consumer must take responsibility for their own actions. In this case, buying more house than they can afford. Foreclosures have already lowered the market prices of all homes (including those of responsible persons) eroding the equity out of homes and therefore acting like a tax. Government assistance will only punish responsible behaviour and reward risky behaviour. We are all still paying a premium for banking services because the government interfered with the savings and loan debacle. I say, keep the governments dirty hands out of the cookie jar. Let the market fix itself.

By MrKnowGood

March 6, 2008 10:28 AM | Link to this

I believe the best solution to the mortgage crisis is the proposal from the Office of Thrift Supervision.

Banks would reduce the principal of the loan to reflect the new lower value and issue a negative amortization certificate for the difference. And If the house regains its market value and is then sold, lenders have first claims to the profits. Personally, I hope that if the house has been sold several times throughout the years that this “lien” would be covered by title insurance.

This, in my opinion, is the only way to bring a “willing seller” and “willing buyer” back into the market. Currently, with home prices falling, sellers are upside down and can’t sell and buyers are waiting for the market to bottom out — IF they can get a loan.

The real danger, and what no one is talking about (yet) is that interest rates will have to rise dramatically to stop inflation ($105/barrel of oil isn’t going away). And what happens when the market bottoms out, but interest rates are in the double-digits? Falling home prices…with no buyers!!!

By Anthony

March 6, 2008 10:36 AM | Link to this

I dont think the market will fix itself. The market on its on its greedy and doesnt think long term as we see with this mess.How many empty houses are you going to have? The banks haven’t thought about this.It would be better to have the person pay something and keep them in the home then another enpty house which kills real estate values. The banks created this mess and I dont see them doing much to fix it.

By Stan

March 6, 2008 10:55 AM | Link to this

KC nailed it. People AND banks MUST take their lumps for bad choices. The Government MUST stay out of the way

Stan

By hrw

March 6, 2008 11:02 AM | Link to this

Indeed the Mortgage Problems has indeed been a bone-breaking event! To bad that Georgia tryed to follow Virginia with the ongoing building and pricing homes Way-out-of-reach for those who live here in Georgia. Bulders, Mortgage Companies, Real Estates Firms and its Agents compound a heavy industry. Homes ranging in the 500K to 1M cause buyers to reach above their means. Then, there were Builders using Mortgage Companies to keep their money and cause buyers to enter into an agreement(s) that now we see have broken them and in time cause a flooding of Foreclosures all over these United States of America. Banks, Mortgage Companies and everyone else will not recover from this ongoing issues and to make matters worse..the compunding interest that continue to invade the mortgage industry space! How do you cure this problem…well, you can’t, but, willingly, you might want to tell those who are in foreclosure that as a Banker, or Mortgage Company or Lender to make out some arrangements.

By Van

March 6, 2008 11:07 AM | Link to this

I agree with KC as well.

By Gordon

March 6, 2008 11:19 AM | Link to this

I was going to add my opinion, but the very first post by KC said it all. When was the last time government actually solved a problem? When was the last time government didn’t make a problem worse? Think about it.

By CJKatl

March 6, 2008 11:44 AM | Link to this

Having the government step in is predicated on two false beliefs: There are victims and artificially inflating home prices is good long term policy.

People purchased homes they could not afford. They were financially irresponsible. If you ever watch stuff being taken out of a foreclosed home, you’ll see large screen TVs and other big-ticket items. If you are having trouble paying your mortgage, you get a second job, you sell things, you take on boarders. Most people facing foreclosure nowadays aren’t doing that. In fact, they are paying credit cards first.

We all learned as kids that ripping a Band-Aid off quickly hurt more in the short term, but meant less hurt in the long term. Home prices have been jacked up by people getting loans they shouldn’t have gotten or been given in the first place. A quick correction will hurt those people and the people who invested in those loans right now, but in the long term, the economy will level out and this will be forgotten. If we drag it out by keeping people in overpriced homes they cannot afford, the market will be unable to correct itself.

The S&L crisis was deemed the end of the world. The depression was deemed the end of the world. The dot.com bubble was deemed the end of the world. The economy righted itself after each crises.

Face it. Nobody forced these people into these loans. They were in the subprime market because they were already financially irresponsible. The lenders were loose in their standards, but they are taking huge financial hits. Many will not survive. Let the market finish its job. Don’t let the goverment step in and drag this out for decades.

By average

March 6, 2008 12:38 PM | Link to this

Home association prices are rising every year and they have too much power over the foreclosure of your home. There need to be somekind of control (something like rent control) over homeowner association robberies.

By Blind Homer

March 6, 2008 12:47 PM | Link to this

Home prices in the ATL market are down very little, it at all. We need a 15-20% reduction in home prices to get bacck to realistic, affordable housing. Recent reports show Fulton county median family income at $66K and average home price at $272k. How can a family with $66k income afford a $272k house? You do the math.

By J SPEED

March 6, 2008 12:48 PM | Link to this

Is there a way for me to be bailed out of my mortgage? I am current on all of my payments and my mortgage company wants to raise my mortgage because of escrow adjustments. Should that be my responsiblity? Government should pay for my rising taxes and insurance costs!!!

By Rufus

March 6, 2008 1:02 PM | Link to this

If you want to “do something,” maybe start a program to educate clueless home buyers who think they can buy all the house they want on sub-prime variable rate mortgages, but can’t even READ the document they’re signing … and then are shocked, SHOCKED when their payments go up. Or, maybe educate clueless citizens who think it’s perfectly okay to blow whatever’s left of each month’s paycheck on electronic gadgets and bling … what, save money? Who, me?

FULLY recognizing that some people undergoing foreclosure are victims of extraordinary circumstances, and deserving of help, the fact is that the vast majority of people affected by this mess simply have their chickens coming home to roost — they can’t begin to manage their personal finances, much less their personal lives in general. Bail them out? Why? Maybe some of them will actually learn something out of this mess, and do better next time?

Or, is it really the government’s role to save us from our own stupidity???

By What about me?

March 6, 2008 1:07 PM | Link to this

Two and a half years ago, at the peak of the housing bubble, my wife and I bought an expensive home, that we could and still can afford, in a beautiful neighborhood. After 15 years of homeownership—buying and fixing up, selling and moving up—we were finally able to afford the house of our dreams. We have a traditional 30 year fixed mortgage with a substantial down payment. We are both highly educated, and spent the first 8 years of our marriage as renters as we saved money and paid off our college loans.

My neighbors accross the street boasted upon moving in that they procured a 110%, no money down, adjustable rate mortgage. They both work in service industries—he only part time. Neither have any higher education. This is their first home. Within the first couple of months they lived in their house, we saw truck loads of new furniture delivered, they bought a new riding lawnmower, new car, new outdoor furniture, new landscaping, and had their deck and terrace enlarged. Their ARM is scheduled to reset this January and they are understandably, very concerned.

In my small neighborhood almost 1/4 are in foreclosure. I’m sure more will be soon. Home prices have plummeted. Most of the equity in my home has evaporated as my neighbors have walked away from their mortgages and the banks have resold them at huge losses—in two cases on my street—the foreclosed houses sold for $100,000 less than the original owners paid for them. My own house value is so much lower that the county even lowered my appraised value and property taxes. I’ve never been so disappointed to get a tax break.

I see how this is going to play out. I will continue to pay my mortgage on my now grossly overpriced house, my equity will disappear and the loss will be mine alone to bear, while my irresponsible neighbors, who never had any equity to begin with, will be rewarded for their spendthrift ways with lower housepayments and tax credits.

I will continue to save and worry, while they will continue to spend— apparently without worry—and why not? They know help is on the way.

So my question is, what about me? Who will save me? Who will even think about me as I continue to pay my own mortgage and indirectly, begin to pay my neighbors’ as well?

By Fred

March 6, 2008 1:33 PM | Link to this

“When was the last time government actually solved a problem? When was the last time government didn’t make a problem worse? Think about it.”

You know, the U.S military is a government operation… and I think they do a pretty darn good job of solving problems and making things better.

By threedeep

March 6, 2008 2:56 PM | Link to this

What about me? What about all of us?Your situation is not being talked about enough however, there was a report last month on CNN Money of people like you walking away from their mortgages. Fortunately there have been just a few forclosures in our neighborhood but I can see homes on the market are staying their forever. One homeowner has dropped his price $50k which is about $30 less than the average price of a home for sell. It has still sat on the market for months. People have to look at their homes like their 401k or stock investments. You only take a lost if you sell below your purchase price. If you stay in your home another 5 -8 years and the prices rebound and correct, you will not take a lost. So keep paying your mortgage because this all happened before in CA and Boston in the 1980’s and you see their markets grew again…only to crash again.

By Smarty Jones

March 6, 2008 3:11 PM | Link to this

IF any of you need any help call me at 404-579-9802 and let’s see what I can do for you. I tell nothing but the facts and I am a local lender right here in the Atlanta Area. I have been doing this for 15+ years.

Ask for Smarty “For all the right Reasons!”

By well informed

March 6, 2008 3:39 PM | Link to this

the problem is people not understanding what they are getting into, the mortgage process is very complicated and overwhelming. i read a book or two but the wealth of information is too much. i did find this site that will help you out for free, just wish i had found it before i got my mortgage. www.mortgagegoodguy.com

By Avery

March 6, 2008 3:53 PM | Link to this

“Laissez-faire” caused the repeal of the Glass-Steagall Act in 1999 and allowed banks to package, market, sell, underwrite, and manage these debt instruments in-house. From loan origination to hedge fund there were cases of no monitoring.

Allowing commercial banks (who are government-insured) to engage in speculative investment banking activities is not only dangerous (like now), but also essentially guaranteeing investment banking activities through the FDIC.

By Mike

March 6, 2008 4:03 PM | Link to this

Nope. There is no way out. We are all doomed to be living in caves by the end of the year.

And its all Bush’s fault. Neocons!!!

By Confused

March 6, 2008 4:14 PM | Link to this

I have not seen many conversations on the actual cost of housing and who can afford what. Who can afford a 300k to 500k dollar home? Who can afford a house over 250k? My wife and I together make over 6 figures and we still cannot, in our estimation, afford a home over 200k. 1.) We have no credit card debt 2.) Both our cars, Honda Elements, are paid for. We do not live beyond our means, but at the end of the day when we look at the mortgage on a house over 250k we don’t feel comfortable with the payment. So, who is buying all of these 300k+ homes? I just don’t get it.

By Devil's Advocate

March 6, 2008 4:24 PM | Link to this

I am not sure what you’re spending money on, confused, but we bought a 265K home at 5.125% fixed, 20% down, on an income of slightly under 100K and our payment (PITI) is only 18% of our monthly income. No credit card debt, no car payments, no loans, no fancy “toys,” maxing out retirement contributions; it is very do-able. Perhaps different people have different comfort levels.

By Ace

March 6, 2008 4:37 PM | Link to this

There was never a housing “market” to begin with. Loans were being made to ANYONE; no money, no docs, no problem. Mortgage companies, brokers, banks, didn’t care because the loans were sold to Fannie and Freddie and then packaged into securities. People started asking what exactly did I buy here? Mortgage broker’s work on commission so who’s best interest do they have. The higher the loan; the higher the commmission. The more loans I make the more money I make. Every other commercial on TV is a home lender asking you to refi. So if you want a rebound then your saying it’s going to go back to this crazy kind of lending. Not gonna happen but I’m sure people said that in the 80’s too after the savings and loan debacle.

By Pompano

March 6, 2008 4:41 PM | Link to this

I agree with KC except for one item - I see nothing wrong with a Loan officer recommending a product that maximizes his/her own commission (and no I am not in the Mortgage Industry).

When I purchase a car, house, etc I fully expect the sales-person to be looking out for their best interest. The onus is on the Consumer to educate themselves and to seek/negotiate the best deal available. In this information age, only laziness prevents one from being an informed Consumer.

By Ben

March 6, 2008 7:44 PM | Link to this

I would advocate the increased availability of assumable loans; so that people who just want to walk away from their home and the loans can do just that and allow someone else to take over their payments.

By Alecia

March 6, 2008 9:05 PM | Link to this

I despise all of the people that bought over their head or greedy lenders that pushed people into products they could not afford. Unfortunately, some less savy people considered these lenders knowledgeable and depended on them for advice and did whatever they suggested. I am a professional real estate investor, and it is incredible how many times I had to cool down mortgage lenders when they tried to push me into strange products. It is easy to see how a normal person could be misled. That said, I agree with Ben. Let’s bring back the assumables or let the owner’s do wrap around mortgages. Unfortunately, this problem is only going to get worse. We have to realize 1) Rates have historically been 8% 2) Credit has tightened 3) unemployment is growing 4) Inflation is on the rise, wages are flat(stagflation)

By Dawg4Life

March 6, 2008 9:34 PM | Link to this

after being in the real estate business for over 12 years I can say this, people need to learn to live within their means.  Plain and simple.  The formulas that the mortgage lenders use are ridiculous and they share some of the blame, but in the end the borrower knows that it is going to be tight. They go ahead with the mortgage hoping beyond hope that they don’t lose their job, that their cars don’t need repairs and that the baby doesn’t get sick….well guess what, life happens…..

By Me2

March 6, 2008 10:21 PM | Link to this

Some of us weren’t idiots who couldn’t read the mortgage papers. Some of us had horrible, unexpected life problems that put us in a bind.

We are highly educated people who carefully considered the purchase of our home. Our mortgage was very do-able with both of us working, even on my husband’s salary alone. We had plenty left over to play with if we so desired—we didn’t—then my hubby and our newborn found themselves in ICU for months, our oldest son had to have expensive surgery, our medical payments skyrocketed, our investments bottomed out, and my hubby—the primary breadwinner—lost his job. He’s been out of work for more than a year and now he cannot find another one that pays enough to justify paying childcare and transportation expenses.

I am a teacher. I work two jobs, but the ends still don’t meet. We cannot sell our house in this market and we’ve exhausted our savings. We’re behind on everything, but we’re unwilling to take the easy way out. Despite this, we have to listen to creeps who say “life happens.” Just pray it doesn’t happen to you. All the planning and saving in the world can’t prepare you.

By Cassie

March 6, 2008 11:10 PM | Link to this

Me2, thanks for sharing your story. It sounds like you did everything right (didn’t buy the max you could afford, had a savings cushion, etc.) and still things fell apart for you. I hope it gets better soon. Sadly, I think you and your husband are in the minority. Your story is different from those who bought the most expensive house they could qualify for on an interest-only loan and then lost a job or suffered an illness. Unfortunately, the stupidity of many obscures the tragedy of a few.

By Enough

March 7, 2008 2:30 AM | Link to this

Its unfortunate, but a bailout of some sort will be necessary to protect the overall economy. By the time it comes, the casualties will be significant. Just about everyone is at fault but to allow the banking and credit system to crumble any worse will put a strain on everyone. If income verifications are put in place and any one seeking a bailout can prove that they have income to pay for a house they own then assitance should be rendered. Just remodify the loans, even those with good standing should be allowed to participate if they want, to resonable fixed-rate levels. If proven that you are living above your means not due to mitagating circumstances than limited assistance should be provided. Not being one to be envious but I watched as family and friends with jobs at places like the post office, blue collar jobs at Ford, GM, Delta etc purchase homes in the 250 to 400 range. Most were basing income on overtime and buying expensive SUV’s and the like. Eating out virtually every night, refinancing taking trips, cruises etc. Does this sound familiar to everyone reading. Most were in jobs that required little post secondary education so you knew something was not right. No way should they be bailed out. But the people who have owned there homes for 10 years plus to be conned by the real estate, mortgage industry need some sympathy. It is a complex situation which will require some skillful new age thinking. This thing is exploding daily, not weekly or monthly but daily and will require intervention. It it lingers through the spring, the economy will collaspe. The Feds know it, the banking system knows it, the foriegn investors know it, most knowledgeble Americans know it. OPEC is doing everything in their power to cause a collaspe of the US economy. By simply restoring faith in the housing market, the ship will start to be steered in the right direction. Bush’s belief that the free market system can function with no oversight and guidance is why we are in this mess. Mans greed will usually trump what is good for the masses. Its hard to believe there hasn’t been massive rallies in every major city to demand that Congress fix this mess ASAP. I guess everyone is waiting for it to effect them before we realize where this thing could be headed. Bernanke knows that a recession is here, he is trying to prevent a depression. By the end of spring foreclosures nationwide will be at 3%, unemployment at 6%, gas at an average of 3.50. The industry will not correct itself because it is seeking a bailout to. Only legislation to force their hand will correct this thing, the free market system we love will self-destruct if not given a little boost by our great government.

By Michael Smith

March 7, 2008 6:56 AM | Link to this

Bravo to KC and everyone else here who recognizes that this is another government-inspired and caused mess!!

Justice demands that the borrowers and lenders foolish enough to undertake obligations they cannot fulfill suffer the consequences of their actions — so let the market do its job.

A “bailout” is nothing more than an attempt to spread the pain away from those who caused this mess onto the rest of us who did not — it is an attempt to make some individuals bear the consequences for the actions of other individuals, which is the very essence of injustice.

Get the government the hell out of the economy! We need seperation of economy and state just like we have seperation of church and state.

By Michael Smith

March 7, 2008 7:30 AM | Link to this

The idea that this mess is the result of a “lack of oversight” is preposterous.

The banking industry is one of the most heavily regulated markets on the planet. A real estate closing consists largely of reviewing a mass of documents — most required by law — that give all of the details of the loan, what the payments are, when they are due, and what the consequences are for failure to pay. No borrower can go through that process and then honestly claim they did not have an opportunity to know exactly what they were getting into.

I can guarantee that 99% of those now facing foreclosure signed multiple documents stating that they fully understood the terms and conditions of their loan. In the great majority of cases, they simply made a poor decision to take the loan — and the lender made a poor decision to grant it — and they must now suffer the consequences.

By Copyleft

March 7, 2008 8:17 AM | Link to this

“Get the government the hell out of the economy! We need seperation of economy and state just like we have seperation of church and state.”

Terrible idea, Michael. Government “meddling” is the only reason we have a middle class in the first place, rather than a plutocracy. Laissez-faire brought us the age of robber barons and company towns.

Or has something changed in the past century, making economic power the only type of power that can NEVER, EVER be abused to anyone’s detriment? To hear some anarcho-capitalists talk, the marketplace truly IS a magical land.

No, a mixed economy is the way to go; capitalism should operate to serve the PEOPLE, not vice-versa.

By DDT

March 7, 2008 11:57 AM | Link to this

I’ve decided to let my mortgage company foreclose on my crappy condo. I’m renting a cheap place. This is the smartest decision I’ve made, and I’ll be completely debt free once teh foreclosure occurs. My advice? NEVER BUY A CONDO! NEVER LET A HOMEOWNER’S ASSOCIATION HAVE CONTROL OVER YOUR POCKETBOOK! Assessments are ridiculous, and an individual can’t control them. “Common areas” are a great way for local government to pass off its responsibilities onto people yet continue to collect local taxes. And another piece of advice? Decide whether renting is financially better than owning before you sign a mortgage. I tried to rent my condo, and I only collected rent that covered half of the mortgage payment. I’m sick of having all my money go to some bank. Foreclosure is freedom! If you want to foreclose, pay off your second mortgage, and keep paying the HOA fees to avoid litigation. The first mortgage company will take your property and won’t bother with a deficiency judgment. To become judgment proof, just rent for a few years and transfer all bank accounts to your spouse’s name. Don’t have a spouse? Do a fake marriage. Banks are a racket, so stop giving them your money.

By KenFromCalifornia

March 7, 2008 1:06 PM | Link to this

“crime pays”…that’s what the government plan is proving to be be true. find an appraiser who will illegally inflate the value of a house because doesn’t want to be frozen out of clients, then find a mortgage broker who will pretend that he/she is legally obligated to act in the best interest of the loan applicant, then find a real estate agent who will address concerns about affordability with the line, “hey, just sell in 3 years for a profit before the loan resets higher.”, and you have this mess we’re in now. you don’t have equity in your house when your new neighbors bought at premium prices due to fraud. bail them out? protect neighborhood housing values? well, that’s like saying the neighborhood drug dealer has supported the local school with his illegally-gained money. and now that he’s in jail and the money has run out, the government should replace all his money because the kids’ standard of living will go down otherwise.

yeah. right.

By Jackie

March 7, 2008 1:22 PM | Link to this

The way laws are structured lends to unrestricted greed. Everyone needs a place to live. The lenders sell FDIC (government entity) secured entities to make a loan to the potential homeowner. Since there is no oversight in the “free” marketplace, many are forced to agree to any terms presented by the lender. The buyer believes that he will be able to write-off the interest and taxes on his purchase, thereby mitigating the cost of ownership. The problem occurs when the purchase price of the property begins to deflate and the teaser rate offered initially rises regardless of the property valuation. The problem occurs when the teaser rate expires and the homeowner is under the assumption they will be able to refinance their property at a fixed rate that is comparable to that they have currently. Often, they were led to believe that keeping their payments current for a period of time will help mitigate any credit problems they may have had in the past, allowing them to pursue the American dream. Past lending requirements were based upon the fact that anyone wanting to secure a loan must have at least 36% of income dedicated to debt service for the property and other outstanding debt obligations.

By ajt

March 7, 2008 3:46 PM | Link to this

One huge cause of this is the banks and lenders shifted there original and expected focus. In previous generations were primarily a service provider. They offered financial services ranging from investments to loans. An integral part of this service was pairing the customer with the correct service to suit their needs. Under this arrangement everybody prosperred.

Unfortunately in the past decade the banks have squandered their long earned reputations as service providers, and instead have been pushing “products”. Shoving retail loans down the throats of often unsuspecting customers in order to make short term gains.

Unfortunately the only real fix at this point is to let both sides suffer. Any bailing out of banks or mortgage companies rewards reckless and bad behavior, and there really is no way to shelter distressed homeowners. Although slowing down the foreclosure process in Georgia would be a much needed and critical step.

By Live On Less

March 8, 2008 7:40 AM | Link to this

“How can a family with $66k income afford a $272k house?” - by buying my 99K condo, HOA 65/mo, 2 bed, 1 bath, tax value 132K, zip 30337, walk to MARTA train, on MLS, Zillow, Craigslist

By Michael Smith

March 8, 2008 7:50 AM | Link to this

Copyleft, there is no such thing as a “robber baron” — that notion is a fiction invented by Marxists.

Under laissez-faire capitalism, no industrialist has the power to use force against anyone; only government has the legal power to use force. Thus, no industrialist can be a “robber” of any sort.

Let me repeat that: no private businessman — no matter how large his fortune — no businessman has the power to initiate the use of force against anyone. He cannot force anyone to do anything against their will.

Economic power is only the power to produce. It is, for instance, only the power to offer a job at a certain wage — it is not the power to force anyone to accept that job.

However, when government begins to intervene in economic affairs, then “businessmen” who don’t want to go to face competition lobby the government for various favors, regulations, tariffs, subsidies, etc. Then you get the obscene spectacle of hugely successful businesses — like many of today’s farmers — getting subsidies from the government.

Government did not create the American middle class. Nor did unions, whose membership has decline from a high of about 40% in the 1930s to less than 15% today.

America’s free, competition-based economy created the middle class. Unfortunately, today that economic concept is under fire and being inexorably destroyed by liberals and leftists of all sorts. When you finally suceed in killing it off, then and only then will you realize its incredible value. You will realize it as you descend into starvation and chaos.

By Michael Smith

March 8, 2008 8:21 AM | Link to this

Copyleft, you also reveal the moral premise that underlies all attacks on capitalism. You reveal it with this statement:

No, a mixed economy is the way to go; capitalism should operate to serve the PEOPLE, not vice-versa.

Your premise is that someone must SERVE someone else — that sacrifice is the only possible relationship between people, and that all we have to decide is who will be sacrificed to whom. Without government regulation, you claim, the “little guys” get sacrificed to the “robber barons”.

This notion confesses a complete failure to grasp the essence of capitalism. Under capitalism, no one has the power to force anyone to sacrifice, because no one may initiate the use of force.

Under capitalism, the relationship that prevails between individuals is the relationship of TRADE, FREE TRADE in which neither party has the power to force the other to agree to trade against their will.

A free trade occurs if, and only if, both parties think they will be better off after the trade; if either party thinks otherwise, the trade does not occur. Free trade is thus mutually beneficial to the traders — it is the very opposite of the notion that someone must be sacrificed to someone else.

Thus, for instance, when you agree to trade your labor for an employer’s wage, you do so because you believe you will be better off as a result — and so does the employer. Do you wish the wage he offers were higher? Sure you do, just as the employer wishes it could be lower — and both of you are free to seek a better deal elsewhere. But if you reach agreement and decide to work there, it means you both think it is the best deal available at the time — and you both think you will benefit.

Capitalism rejects the notion that all relationships must be sacrificial — it, instead, is based on the notion that all men are created equal and possesses an equal right to pursue their own happiness, with no one having the power to force anyone to sacrifice for anyone else‘s benefit.

By catlady

March 8, 2008 10:00 AM | Link to this

I am not for a bailout of subprime borrowers, altho their decisions have made my life difficult (I would take a huge hit to sell my house and retire, which I have been looking forward to doing). They hoped to get something for nothing (or nearly nothing). I am not for a bailout of banks. They knew what they were doing. I AM for prosecution to the fullest extent of those who enabled this debacle. They should be jailed and their possessions confiscated and sold. That money can be distributed to those responsible owners whose houses have gone down markedly in value because of their neighbors’ greed, and because of the greed of real estate agents, banks, and mortgage brokers, as well as investors. All those who profiteered should be punished! THEY did this to us.

You have to think about what your long-term goals are with legislation. Do we go for the quick fix, or do we use this to teach and reinforce that greed brings you misery? That you are accountable for your decisions? Do not pass laws that mitigate people’s bad choices. That encourages it to happen again. (See the illegal immigrant amnesty of 20 years ago for a prime example.)

By Bought what I could afford

March 8, 2008 10:41 AM | Link to this

Amen to KC. And I have sympathy for “What about me” and for those who are in trouble because of unexpected medical bills or job losses. But I, who bought a three-bedroom house that I could afford, should not end up subsidizing the 4-bedroom, 5-bath homes filled with furniture & electonics that others (like what about me’s neighbors) “bought” with subprime loans and cannot afford. I keep hearing these homeowners in the media whining “it keeps going up and up!” Did they think “adjustable” meant that their rate was going to go down????

By The Truth

March 8, 2008 11:09 AM | Link to this

“Government did not create the American middle class. Nor did unions, whose membership has decline from a high of about 40% in the 1930s to less than 15% today”

Just a side note, this has occurred because a lot industry where workers were unionized have moved out of towns with traditional union strongholds such as Chicago and New York to the Midwest. Industries such as beef processing plants now actually recruit workers from south of the border and pay them low wages and since most of them do not speak english they do not have to worry about them unionizing; there just happy to be here. There are barrio towns cropping up all over the midwest but that’s a discussion for another day. One of the bad side products of capitalism, profits have never been better for the huge companies but wages and the middle class suffer.

By Barbara

March 8, 2008 11:09 AM | Link to this

GA House passes another bill to “cure” mortgage failures.” HB 1217 for Home Inspectors to be licensed by the “State” - this is another traversty to the industry. License Contractors was the first, which has not real meaning because all the contractor working in the residential or commerical industry classified as “speciality” (which is 90%) of the construction industry, do NOT need a “license,” so what is the purpose of all these wasted bills.” Are we as citizens so blinded or self-centered that we do read or care about all the new legislation that is pass on the hill?

By Ace

March 8, 2008 11:19 AM | Link to this

How about licensing the mortgage brokers? What are the qualifications to be a mortgage broker and help people with their biggest investment (probably of their lives) THERE ARE NONE!

By Brian

March 8, 2008 11:35 AM | Link to this

That’s a good idea but it’s probably not going to happen Ace. (license mortgage brokers) The National Association of Mortgage Brokers is a very powerful lobby with a lot of money and influence over members of congress. Heck, a lot of people in Congress made their money in the mortgage/banking industry. They get a pretty good percentage of every loan they sell. They are going to fight tooth and nail before they let that go.

By h ryder

March 8, 2008 11:56 AM | Link to this

I read a few comments and skipped the remainder which may well offer an opinion similar to mine. Some people need to get real. Leave the market alone. Those who will lose a house or become bankrupt should and those who provided the loans should experience the identical fate. If not, then those, including my wife and I, who purchased a home with cash in the last year or two should be reimbursed for the dlifference in our purchase price and the current valuation.

By GaLiberal

March 8, 2008 6:34 PM | Link to this

The mortgage crisis is an outgrowth of Bush’s insane fiscal policy to finance the war and his tax cuts for the wealth with borrowed money. That has lead to the dollar plummeting to third world status, the huge run-up in oil prices, and a tightening credit market. When your money is almost worthless, your creditors want a higher rate to compensate for the loss of value. When you can’t want to pay the increased rate because it would stall the economy, no one loans you money except people (or countries)that need cash worse than you. So China has become our biggest creditor. They loan us a bunch of money so we can keep buying their goods at higher prices and Bush can keep this reckless, unnecessary war in Iraq bleeding us dry so China can loan us more money. Get the picture. Now Bush is even more irresponsible with this phony ‘tax rebate’ to stimulate the economy like we are going to be stupid and buy big screen tvs or new cars or other consumer crap on a measly $1200 or less. He must really be stupid. Or just thing we are all a bunch of suckers. Of course, people were stupid enough to vote for him twice.

When you vote Rethuglicon, you vote against your own best interests. And the mortgage crisis is living proof.

By KimWhit

March 8, 2008 10:15 PM | Link to this

The solution to this debacle is really simple. Sub prime mortgage holders and homeowners who are current on their mortgage can income qualify for a rate modification regardless of whether they have equity or not. Anyone who can demonstrate that they can actually income qualify for a thirty year fixed mortgage payment would automatically be given a market rate thirty year fixed mortgage. Those who don’t qualify (99% of NIVA, SIVA, NINA, SISA loan holders) would have the option of relinquishing their homes to the bank. The process would be incredibly simple with no tax implications or chargeoffs. The bank would not trash the homeowners’ credit with a foreclosure. Just report the mortgage “paid as agreed/voluntary repo” and hit their credit score pretty hard so they couldn’t go right out and buy another house for a few years. They would have to take their medicine and learn a lesson. There is no point in providing relief to borrowers who realistically never afford their homes in the first place. Many borrowers who used stated income loans to purchase their homes never could and never will be able to afford the homes they bought. They knew that they could not afford a $2500/mth house note on a $3000 net monthly income. I worked in the retail mortgage business for a long time (quit one year before the implosion) and have seen borrowers totally on board with the liar loans. They are not victims. They signed the 1003 application showing their income inflated five times above what they actually earned. They had the ability to understand the disclosures because the RESPA Act insures that these are written in plain English with very little jargon. 99% of mortgage documents and disclosures are boiler plate. I observed that many of these customers were totally arrogant and rude during the entire loan process and want everything given to them. They were desperately seeking to get into the $300,000 home with a $30,000 annual income. Those who were complicit with fraud should most definitely lose their homes.

By The truth

March 9, 2008 5:58 PM | Link to this

GaLiberal, George Bush didn’t make ANYONE buy a house they could not afford. Yes, this country is in big trouble and it is ALL due to government. Government IS the problem. Republicans and Democrats are corrupt and neither party has solved our nations biggest problems. We need to drill in our OWN country and seal up the borders. NOW! People need to save more money and quit buying things they can’t afford. If I see one more story on some family that can’t afford gas for their Hummer I’m going to scream. Also, I still don’t understand why people want government to control health care. If you think the housing market is in trouble just wait until Osama or Hillary Stalin gets a hold of it.

By Copyleft

March 10, 2008 9:35 AM | Link to this

How will drilling domestically get us off the oil habit?

And Michael… you really do come across as some sort of free-market cheerleader, but that requires (as I said) pretending that economic power is, magically, the ONLY kind of power that can never, ever be abused.

Without regulation, “competition” doesn’t exist; the larger corporations crush the smaller ones. You can buy stuff cheap at Wal-Mart—but only because you can’t afford to shop anywhere else, because all the good jobs have vanished overseas. And you have the “freedom” to work three jobs for subminimum wage, competing with illegal aliens and third-world sweatshops, or you have the “freedom” to starve if you so choose.

If that’s your vision of “freedom,” say so. But it sure isn’t mine.

By Rob Mason

March 18, 2008 12:04 PM | Link to this

I agree with KC 100% This Keyensian doctrine embedded in the beltway has caused every financial problem we face today. The Markets WILL solve the problem, left alone they will. But no politician has ever left them alone save Jefferson. Markets work Governments Don’t.

By JMV

April 1, 2008 9:06 AM | Link to this

In response to J SPEED above, Why should the government pay your taxes and insurance. This is part of home ownership. When you buy a house the taxes and insurance are not set for the 30 years. If these things have risen out of you reach, then sell, get a second job or take in a tenant.
But everyone has to pay taxes and if they are smart/or have a mortgage they have insurance to protect their investment, why are you any different.

Does the government pay your car insurance for you, do they pay taxes when you buy a big ticket item. Why should they pay real estate taxes and insurance on YOUR property…….

Re: By J SPEED

March 6, 2008 12:48 PM | Link to this

Is there a way for me to be bailed out of my mortgage? I am current on all of my payments and my mortgage company wants to raise my mortgage because of escrow adjustments. Should that be my responsiblity? Government should pay for my rising taxes and insurance costs!!!