Tuesday, February 26, 2008

California Foreclosures: Send in the Clowns

On the front page of the LA Times there is a story by Jonathan Peterson titled Aid on Home Loans Sought...that should scare every potential buyer along with every homeowner. If the Boys in Washington DC have their way they are going to bring the mortgage market to a grinding halt. These clowns want to pass a bill that would allow bankruptcy Judges to not only alter the interest rate and payment on a mortgage but the amount of the loan itself in an effort to "save" homeowners. What a bunch of garbage! While I feel for those who have lost their jobs, had medical problems or faced a death or divorce.. the fact is they are in the minority.

Most of the helpless homeowners the government wants to save never should have been allowed to buy a home in the first place. They had rotten credit and no financial resources. The house payment isn't their only debt problem. Most have huge credit card debt. They can't afford the payment and upkeep on a home with all their other debt. 90% of them will still lose the house no matter what the government does as they have little sense of financial responsibility. The only thing this little bill will do is make most lenders back out of the market. The few who stay will push up rates by 1.5-2% or more to cover future losses.

Think about it... who in their right mind would make a loan to anyone if it could be altered or foregiven by filing bankruptcy. The courts would be clogged by people filing bankruptcy to have their rates lowered and or the amount of the loan discharged. The only thing I have to say about Sen. Richard Durbin ( D-Ill.) and Majority Leader Henry Reid(D-Nev) is what a couple of twits.

The mortgage market isn't in enough of an uproar. Nope.. so these two have come up with a little program to literally destroy the entire industry. Makes you wonder if they ever get outside and see what is really happening in the world. It also makes you wonder just what those guys are smoking in the back room.

I know when Stephen Sondheim wrote A Little Night Music .. he probable didn't have these guys in mind... nevertheless the lyrics sure seem to fit.....Where are the clowns?...Quick, send in the clowns....Don't bother, they're here....

**** Update 2/27/2008: Rumor is that Bush has said he will veto if this passes...

I don't know about you but I'll be firing off a letter to my representatives in both the House and Senate..


Anonymous said...

AGREE 100%

Kaye Thomas said...

Anonymous 8:41,
Always nice to know someone agrees with me..

Anonymous said...

This is an easy one to agree on. It is in the interest of a very small minority, and AGAINST the interest of pretty much everyone else.

If anything does go through, pretty much gives the green light to buy the most expensive house around, live beyond your means, and then get a bankrupcy judge to drop the amount owed! Clearly a moral hazard.

Best thing to do is flush out the system, those that cannot afford should lose and start anew. It's tough, but that is the way that life is sometimes.

Sometimes the political pandering is astonishing.

Kaye Thomas said...

Anonymous 10:33,
Just heard through the grapevine that Bush says if they pass this he will veto it.. and I don't think they have enough votes to override the veto.

Election year politics are always on the silly side.

Anonymous said...

Don't get too worked up over this. Even if it passes it will not have that big of an effect. You describe a situation with a person with low income and lots of debt who never should have gotten the loan in the first place. Well, maybe this will get the lenders to readopt sane underwriting standards and not give loans to those people!

Also, I seriously doubt that this would result in a crush of people declaring bankruptcy just to lower their house payment. First of all, bankruptcy is not a walk in the park. Second of all, it's still all up to a judge. If you have the ability to repay your debts, the judge will not allow you to go through the whole process. This would only effect properties that would turn into an REO anyway.

Kaye Thomas said...

Anonymous 2:14,
As I noted in another comment rumor is that if it passes Bush will veto.. and you are right about bankruptcy being tough but I'd be willing to be money that they will throw in something to make the process easier..

What these guys don't understand is that you can't save people from themselves unless they want to be saved. Most of those in trouble have always been in trouble and this won't fix things.

These guys don't give up so Iwouldn' be surprised to see this one come around again when the administration changes

MBWatcher said...

I think we're all locked arm-in-arm on this one, Kaye.

First, on principle, second, because "noble" efforts to save homebuyers are at best going to prolong the price correction (nationally) and turn it strange, with untold, surprising ramifications.

Kaye Thomas said...

Not quite all of us or stupid ideas like this would never see the light of day..