Over
at Mish's place, they're all in a lather over Obama's effort to backstop mortgages with momey that does not exsit. Here's one sample:
I bought a house eight months ago. We saved for years, and we made sure to buy something we could afford even if one of us lost their job for six months or more. I have zero desire to be subsidizing idiots who don't even understand the loans they're taking out.
Here's another one, from
a book that might be worth reading, drawing a parallel from ancient Rome:
“By the 5th century in the West, the empire was literally burning through its capital - its productive farmland and its peasantry. Peasants deserted their lands, so power and wealth were increasingly concentrated in the hands of large landowners, who then used their influence to evade taxes. …. As state finances deteriorated, public services like roads, bridges, aqueducts and the postal service broke down.”
Atlas is shrugging in California as businesses flee the state. With all the anger over the endless bailouts for the profligate and incompetent, could it happen on a wider scale? Hmmm...
The larger point I picked up from Mish's post was the possible conversion of non-recourse loans to recourse loans.
ReplyDeleteNormally, refis are recourse loans.
When people get themselves into recourse loans, they expose themselves to a lifetime of crushing debt if the deal goes bad. I had never considered this eventuality, as all the mortgages I have had have been conforming and thereby non-recourse.
Unless this is specified in the new law, people who accept these terms may be unwittingly swallowing a treble barbed hook. Talk about lending sharks...
The other point that amuses me is the whole issue of "underwater" mortgages. Your house is where you live. If you're a real estate speculator, you might be interested in whether or not you're underwater (just like an employee with stock options). But the whole notion of taking out a 30-yr loan with no intention whatosever of paying it off is beginning to bite the Boomer retirees, who find themselves in retirement with diminished investment portfolios they considered to be "savings" and, in terms of life expectancy, infinite mortgage indebtedness.
We don't think twice of getting a car loan for $30-40-50K which is, in fact, going to be "underwater" the moment the car leaves the lot. We buy the car for transportation and pleasure. Homes are not an "investment" for the vast, vast majority of families, just as cars or mobile homes or RVs are not "investments".
I know that's bad news for those who hunger for a 60" plasma HDTV and a pool, and bought a house as a permanent line of credit ATM card, but that's the way it is.
The "creative" team on the ad agency that dreamed up the line "your home is the largest investment you'll ever make" should be taken out and cudgeled to death. Well, maybe that's extreme. Flayed.
Secular, that was a wonderful comment. I'm going to excerpt it into another post.
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