Tuesday, July 29, 2008

Housing Stories III

6-month change (to June 2008) in the no. of foreclosures per 1,000 housing units

In Housing Stories and Housing Stories II this blogger found many of the “sob stories” re folks’ housing woes that are appearing in the news to be unpersuasive and often the fault of the borrower. After perusing many more articles since, this blogger still finds very few examples where he agrees that the government should come to the rescue... A few links below:

The first link is the story of Diane McLeod. Let’s count the problems: First, while carrying $25,000 in credit card debt she thought it was a good idea to buy a house with no money down, via a loan that carried an early repayment penalty no less! Next she refinanced her house a year later to cash out all the appreciation to pay off the credit card debt – this incurred the early mortgage pre-payment penalty which she paid using retirement funds, which generated IRS penalties for early withdrawal, which she paid with her credit card! A second refinancing to eliminate new credit card debt… OK, so the illnesses were unfortunate, but while recuperating she ran up her credit card debt again. Bottom line: she never should have bought a house in the first place, complaining about fees and interest aside.

The second link has three sad stories of home loss. The first was precipitated by a divorce, in the second the people in question never could afford the house that was bought (more for sentimental reasons), and in the third a death, an injury, and a layoff. Nothing related to predatory lending or malfeasance, just garden-variety bad luck. It’s true that if the market had just continued to go up then they might have come out all right on selling their properties, but is it the government’s role to make sure that this happens? Or to bail out people when it doesn’t?

The third link speaks for itself. The fourth too – Mercedes, big SUV, big credit card debt, etc. The next link focuses on the effects that foreclosures have on children. Not much financial detail re the cases, but again divorce and ill health figure in many of the stories. The next article deals with the effect on pets, and here this blogger strongly feels that people who abandon their pets like this are lower than the low and deserve to be tracked down and prosecuted to the full extent of the law. The article has the line “Owners forced to sell their homes don't have many options… Suddenly, there's no room in their life anymore for a pet.” True, but leaving a pet tied to a dumped couch, locked up in an abandoned building, left running loose??? How about the local shelter, or get the pet euthanized?? Good grief!

The next article is about homes in Manatee, FL, where 45% of the foreclosures are on 2nd homes and not principal residences… Thomas Wilson apparently was surprised to find out at his closing that his monthly PITI would be $3,276 when he “had been told” that it would be $2,500. Give this blogger a break. First of all one receives information on payments and estimated closing costs in writing a couple of days prior to closing… Ah, “Wilson, who is not currently making payments on the loan, acknowledges that the couple should have looked at the loan documents more carefully.”I didn't read the papers," Wilson said” Second, why would anyone buying a half million dollar home not take the one or two minutes necessary to plug the numbers into any one of a million online mortgage calculators? Come on, how can someone be so cavalier with the largest expenditure they will make in their lifetime? Mr. Wilson generously says “I'm not trying to weasel out of anything. If I owe you $530,000 I'm going to pay it," says Wilson. "Make this loan work with $2,500 (payments) like you initially said. And everyone walks away a winner. If you can't do that, let us out." So, he’s ready to pay $2,500 a month... Hmm, then why is he “not currently making payments on the loan...”?

The bottom line: this blogger is happy for the government to intervene in case of clear fraud (but only if perpetrated without the borrower’s connivance); to render some assistance in cases of unexpected, catastrophic illness and/or a few other hard-luck cases; and definitely only for primary residences. However it is not the government’s job to protect people against their stupidity and/or greed, nor is it to underwrite people’s poor investment choices, nor is it the government’s role to guarantee that home prices continually rise so that people get to ride the gravy train!

Given a Shovel, Americans Dig Deeper Into Debt
3 Stories Of People Losing Their Homes As The Bubble
The Foreclosure Story: What does the Process Looks Like
The Foreclosure Story Number 2: $136K/Year Income to Foreclosure
Foreclosures' financial strains take toll on kids
Pets losing their homes too
Foreclosed dreams in Manatee

Stop The Housing Bailout!

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