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June 18, 2008 09:40 PM UTC

We must keep our families in their homes!

  • 13 Comments
  • by: LyneaHansen

Will Shafroth released his solution to the mortgage crisis.

Foreclosures recently reached a record high across the nation. More than 900,000 households are in foreclosure nationwide, which equals about 2% of all mortgages. Here in Colorado, there were nearly 40,000 foreclosure filings in 2007- surpassing the national average. Adams County alone saw 2,202 foreclosures in the month of January and has the highest foreclosure rate in Colorado. These foreclosures not only hurt the families that lose their homes, but also hurt the entire community as individual foreclosures draw down the value of all homes in the neighborhood.

There are several contributing factors to the recent increase in home foreclosures including predatory lending practices, the housing “bubble burst,” and the general downturn in the economy. We must quickly turn the corner and map a course on the road to the housing market recovery. This requires a four step plan of action.

• First, do everything we can to help people stay in their homes.

• Second, the housing market as a whole needs a boost to aid recovery.

• Third, we need to crack down on predatory lending practices.

• Finally, we must address the long term systemic economic problems that led to the mortgage crisis in the first place.

For many in the last year, owning a home has turned from the American Dream into a nightmare. Many hard-working Coloradans would be able to get through this challenging time if they only had the opportunity to continue paying their monthly mortgage payments. Keeping people in their homes benefits not only those individuals, but everyone in the community. While this is unquestionably a difficult problem, if we work together – homeowners, lenders, and elected officials – we can find equitable solutions for all. It is time to turn this car around and get moving on the road to economic recovery!

Read my plan for solving the mortgage crisis at www.ShafrothForCongress.com

We can and we must stop the bickering in Washington long enough to keep our families in their homes.

Comments

13 thoughts on “We must keep our families in their homes!

  1. If they can’t afford their homes they probably should not have purchased them in the first place. Say that is wrong.

    And if they fell for predatory loan sharks, is that my fault? Or your fault? Should I have to pay their mortgages now? Or donate my hard earned money to help pay their bills? Money that needs to go towards my own bills?

    I don’t think so.

    Nobody has yet to volunteer to pay mine. And I’ve had mortgages since the mid 80’s. And yes, I’ve made my payments on time each and every year since I bought my first house. Even when times were hard in my household.

    It’s called responsibility and priorities.

    The only part of what you say that I agree on it that “balloon payments” and “ARM’s” need to go bye bye.

    Other than that, buyer beware.

    Simple.

    1. They’re the ones that decided to throw out their rules regarding who was qualified to get a mortgage and who wasn’t. It’s not the borrowers’ fault that the lenders gave them a loan they couldn’t afford; it’s the lenders’ fault.

      That said, I’m not sure that I’d bail them out, at least not on this scale. Whatever money down and principle they paid should be paid back, though.

      1. I think “some” of the mortgage companies are partially to blame, but the overall responsibility falls on, and and should fall on the shoulders of the borrower.

        Nobody forced them into taking out an ARM. Nobody forced them to take out balloon payment loans. If they were to dumb at financial transactions they should have hired an attorney.

        Placing ALL of the blame on mortgage companies is not right.

        That said, I am sure there are some mortgage companies out there that have pushed loans on people knowing they did not understand what they were getting themselves into. They should be stopped from ever legally doing this again.

        But the brunt of the responsibility should and must fall on the borrowers. Any bail out of all these thousands of people that are risking foreclosure will do nothing but raise the costs for those of us that have followed the rules.

        1. There are still compelling reasons for government intervention.

          1. People who lose their homes have declining consumer confidence.

          2. People living next to unoccupied foreclosed homes lose equity, which depresses consumer confidence.

          3.  People who lose their homes are forced into rental housing, which pushes up rental costs which, which hurts the broader renter population and, yes, hurt consumer confidence.

          Unlike past real estate crises, the finnancial innovations that led to the expansion in the credit market (which I hope I get a chance to explain–I’m busy today), have created a situation that is not condusive to normal market clearing mechanisms.

          If the Government doesn’t take action we will all feel the impact.  If banking regulation had kept up with finnacial innovation (which I advocated 10 years ago) or If the government had taken action a year ago (which I advocated for) we wouldn’t be facing the worst recession since the early ’80’s (the recession was unavoidable, and has many causes, but the housing component is going to make it much longer and deeper, with a much slower recovery).

          There were people who didn’t think the government should have taken action in the great depression and unless you are one of those people, you must ask yourself, what is the point the government steps in to protect the economy.

          1. as far as I am concerned. As long as that action is to make the rules of borrowing more clear and more defined. In other words, eliminate shady easy loans and allow only conventional loans.

            But if government intervention means that us taxpayers have to bail out these home owners, no way. I refuse to accept having to pay someone else’s mortgage simply because they were too stupid to understand what they were getting in to.

            We need to get as far away from the “nanny state” ideals and more towards self responsibility.

            We are all grown ups here aren’t we?

            1.  

              I refuse to accept having to pay someone else’s mortgage simply because they were too stupid to understand what they were getting in to.

              Otherwise we would be out of Iraq–most of us don’t want to spend money on that.

              The mortgage crisis is a strategic threat to the long term health of this country–Why are you weak when it comes to defending americans?  There are real threats out there and if we don’t take action to protect Americans, this country is is danger.

        2. By that reasoning, contaminated tomatoes are no one’s business but those who were foolish enough to buy them, eat them, and so “dumb” at biology they failed to hire their own pathologist. Nobody forced them to order a BLT. Nobody forced them to chop tomatoes onto their tacos.

          The mortgage spree existed because financial shuffling championed by Phil Gramm, who pulls down a paycheck from UBS while advising John McCain on economic policy, allowed mortgage lenders to securitize their loans and sell them off (to UBS, among others), divorcing the lender from the risk while the scam pumped money out of Americans with deals too good to be true.

          1. Should I have to pay for their stupidity for falling for a scam?

            You can volunteer if you want but I don’t think my tax money should in any shape or form be used to bail out these borrowers.

            Correct?

      1. I say tell them to move.

        The joys of being a renter is “mobility”.

        Oh and tell them to also buy renter’s insurance. We don’t want to hear their sob stories when the house they rented burned or was robbed and they “lost” all their possessions.

        It is cheap. It saved me a lot of money when burglars broke into my rented house many years ago and cleaned me out.

  2. Unlike 2B, I personally couldn’t care less how the government wants to use my tax dollars.  Ridiculous wars, bailing out homeowners, fixing potholes…hell…buy every American a handle of Grey Goose, I really don’t care.

    But when people choose to buy a house, they damn well better know what they’re getting into.  Of course, mortgage companies should fully inform borrowers of what’s going on.  But it’s not like 900,000 people were somehow bamboozled.  Naturally, some were…but it’s not like 9 year olds are buying houses.  These are adults.  Adults make choices.  Sometimes they’re remarkably bad ones.  But does that mean the government should be there to clean up after them?  

    The 3rd and 4th steps of Shafroth’s plan sound lovely.  But the first 2 just strike me little more than using a band-aid cover a gun shot wound…

    The “American Dream” of owning a home, as Will (Lynea) puts it, is a funny thing.  Maybe it’s just me, but the American Dream is a risk/reward situation.  You’ve got to put a lot on the line to achieve the “American Dream.”  If you fall short, well, that just seems to be part of the process…

    1. I asserted above that the situation is entirely the fault of the mortgage companies, and virtually none of the borrowers’. Why? Because they were the ones with the decades (even centuries) of experience and decided to throw out a proven formula so that they could originate loans and then sell them on the market with no care whether the borrowers could really afford it or not. And they knew whether the borrowers could afford it or not.

      NPR had a very interesting episode of This American Life dedicated to the mortgage crisis. They related the story of one loan consultant who was denying applicants only to have her decisions superceded by her superiors. There was also some outright fraud going on; there was a woman employed as a cleaning lady who was told to claim a

      MONTHLY income of $15,000 so she could qualify for a $500k mortgage.

      This was all driven by the market of buying and selling mortgage securities which was extremely lucrative for a while there. That became the focus, and it didn’t bother the loan originators any because it was going to be someone else’s problem if the borrowers defaulted.

      Poor people don’t know anything about finance, so they didn’t know what they were getting into. I’m not sure, given the situation, how they were supposed to learn. I learned from my parents who owned their own house; who teaches a poor person living paycheck to paycheck about saving up 20% for a down payment, or how escrow works, or mortgage insurance (for those who put up less)?

      So, even though it’s against my sense of personal responsibility, I can’t blame the borrowers. Again, all they did was show up and apply for the loan. It was up to the mortgage company to assess their income, assets, and desired property and say “NO” if the borrowers couldn’t afford it.

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