Wednesday, March 4, 2009

Relieve Me From Mortgage Relief!

I am having trouble ginning up the sympathy that the NY Times is trying so hard to establish for this "troubled" homeowner
Chadi Moussa lives in a house valued at more than $1 million in Dublin, Calif., in the desirable East Bay area. Unfortunately, he owes nearly twice that much on his mortgage. Mr. Moussa, who runs a used luxury car dealership, is by any definition a troubled homeowner.

But when he looked at President Obama’s housing rescue plan, he saw nothing for him because his mortgage was too high.

“You give $25 billion to a bank, at least they should help people stay in their homes,” Mr. Moussa said. “But once you get to big loans, nobody’s doing anything about it.”

 I swear. If this guy is representative of what average Americans are thinking, then we really are doomed. You have a $2 million mortgage on a $ 1 million house and he wants the government to "help" you?! We're supposed to roll out the tax barrel for the owner of a "used luxury car dealership?" Apparently we are. 

This is simply grotesque. This guy doesn't need "help." He isn't a 90-year old woman with Alzheimers. He isn't a janitor for Lehman Brothers with 6 kids who lost his job. He isn't a retiree slowly dying of a terminal disease. He is an able bodied adult (I refuse to call him a man) who got over extended and can no longer afford the lifestyle he has been leading the last few years. Oh No! Call an ambulance! Such a thing has never happened before!

Then there's this guy:

For Mark Klepper, 50, who lives in Miami, buying a big house was a way to establish credit to start a business. In 2004 he bought a home for $585,000, and watched its value rise to $1.4 million. After refinancing twice, he owes $1,064,000. But the home is now worth a little more than he paid for it, and his income has fallen by 40 percent. He stopped paying his mortgage in January. If he were to continue paying, he said, the drain would crush his business. The government’s plan does not help him.

“I feel if there’s a plan out there, there shouldn’t be a limit,” Mr. Klepper said. “If the government is helping these lenders, they need to take some principal write-downs.”

He asked his lender to reduce his balance to $600,000 and his rate to 4 percent, but so far has made no headway.

Gee, the lender wouldn't knock 40% off the principal on a million dollar loan? I thought everyone got a good deal at the Santa Bank! And way to go on your strategy of "buying a big house to establish credit" to start your business. Only it's supposed to be the other way around. You're supposed to start a business, work your ass off, THEN buy the big house. Again, our taxes are supposed to help this guy? Is he serious? Yes he is. 

Obama's mortgage relief "plan" is inadequate, not just because it is too little too late, but because there are going to be millions of people moaning and complaining because they weren't "helped." And, there will be a small army of non-profits and "community organizers" ready to stoke their resentment and demand their "share," people like this: 

”Even with refinancing and loan modifications, many borrowers will still end up in foreclosure, said Christopher A. Viale, president of the Cambridge Credit Counseling Corporation, a nonprofit agency in Agawam, Mass.

“There’s 10 million households that aren’t being talked about, and they aren’t going to be helped at all,” Mr. Viale said. “They aren’t behind on their mortgages, but they’re putting everything on their credit cards, they’re making minimum payments and paying penalty rates, and there’s no way they can pay off the interest.”

In the past, these homeowners might have refinanced their homes to pay down this debt, but that is no longer an option. “They need reductions of 30 or 40 percent” on their mortgage payments, Mr. Viale said.

For God's sake, if someone's finances are really that shakey, they need to get out of their expensive housing and into something they can afford, whether it's an apartment, a rental, their parent's house, or whatever. If you are "putting everything on your credit cards" you are on the midnight train to the Bankruptcy Court.  Not only that, you will be spending an incredible amount of time and $$ trying to stay one step of your creditors while you frantically try to hold on to a lifestyle that you honestly couldn't afford in the first place. 

Guys like Viale may think that they are "helping" by advocating for relief for troubled borrowers. It's "compassionate!" No it's not. Compassion is telling someone with an unhealthy spending habit and a crippling debt load that they need to stop spending, and work off their debt either through a BK or by, you know, working. It's not fun, I agree. It's much more fun to buy a Hummer on a beer budget and pretend you're rich because your house doubled in value. But maintaining that illusion will not just cripple your finances; it will eventually cripple society if millions get the idea that they can get the government to essentially fund their "middle class" lifestyles. 

People would much rather hold on to the dream of a materially rich life, rather than face the reality that they can't afford it. They will jump at any chance to maintain the illusion and ignore reality. And that's what Obama's "plan" will accomplish. It's little more than magical thinking writ large across American society. 

There's a simple solution to the foreclosure "problem:"  create a mechanism to allow homes to enter foreclosure quickly and painlessly, and facilitate the homeowners finding new, cheaper housing as quickly as possible. No one wants to see mass dislocations, but let's get real. Millions will not be sleeping under bridges because the Evil Bank foreclosed on them. They will live in smaller housing definitely. They might have to sell some of their toys and baubles. Is that a tragedy, Tom Joad Jr.? No, it's not. It's unpleasant, but no one has ever died because they were foreclosed on. But, allowing people to think the gov't can magically make it all better just to avoid some temporary unpleasantness? That is literally like indulging a child. That's no way to get ourselves out of this mess. It's a way to keep the mess going.  

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