How to Help Struggling Homeowners Is Nothing New

24 02 2010

FDR’s Superb Fix for Our Housing Crisis.

And I like the kicker — some political peace would make me feel a lot better about my fellow Americans along about now!

Most important of all, by enabling thousands of Americans to save their homes, it strengthened their stake both in the existing order and in the New Deal. Probably no single measure consolidated so much middle-class support for the Administration.

Read to the end to get the gist of what’s really going on and why it isn’t working for those real Americans so rightly wronged yet so wrong about how to make it right:

“Every government foreclosure mitigation effort so far, including HAMP, has depended exclusively on carrots for the industry, usually designed by the industry itself. The industry’s lobbying efforts have successfully denied any stick to go with the carrots, notably the judicial modification of mortgages in bankruptcy (“cramdown”). The acquisition of mortgages by eminent domain will provide foreclosure mitigation efforts with a badly-needed stick.

In normal times, HAMP would better suit our preferences for limited government than HOLC. But the HAMP experiment has failed—and the foreclosure crisis is more dangerous now than it was a year ago. Fortunately, we have a proven method for solving it. We should use it.”

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40 responses

24 02 2010
Crimson Wife

The main reason why we were finally able to afford to buy our own home is because all the foreclosures and short sales brought down prices to a semi-reasonable level. The house we bought turned out to be a regular estate sale, but it was 30% below its peak 2007 value due to the weak market.

The majority of the people losing their homes to foreclosure/short sale did not suffer some unforeseeable event like extended unemployment, disability, divorce, etc. They were simply greedy and/or stupid and bought homes they knew (or should have known) they couldn’t really afford.

Back in the Depression, folks losing their homes hadn’t bought them with 0% down/interest only/no doc mortgages hoping to “flip” them or refinance before the higher payments kicked in…

24 02 2010
JJ

I know California is its own world but people are the same all over. Funny (peculiar, not ha-ha) to hear the philosophy of “simply greedy and/or stupid” right after having this conversation though . . .

(CW, you are one of the most pure Theory X authoritarians I think I’ve met!)

It’s what you believe about this world and how we should live morally here, that either brings us closer together or sets us up to fight each other at all costs. Authoritarians may be fundamentalists or not but for whatever cause, if you hold as natural truth that people are born bad, lazy, sneaky, greedy etc and must be forced, coerced, punished, trained and shamed into acceptable conformity and productive activity by larger, more powerful Authority, then you and I will not get along, I won’t work or vote for you nor consider you my kind — and stay away from my kids!

In management theory, authoritarianism isn’t about Christianity nor any fundamentalist religion. It is simply Theory X. There are Theories Y and Z as well. How different would our parenting and homeschooling divides be, I wonder, if we used those constructs to align ourselves and just skipped the religious wars altogether?

25 02 2010
Audrey

I don’t think the people losing homes are greedy, but I do think the corporate machine that snowed them into believing that paying that much, at those rates, is greedy. I think a lot of people fell for the prosperity propaganda, but in the end, the only ones really prospering are the money-mongers, who are stripping it off the backs of the working class.

25 02 2010
JJ

Cock of the snook to Audrey at Lynn’s!!!! Aaaahhhhhh — the custom-fitting power of story message from the perfect power of story messenger! JJ feels herself basking, basking, no, wallowing, wait, I’m melting . . .

Margaret Atwood delivers a surprising look at the topic of debt. In her wide-ranging, entertaining, and imaginative approach to the subject, Atwood proposes that debt is like air — something we take for granted until things go wrong. And then, while gasping for breath, we become very interested in it.

Payback is not about practical debt management or high finance. Rather, it is an investigation into the idea of debt as an ancient and central motif in religion, literature, and the structure of human societies.

Margaret Atwood writes “These are not lectures about how to get out of debt; rather, they’re about the debtor/creditor twinship in the broadest sense – from human sacrifice to pawnshops to revenge. In this light, what we owe and how we pay is a feature of all human societies, and profoundly shapes our shared values and our cultures.”

25 02 2010
Crimson Wife

Audrey: Those evil greedy bankers held a gun to folks’ heads and forced them to buy homes with a price tag 10x their annual incomes with risky mortgages?

If everyone had stuck to the old-fashioned idea of plain vanilla 20% down 30 year fixed mortgages and homes costing 2.5-3x income we wouldn’t be in this mess. Some people would still be losing their homes because the unemployment rate *is* triple that of a few years ago, but we wouldn’t have the widespread foreclosure problem we do now.

JJ: I think I’m too much of a libertarian to be a true authoritarian. I don’t believe it’s government’s job to force people to do the right thing. Most folks who strike me as authoritarian have a big Calvinist streak. It’s not just a belief in human nature as inherently sinful; it’s that plus the belief in predestination & the consequent rejection of the idea of free will.

Authoritarians want to impose their rules on others like what Dale talked about in his post (very funny BTW, thanks for the link!) I believe that folks should be free to make their own decisions unless that decision infringes on the basic rights of others. I don’t feel threatened by pluralism and certainly don’t think the role of government should be to impose morality on its citizens.

25 02 2010
Audrey

No CW. I did not, at all, suggest that force was used — rather seductive propaganda — far more insidious than brute force. Yes, all people do inevitably have a choice, but when the glossy lies look so pretty and true, it is easy to fall into the big piggies’ traps.

25 02 2010
JJ

And not just when it’s a trap. No one knows how high finance works anymore, not even the Wall Street wunderkind much less their targets. If CW and her family somehow are flourishing as most Americans suffer and literally die (the house was an estate sale, yes?) I confess it surprises me the godly view would be how especially virtuous they must be, to be rewarded with wealth!

Seriously, to believe that people being foreclosed on generally deserve to have the pound of flesh carved from them by their creditors, makes me think CW wouldn’t be so glib if she had to do the carving herself, like Shylock in Merchant of Venice. Reagan “welfare queen” politics was a cheap lie then and is worse now, but at least he was just playing a B-movie role.

Do abused women and children choose to suffer and deserve to because they aren’t as fortunate as CW (so far?) Do addicts or crime victims or natural disaster victims deserve to suffer because they are not wealthy and must have therefore brought that condition on themselves? The mentally less capable, the physically less capable, the socially marginalized, those who had a good job when they bought a house but have lost it and can’t readily get another in this economic crisis ( thus lose health insurance and have a medical need, thus go bankrupt) —

25 02 2010
JJ

Feeding the Beast — our addiction to anger and fear [and blame?]

. . . [w]e need to stop looking for villains and start looking in the mirror. What ever happened to the notion of shared sacrifice and shared responsibility? What ever happened to John Kennedy’s exhortation to ask what you can do for your country?

These are very hard and challenging times for most Americans. The solutions do not lie in anger and demonizing the other. They lie in our own hope, perspective, ingenuity, and ability to be part of the solution.

26 02 2010
JJ

Feb. 25 (Bloomberg) — The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. . .

At present, lenders can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility. Under current HAMP rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification.

The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.

OTOH?
Top Treasury Official Backs Off Promise To Stem Foreclosure Crisis, Signature Initiative May Fall Short

26 02 2010
Crimson Wife

If I were the victim of some unfortunate circumstance beyond my control like a natural disaster or random crime, I would be very upset by JJ’s lumping me in with addicts and others whose suffering is the natural consequence of their own poor choices.

Everyone’s situation is part luck and part the result of all the decisions they’ve made in the past. Bad things can happen to good people as well as to bad people. The previous owner of our home was by all accounts a great guy, who happened to develop Hodgkin’s & die at 62. I have a lot of sympathy for folks who are truly down on their luck, I really do.

However, I don’t have much sympathy for people who suffer through their own fault. When my car insurance premium shot up after I caused a fender-bender, I didn’t get angry at the evil greedy insurance company- I got angry at myself. I made the mistake and now I’m paying for it (literally).

26 02 2010
JJ

About “true libertarians and Christian conservatives” confusing themselves over morality and humanity:The Philosophy of Me

You’d think that the contradictions would be too great, and there are certainly rifts at times between the true libertarians and the Christian conservatives. But for political reasons conservatives try hard to keep a combination of these two philosophical strains in place at the same time, a sort of hybrid conservative that scours the Bible for quotes that can be somehow interpreted as pro-free market and against taxing the rich.

My personal favorites in this genre include a Christian Coalition issues guide which argues against labor unions by quoting a verse about how slaves should obey their masters, and a guy named David Barton who argues that the Parable of the Talents (which some Bible readers might have thought was an analogy about spiritual matters) means that there should be no Capital Gains tax.

. . . every last verse they can find to justify selfish libertarianism is overwhelmed by the literally hundreds and hundreds of verses about helping the poor, loving thy neighbor, showing mercy and kindness, lifting up the oppressed, etc., etc.

. . .Ayn Rand/Glenn Beck — the glorifiers of selfishness, cruelty, and the lions eating the weak — have become the dominant players of modern day conservatism.

27 02 2010
Nance Confer

I, too, am less than completely sympathetic about McMansion owners being underwater (58% of mortgage holders here in FL) or homeless.

OTOH, as you rightly point out CW, luck and personal decisions mix together to get us to our situations.

And I think it is difficult to judge from the outside. How many of these people in McMansions genuinely believed they would continue to be able to support a lifestyle that many of us viewed as excessive? Do I really think these people set out to throw caution to the wind, wing it, risk their family home and circumstances so they could have a pool and a “great room?”

No. That’s not what I really think. What I really think is they are part of a larger society. A society that tells them they should have these things. That having things is a sign that they are living the right way. Even, for some, the way a god wants them to live. That all that stuff is the reward for playing along and doing all the right things.

And now many of them are just as screwed as those of us who have made other, less ambitious, less materially-focused choices.

The difference is that I know how to be broke. I’ve always been broke. 🙂 If I were a good person, I would feel sorry for the yuppies (is that still the right slur?) who have to deal with all the crap of being broke. They have to cope and much of their sense of self-worth is tied up in stuff which they no longer have. It must be difficult.

And I almost feel sorry for them. Almost. 🙂

But I don’t think they should be punished, either. I see that the time has come for many people to discover the joys of “simplifying” their lives — iow, living like the rest of us. But I also see that we are all connected. If the entire construction economy tanks, my DH and a lot of people we know are in trouble. Our incomes — all of us — depend on each other and we need to get over this hump without making it worse.

It’s just not a matter of easily affixing blame and moving on. This is going to be a difficult patch.

Nance

27 02 2010
Crimson Wife

I don’t recall ever arguing for the abolition of the capital gains tax. I *may* have mentioned my belief that there should be no tax on capital gains or interest below some reasonable threshold ($10k or so) in order to encourage folks to save & invest. But the trust fund babies of the world SHOULD be paying taxes IMHO. And I could probably find some verse in the Bible to justify it (Luke 12:48 comes to mind).

27 02 2010
JJ

Did you guys see the NYT story today about how anti-abortion politics have gone pro-black procreation lately?
To Court Blacks, Foes of Abortion Make Racial Case”

It would help actual disadvantaged families more, including racial minorities, to get them health insurance and help them keep a roof over their heads . . .especially after you’ve encouraged them to have larger families whether they can afford it or not.

28 02 2010
JJ

For CW and Nance, re Les Miserables:

For the first time in his life, Javert is faced with the situation where to act lawfully would mean to him acting immorally. Unable to find a solution to this dilemma and horrified at the sudden realization that Valjean was simultaneously a criminal and a good person—a conundrum which made mockery of Javert’s entire system of moral values—Javert decides to remove the problem by removing himself from the problem. . . and drowns himself in the river Seine.

28 02 2010
Nance Confer

CW, I think she’s telling us to go jump in the lake. 🙂

Nance

28 02 2010
JJ

😀
AND at the same time I am embracing most of what you each said!

1 03 2010
Lynn

I love happy endings. 🙂

1 03 2010
Crimson Wife

The NYT also had a brief mention that Pres. Obama is quietly working on a back-up health plan that would cover all the U.S. citizens who make up to 300% of the poverty level and who aren’t already eligible for existing government programs- at ONE-QUARTER the price tag of the current Congressional plan. I couldn’t believe it when I read that! If we can cover everyone who really needs to be covered (U.S. citizens with low-to-moderate incomes) at not too great a cost by expanding eligibility for existing programs, why was there ever this big Obamacare plan to begin with?????

1 03 2010
NanceConfer

Because, for some reason beyond my ability to comprehend, Obama and friends felt it best to work within the existing insurance industry. He also thought (still thinks?) bipartisanship was going to work.

Nance

1 03 2010
JJ

That’s not the only reason. I may be able to pay for a plan CW could afford and not notice or care about the cost of, but the company might just blow me off as too old of fat, for example. That needs fixing too.

1 03 2010
JJ

Also, one-quarter of the cost could mean of the total reform, not of the individual policy. Probably the companies will still be gouging and the cost to the rest of us will just go up that much more, for that much less coverage or consistency to count on . . .

2 03 2010
JJ

Just saw this in my morning reading about our nation’s “doom loop”:

“But, then, we seem to be living in a time when the unacceptable is routinely accepted — and written off as unavoidable.”

2 03 2010
Crimson Wife

If government bureaucrats are going to be regulating the financial system, then they’re going to have to be compensated enough to attract folks who are actually competent to do the job. Otherwise it’ll be like Sarbanes-Oxley- well-intentioned but a disaster in practice. And frankly, I don’t think there’s the political capital to pay the kinds of salaries that would be competitive with what’s being offered in the private sector.

There was a piece on NPR this morning about the SEC and Bernie Madoff. Some guy who looked to invest in Madoff’s fund crunched the numbers and figured out it had to be a fraud. He tried calling the SEC but the incompetent bureaucrats there didn’t want to listen to him.

I’m not opposed to having a certain amount of government oversight of the financial system, but it is imperative to have the right folks doing the regulating. And to get the people capable of doing a good job, they’ll need to be paid quite a bit more than what the current salaries are.

2 03 2010
JJ

So — we would be buying their superior competence and character? Does that mean no one with both as required, will work for the people, not even after making their own millions and perhaps raising a wealthy and self-sustaining family? (Maybe the character isn’t really what we are getting for the money then?)

2 03 2010
JJ

The politicians getting paid the most don’t seem to be giving us good value for the money . . .

3 03 2010
NanceConfer

As I recall that story about the would-be whistleblower, it was a combination of incompetence and lack of interest from political appointees. Not all government workers are created equal.

3 03 2010
JJ

Directly to CW’s point about improving a workforce by improving compensation, we have ample conflicting examples and research. It sure isn’t a guarantee in any field and I’d argue even when it does correlate thus seem to work, it’s not the only or the most important factor.

My dad’s field (for the full second half of the 20th century) was business administration, specifically management policy infused with ethics as the only way to win public or private success that is meaningful rather than illusory like the Emperor’s New Clothes. All through my own studies and career, as I became a grad student and education administrator slash public policy legislative liaison, I brought his perspective into my own management and policy emphasis: get the right people and then treat them right, cheaters never win because it matters how you play the game, all the honorable things we teach our children whether we then run by those lights ourselves or not.

If you are a disciple of this school of thought, competence doesn’t exist without character and money is not the measure of either.

It’s the kind of ethics I always expect “Church” to endorse and am too often disappointed. Hmmm, isn’t the clergy a glaring example? That’s a field that doesn’t attract and retain quality by higher salaries . . .

3 03 2010
Crimson Wife

Can’t speak to anyone else, but my DH spent the summer between the 1st & 2nd years of grad school doing a defense policy internship. He loved the work but the post graduation job he was offered at the end of it paid peanuts. So the next summer, he did an internship in investment banking. He hated it but the signing bonus alone was more than what the entire annual salary for the policy job was. He had loans to pay off and a growing family to support.

It isn’t about making millions but we can’t pay our civil servants 1/4-1/3 of the salary the private sector offers and expect to attract the kind of talent we really need to oversee a highly complex financial system.

3 03 2010
JJ

Except as problem-solving, that prescription is in direct conflict with the other conservative-libertarian “dismantle government” principle of starving and shrinking and discrediting and privatizing it. Isn’t it?

3 03 2010
JJ

I’m thinking it is the corrupted and corrupting private sector salary extremes that create the lure from public service, and the answer isn’t trying to match that excess with tax dollars, but the opposite. Use tax dollars to make our national and global economy work better for us all, so nobody’s family starves and everybody has the chance to do work they love and are good at.

3 03 2010
COD

Government salaries are much more competitive with the private sector than they used to be, at least at the Federal level. In fact I have a friend that recently quit his defense contracting job and went on the Federal payroll doing the exact same job. He got a raise, and all the usual perks and security of working for the government.

3 03 2010
NanceConfer

And I’m pretty sure we don’t want to point to investment banking or any sort of bank salary structure as the template for government pay. People already don’t trust either one. 🙂

3 03 2010
JJ

Florida government has an interesting little proposal going, that state employees including elected officials should have to pay for their health insurance, and that those with bigger families (more children) should pay proportionately more than those with just a spouse, one child, etc.

This makes good sense in some ways and makes the problem even worse in others. Like most policy!

There’s sentiment and good sense in making all state and federal officials pay so they will suffer or benefit along with their constituents and staff. Also, it makes sense that each person on a family plan would cost more and the cost would be borne by the person responsible for those family choices to expand the family in the first place. (Do any of y’all know Who insures the Duggars btw, and do they pay even for a flat rate family plan, or is it some kind of comped gift for reality tv?)

Thinking the prepaid tuition plan is paid for per child, rather than buying family insurance to pay for as many college educations as a family might produce children, for one flat rate.

4 03 2010
NanceConfer

Sounds regressive to me unless they mean this for state employees who make over a certain amount. Of course, that would then be “socialist.” And what are the numbers, I wonder, on how many high-salaried couples have fewer children versus lower-salaried couples with many children? Care to break that down based on race and ethnicity and figure out how many lawsuits are coming?

But isn’t that how health insurance works anyway? If I went to buy private insurance, wouldn’t the price be based on how many of us there are?

Not that the pricing is reality-based to begin with. . .

Nance

4 03 2010
JJ

Right, I have private family coverage now with no “group” and each additional person is not only charged more but each is rated based on age, sex, weight, etc to determine how much more — like life insurance rate tables.

But when I was with the State, a family plan was one flat rate and it didn’t have anything to do with the health variables of the individuals. So it was more affordable than a private sector family plan and it was stable, no mid-year cost increases etc. Also it was partly subsidized by taxpayers (socialism!) because the adult employee is covered for free and that’s the priciest part of family coverage. Now that I am covered independently with my two kids (Dad is covered on his private sector job) we pay very high rates but almost all the cost is for middle-aged JJ, not the kids.

About higher income couples in any sector, they tend to both have jobs (or shall we say careers) to generate that high family income and often with paid insurance as a career benefit. If they both happen to work for the State, then their coverage at taxpayer expense is complete at no cost to them. So in a trifecta, Nance is right again! The lower income state worker (whose spouse is more likely to need to be home rather than working, if there are many children) is already disadvantaged by state health insurance policy and has to pay for the family coverage — and this proposal would make their burden even more unfair, not less so.

5 03 2010
JJ

Inconvenient timing on these data! 😉 CW may want to take up her argument with USA Today today, rather than Snook . . .

Federal Pay Ahead of Private Industry:

“The data flip the conventional wisdom on its head . . . Federal workers make substantially more than private workers, not less, in addition to having a large advantage in benefits.”

5 03 2010
JJ

And the difference between the two universes isn’t just intellectual, it’s also moral. . . the parties feel the pain of different people.

. . . bipartisanship is now a foolish dream. How can the parties agree on policy when they have utterly different visions of how the economy works, when one party feels for the unemployed, while the other weeps over affluent victims of the “death tax”?

. . . Someday, somehow, we as a nation will once again find ourselves living on the same planet. But for now, we aren’t. And that’s just the way it is.

6 03 2010
JJ

Huffington on the American aristocracy destroying the middle class and in the process, their own American Dream:

We’re about to become Venezuela, or Brazil, you know where the people at the top are basically behind they’re [sic] gates with guards to protect their kids from kidnapping. The middle class is crumbling and that’s the country we’re going to become… if we don’t fundamentally change where we’re going.”

Arianna explained that the anger driving Michael Moore is the same as the anger felt by those in the Tea Party movement. “It’s the anger about that fact that what is happening is not fair, that the fix is in, that the system is rigged, and that people who are working hard are not really getting rewarded. And the people at the top who brought us to the financial brink were actually bailed out by the taxpayers.”

6 03 2010
JJ

Where has all the income gone? Look UP

Economic Policy Institute graphic

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