Relief Effort Fails Many At Risk Of Foreclosure

WASHINGTON – The Obama administration's effort to help those at risk of losing their homes is failing to aid many and could spur a rise in foreclosures that would further depress the housing industry.

More foreclosures would force down home prices and that would deter already-ailing homebuilders from starting new projects.

The banks are predatory, it’s really that simple.

Loose your job? *If* you are granted a loan modification, prepare to have a substancial fee added to your house loan, such that you will likely be ‘stuck’ with your home for the next decade - without regard to your job situation - because the bank offered Foreclosure, or a 275K loan on your home loan of 250K.

Or, short sell your home, have the bank eat $100,000 and then purchase another home that is in the short-sale cycle and is marked down even further than your home.

Locally, we are seeing homes that sold for $465K just 2 years ago, now selling for $215K from the bank - and the bank has a surplus of them. In our area, 3/4 of the homes on the market are short sales.

It’s insanity, and Obama is making it worse.

“The banks are predatory, it’s really that simple.”

And none of the buyers were??; and none of the buyers were greedily buying at the late end of a bubble??; and none of the buyers, under “normal” circumstances were persons who should have never been approved for the original mortgage??; and every mortgage holder is absolutely deserving of staying in the home, on any terms?????

Hogwash.

Experts told everyone the current situation would be the case; that the artificial manipulations in the rules to refinance the foreclosing mortgages, was, over time going to find a good many of them back in the position of foreclosure again.

The faster they cut their losses, go back to renting, and get the excess houses re-sold to solid buyers, the sooner housing markets will recover. Keeping the politicized “save us from foreclosure” process going, is just dragging out the pain, not making it go away. The only thing that is going to take it away is for enough buyers and enough banks to cut their losses. The idea that it is only the banks that should absorb those losses is absurd.

Before you go lumping everyone in the same bucket - you have to realize there are several buckets in place.

1. Those who should NEVER have had a house, but got one due to Congressional threats to the banks. Where loans were made in regard to racial quotas, not the ability to pay the loan.

2. Those who took advantage of the homes, such as was rampant in the People’s Republic of California. Radio advertisements stated ‘No credit check’ - where a man could (and many did) buy a mulit-million dollar house with $0 down, and paid $1,000/month for the home. The idea was that the house would appreciate faster than the excess mortgage applied to the principle. Some got wealthy during the boom - others went bankrupt.

3. IMHO, the largest by far - we have 7.3% unemployment here in Utah. Many are higher - but consider; assuming you lost your job it is almost assured that the next job you do get will be SUBSTANCIALLY lower pay than your last job. Supply vs Demand is a Law, not a suggestion. If you have 1,000 applicants per job; not only is the employer able to be very picky, he can also offer far, far less. A major employer in Utah is ATK, where they are offering $56K for a Sr. Electrical Engineer. 2 Years ago that same position commanded $92K - so you do massive layoffs and re-hire at ~60% of the usual rate.

So, if that happens to you; how do you make your house payment? If you ask around, you will see that there are A LOT of good people who are in a situation they never imagined could happen just 2 years ago.

Now, add the fact that not only has your income dropped 40% (through no fault of your own); but your house value has dropped 25-40% as well - yet your payments remain the same.

"Radio advertisements stated ‘No credit check’ - where a man could (and many did) buy a mulit-million dollar house with $0 down, and paid $1,000/month for the home. The idea was that the house would appreciate faster than the excess mortgage applied to the principle."

So who - the lender or the borrower - in such a case was more "predatorial", more greedy? You seem to think the lender was more guilty, while I believe it was a tie.

"assuming you lost your job it is almost assured that the next job you do get will be SUBSTANCIALLY lower pay than your last job."

Many who will get a new job will have to take something less, and some might have to take substantially less, but that is not "assured" for everyone that they will be in your "substantially" lower category. While there are incidents, anecdotal evidence that this does happen, it is (1)circumstantial and conditional, (2)not absolute or universal for everyone who is unemployed.

"Supply vs Demand is a Law, not a suggestion. If you have 1,000 applicants per job; not only is the employer able to be very picky, he can also offer far, far less."

Again, you attempt to make a universal rule of your own, suggesting that labor market conditions for every job will mean that ANY employer seeking to fill ANY job will be able to obtain new hires while offering "far, far less". Is it POSSIBLE in some circumstances? Yes, but again you are wrong because you try to turn the possible, the conditional into an absolute.

"A major employer in Utah is ATK, where they are offering $56K for a Sr. Electrical Engineer. 2 Years ago that same position commanded $92K - so you do massive layoffs and re-hire at ~60% of the usual rate."

Again, that is anecdotal, and situational. Most of the layoffs at ATK in Utah are not due directly to the recession as much as they are to aging parts of ATK's business. Most of the layoffs are a result of NASA's discontinuation of the space shuttle and Minuteman missile programs and to overall changes in federal and commercial budgets and plans in the aerospace industries. Also, you need to be careful when you might be mixing starting salaries in any job category with previous average salaries of earlier incumbents in the same positions - its a little bit of apples and oranges.

Also, in ATKs case, (1) the size of it's layoffs are not "massive" in comparison to its total number of employees, nationally or in Utah (where the layoffs have been reported with different rates between 10 and 20%). Also, in ATKs case, there is no evidence that the layoffs have been pursued to simply refill all the positions people were laid off from with lowered salaried persons.

The worse anecdotal situations, with respect to ATK are a result of history; as when a small town might have had ATK as the overwhelming dominant employer (in one case it was 60% of the town's employed persons) and now the circumstances have changed, the product demands have changed and the things that the one ATK plant in that small town were once perfect for are no longer the things that ATK must concentrate its business on. That kind of thing happens even when there is no recession.

"Now, add the fact that not only has your income dropped 40% (through no fault of your own); but your house value has dropped 25-40% as well - yet your payments remain the same."(/i>

Yes true, it happens. But your opening gag line, that the real culprit is simply "predatory" lenders is wrong, when the real causes are many and varied (not the same in every case) and sometimes no one was "negligent" - lender or borrower - just both caught in a bad period of the housing market.

But, everyone in this country has slipped into a mindset where if something happens (no matter why) it must be due to an evil cause and someone must be protected from the consequences (by everyone else). That mindset drags into the public-protection-from-harm racket everyone whose wounds were intentionally, or by their own idiocy or negligence, self-inflicted. The laws meant to "bail out" the deserving never weed out the undeserving; they don't even try to.

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