The Mortgage Crisis and our Pending Economic Collapse: Whose Fault, Who Gets Paid Twice?

I'm ambivalent, trending towards punitive, towards all the supposedly hapless folks who bought ridiculously overpriced homes at dumb-ass rates that have our economy reeling from the mortgage crisis. I rent, I hate renting, and I deleted, unread, all the "no money down, fifty cents a month...for awhile" mortgage email calls, fliers, and emails I received. Too good to be true? You betcha. Yet, all the Dem candidates are weeping crocodile tears and promising to help these foolish folks who 'bought' homes they couldn't possibly afford without dealing crack and not the sensible ones like me who are still waiting for homes we can actually afford. Where's their plan for us?

I hate predatory lending and its focus on the usual suspects but c'mon! A bubble payment two years down the road twice the FULL value of the overpriced house? Who's zoomin' who? Part of me says "you made your bed, now move it back to your mama's house," part of me says, indict and jail the brokers and loan officers. Well, now we stand on the brink of recession partly due to it and—guess what—the lawsuits against the brokers and real estate agents have begun.

Trouble is, Grandma Jones and Jose "Bedpan" Ramirez—those who could be reliably believed not to know any better—won't be hiring any of these lawyers. The million dollar homebuyers are. Had their eyesore McMansions appreciated overnight, one assumes they'd be the respondents in the suits, not the petitioners, and indignant at being expected to cough up the difference between what they paid and what the home was now worth. But they were trying to 'front,' paid the price for their hubris and are now bound and determined to pass the cost of their folly on to us.

I can't help feeling that the true victims here, the people who really need help, are those like me, like you, who desperately want to own their own homes but won't trade a perfectly good cow to 'invest' in magic beans to do so. Unsophisticated (or rapacious, greedy) buyers have the pity of the nation, enabling/greedy agents and bankers have either their commissions or promotions...what about the rest of us? Where's our advocate now that it will be a million times harder to qualify for a sensible home loan?

Comments

Race card pimps Jessie and Fat Al are pumping this issue for all they can. But, why should tax payers bail out idiots who shouldn't have bought houses in the first place?!? That's socialism! They put their name on the line, and they should live with it!

Is the financial responsibility any different than if you commit a crime? You acted, you are responsible for what you have done! I forgot, taking responsibility for your own actions isn't PC!

Posted by: walt235 on 01/23/08 at 5:22 AM Respond

Michael should do a piece on the "Fake Banking Crisis" surrounding the subprime lending market.

1. All of these "risky" subprime loans usually have a combination of LMI (Lender Mortgage Insurance) funded by the lender through the exorbitant rates, and PMI (Private Mortgage Insurance) forced on the borrower. The purpose of this insurance is to cover defaults. So, the lender losses nothing. http://en.wikipedia.org/wiki/Lenders_mortgage_insurance

2. The insurer, in turn, has packaged these insurance risk derivatives in Credit Default Swaps and peddled them to reinsurance companies through reinsurance brokers. Making handsome profits all the while, the insurer risks nothing. http://en.wikipedia.org/wiki/Credit_default_swap

3. The reinsurance companies have more than adequate reserves to cover these losses, and in fact many are enjoying huge growth in earnings despite breath-taking losses on these derivative products. As you can see, one of the largest derivative holders Swiss Re absorbed a $878 million payout while still posting return on equity 13 percent above their own target. http://www.charlotte.com/463/story/369392.html

Essentially, this manufactured "crisis" is being sold to the public in an attempt to incite panic over the effect on the economy so that politicians will bail out the banks on the front end to prop up obscene earnings on the back end of this financial chain. Losses are not being covered, earnings are... they are trying to stick the taxpayers with an unnecessary bailout.

Posted by: Corrupter on 01/23/08 at 10:26 AM Respond

I completely agree. Both parties in these stupid loans should learn through suffering, but unfortunately the cautious ones will end up paying the tab one way or another.

Even if the loaners/loanees don't get bailed out, the rest of us still have to live with the economy going down the tubes.

Posted by: Michael on 01/23/08 at 6:53 PM Respond

I agree with all of you but sadly it's the American way to shoot first and then cry about how someone made you do it and then u get off by pleading ignorance..remember when the fast food industry 'tricked' people into being overweight? same thing!

Posted by: lyza on 02/14/08 at 10:41 PM Respond