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HOUSING: Bad choices shouldn’t be rewarded

Letter by Bruce A. Meyer, Gig Harbor on Nov. 9, 2010 at 1:44 pm with 56 Comments »
November 9, 2010 3:53 pm

Re: “State needs five-year moratorium on foreclosures” (Viewpoint, 11-9).

The writer, Dan Leahy, states we need to return to reality and then he himself runs as far away from it as possible.

Yes, there was a housing bubble. Some people gave bad advice, some people took it. Some people took mortgages they couldn’t afford, and some banks granted mortgages that could not be paid back.

Reality entails responsibility across the board. Leahy seems to feel that is too harsh and should only be selectively assigned.

Those who gave bad advice should be out of a job, and no one should listen to them anymore. Those who chose to heed that advice have financial problems they have to extricate themselves from no matter what the pain. The people who took on financial responsibilities they couldn’t handle hopefully have learned never to do that again, and the banks that made loans that can’t be repaid will lose their initial gains when foreclosure puts property on their books well below the monies they loaned out.

Leahy states that mortgages should be written down to current property value. Would he also assert that people who bought stocks in a market rally should get their money back if the market sells off?

Reality involves consequences for one’s decisions and actions. To nullify these consequences simply ensures that the negative costs of bad choices are rewarded and will surface again and again in the future.

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  1. PumainTacoma says:

    School of hard knocks says: Don’t borrow more than you can pay. Don’t ask others to pay for your mistakes. Don’t bite off more than you can chew. And for god sakes, DO NOT expect your credit to be free and clear in five years time.

    I am so tired of people who GAMBLED. Yes, gambled with their money. I do not owe you anything for your addiction. Cut the credit cards, take the bus, walk, ride your bike, go to thrift stores, and stop buying crap you can’t afford. It is your loan. OWN UP TO IT.

    As a recent sign reminded me” PUT YOUR BIG BOY/GIRL PANTIES ON AND DEAL WITH IT.

  2. or, just become a lib and make it everyone else’s fault.

  3. PT – “School of hard knocks says: Don’t borrow more than you can pay. Don’t ask others to pay for your mistakes. Don’t bite off more than you can chew” and “tired of people who GAMBLED. Yes, gambled with their money”.

    The people who gambled and needed a bailout were Wall Street, the Banks, and other lending institutions that made, backed, and traded in sub-prime mortgages.

    The majority of people who have lost, or are about to lose, their homes to foreclosure did so because they lost their jobs do the economic meltdown brought about by the reckless gambling of Wall Street, the Banks, and other lending institutions.

    IS – were there no conseritvies that lost their jobs and their homes?
    The housing foreclosure crisis is part of the economic meltdown that is destroying our country.

  4. Sumner401 says:

    Writing bad loans, should be rewarded?
    I understand the idea of only buying what you can afford, but when a bank tells you you can afford it and hands you 500K for 200K house, how is that your fault?

    Deregulation is what caused this, the banks raped the public and the GOP set things up so they could. They did it with the S&L years ago and they made billions, they liked it, so they did it again and made trillions.

    Stop deregulating things!

  5. redneckbuck says:

    There were laws passed that forced some of those banks to lend to people that did not deserve it. Let’s start with Freddy! Who formed those laws again and who was overseeing Fredd?

  6. Sumner — Oh come on! The banks never told anybody what they could afford. They told them how much they could qualify for, based on their income. It’s not the same at all. 10 different families might have 10 different ways they spend the same amount of money so it’s up to the person who borrows the money to make sure they only borrow what they can afford to pay back.

  7. Why does the right wing always blame the victums and support the crimals.

  8. xring — Just say Joe Homeowner bought his house for $200,000 in 2003 with a zero-down loan, then refinanced it in 2007 for $350,000, putting $150,000 cash in his pocket. Then say he lost his job in 2009 so he hasn’t made a payment for over a year and is in foreclosure. Please explain to me how pocketing $150,000 of someone else’s cash and living rent-free for 2 years is getting ripped off?

  9. Sumner401 says:

    There were laws passed that forced some of those banks to lend to people that did not deserve it.

    No there wasn’t. Your source is lying to you….again.
    It’s been more than covered and your post is wrong.

  10. Sumner401 says:

    The banks never told anybody what they could afford.

    When they give you a loan, they are telling you you can afford it.
    They gave out loans they KNEW people couldn’t afford because they KNEW they wouldn’t hold on to the note.
    They screwed people, and you know it.
    why do you people defend them?

  11. ronneiew –
    How many homeowners actually refinanced before they lost their homes?

    The only way a lender would refinance for $350,000 would be if the home was worth more than that amount.

    And if JH had $150,000, rest assured the Banks would have founded it and taken it before they foreclosed.

  12. nokoolaide says:

    “I understand the idea of only buying what you can afford, but when a bank tells you you can afford it and hands you 500K for 200K house, how is that your fault?”

    Are you serious? The answer: Did they put a gun to your head? It would be YOUR fault!

  13. xring — It’s really easy to see how many homeowners refinanced their houses after they bought them. Go to http://www.northwesttrustee.com and enter your zip code. You will see a list of houses in that zip code that are in foreclosure. Pick a house, look up the owner’s name on the Pierce County website, then search the recorded documents section of the County Website to see the deeds of trust that homeowner has recorded. You will be astounded that the vast majority of houses in foreclosure have deeds of trust larger than the original purchase price. Seriously, it’s almost all of them.

    Yes, up until the fall of 2007 banks were doing cash-out loans up to 100% of a home’s value. If you bought a house in 2003 for $200,000 it could have been worth $350,000 by 2007. Even government loans (FHA) could get you 95% cash out.

    If JH still had the $150,000 they would take it from him, but he doesn’t because he spent it.

    See, that’s the real crux of it. Homeowners were taking cash out of their houses to enhance their standard of living and they got used to it. Now even people who haven’t lost their jobs are having trouble making ends meet on the same income because they can’t borrow extra money anymore.

  14. aislander says:

    ronniew: It seems to be of vital importance to certain lefties on this forum to obfuscate and cover up the federal government’s role in the sub-prime debacle in both creating the pressure to make the bad loans, and providing a buyer-of-last-resort for them…

  15. aislander — that’s definitely true. Banks have to submit HMDA information to the government. If they aren’t writing enough loans to “disadvantaged” groups they get in trouble. There certainly was pressure to create a loan that was attractive to both borrowers and investors.

    A friend of mine bought a condo last year. He wanted to do a 3% down FHA loan but FHA wouldn’t endorse the condo project because the builder had not done enough marketing specifically to minorities. He had done plenty of marketing to sell his condos, but none of it was targeted directly to minorities. Luckily my friend’s parents were able to help him come up with the 10% down payment he needed for a conventional loan.

  16. Sumner401 says:

    aislander once again we find our selves here, me asking you for proof of your wild and false claim about the big bad scary govt. forcing or, now that you have back off “creating pressure’ to make loans.
    You know ti isn’t true, everyone knows it isn’t true and yet you persist with the lie.
    Why do you do that?
    Can’t you just admit that you have bought the snake oil?

    Facts and truth aislander, why can’t you righties ever tell the truth and deal in facts?

  17. Ronnie and Aislander – You are both correct re. Gov.’s interfering mandates via Fed. Res. and Fan / Fred.
    It is called the “Community Reinvestment Act of 1977″
    ahem…that would be…Jimmy Carter

    ronnie @ 8:16…I concur…

  18. Ronniew – and some were taking money out just to pay bills, and try to lower their home payments. It was also good for tax reasons as home interest is deductible.

    Lars – And Reagan and two Bushes did not try to change it because two many people (bankers) were making two much money. Un-regulated business is a conservative tenant, not a progressive one.

  19. Reality involves consequences for one’s decisions and actions.

    How do I get million dollar bonuses for decisions that throw the entire world’s economy into crisis and criminal actions?

  20. First_Lefty says:

    ronniew says:
    November 10, 2010 at 10:28 am
    Sumner — Oh come on! The banks never told anybody what they could afford. They told them how much they could qualify for, based on their income. It’s not the same at all.

    My credit union has advised me several times of what I can afford. Can’t the big banks….what was the saying?…..oh yeah….PUT THEIR BIG BOY/GIRL PANTIES ON AND DEAL WITH IT.

    Difference? Our credit union is a cooperative (read SOCIALIST) operation of MEMBERS (read “like a union”). We are responsible to each other and know that respossing houses and other collateral turns us into a sales operation that we don’t want to be. We loan responsibly so that everyone wins.

    What a concept, huh?

  21. First_Lefty says:

    make that repossessing

  22. First_Lefty says:

    Leave it to a Con to misinterpret the CRA.

    There is a difference between lending discrimination and lending control.

    There is nothing a bank loves more than to charge 5 points above the going rate because of credit rating.

    So take inflated values, add higher interest and what do you have? Short term gains by the lender – until the bubble pops.

    Doesn’t that sound like Wall Street 2008?

  23. aislander says:

    Why is it SO important for lefties to deny the reality of government’s role in the sub-prime disaster? Barney Frank even denies he said what he is on tape saying…

  24. aislander says:

    Could it be that they’re preparing to do the same thing all over again in the lame-duck session?

  25. Sumner401 says:

    Aislander what ‘roll’ of the federal Govt?
    Are you still spreading the lie you have not been able to back up?

  26. aislander says:

    What do you mean by “roll,” sum? I wrote “role…”

  27. aislander says:

    By the way, sum: SAYING that something is a lie that is NOT a lie sounds like, well…a lie.

  28. First_Lefty — Credit rating is the single most important factor in predicting who will default on a loan. If you were going to lend your own money to someone who was a little iffy wouldn’t you charge a little more interest because of your higher risk? If the government is pushing for increased home ownership and everybody with clean credit already owns a home what are the banks supposed to do about lending to people whose ability to pay the money back is suspect?

  29. xring — Yes, they paid off credit cards and other debts, so they don’t actually have the cash stashed. But spent is spent. Whether I ran up my cards then paid them off with equity from my house or just took the equity as cash and spent works out the same. Also, once you’ve borrowed the money, the value of the house becomes irrelevant. If you owe $350,000 the payment is the same whether the value is $500,000 or is only $250,000.

    You know why people who haven’t lost their jobs can’t make their payments? Because for the last 10 years they’ve been spending more than they earned but they’ve been getting away with it by paying off their credit cards with equity from their houses and stretching out the payments 30 years. Since house values started dropping in late 2007 they haven’t been able to refinance to clear their credit cards off so now their cards are maxed. I know a lot of people in financial trouble right now who haven’t cut back their standard of living one bit.

  30. First lefty sez – “So take inflated values, add higher interest and what do you have? Short term gains by the lender – until the bubble pops.

    Doesn’t that sound like Wall Street 2008?

    Nope…sounds like 1978-1980. 14.7% interest rate for conventional home loans
    backed by Fannie.
    I know . I was trying to buy a house using conventional. Got really blessed with a “By Owner” sale at about half the interest rate.
    Side-stepped Carter…
    Now if only we could finally deal with the “Frank-n-Dodd” monster, huh?

  31. there plenty of blame to go around, so let’s playing the blame game and one-up-man-ship and put our skills and intellect to work finding a way out of this boondoggle

  32. aislander says:

    xring: We NEED to fix blame where it belongs and do it quickly, since I understand that Barney Frank, et al are making noises about again pushing for more “equitable” lending practices in the home-mortgage industry…

  33. aislander — everybody involved — banks, consumers, investors, and the government are all to blame. Everybody played a part in creating this mess. The government has responded by creating legislation to make lending more transparent from all angles. It is now illegal to lend money to someone who cannot demonstrate through specific parameters that they can pay the money back. The banks have responded by following the legislation and only lending to the people who fit within the parameters delineated by the government (via FHA, VA, Fannie and Freddie.) Now it’s up to the consumer to change spending habits so they can buy a house within the new regulations. No more bouncing checks to KFC if you want to buy a house. For a while now people have been lavishly furnishing their apartments, then complaining they can’t afford to save for a down payment. People are just going to have to figure out how to stop buying “stuff” if they want to buy a house.

  34. Islander
    “denies he said what he is on tape saying” … “preparing to do the same thing all over again” sound more like the Repubs and TP, but the Demos have been known to do the same

    – ‘fixing the blamed’ – the problem is that fixing the blame often becomes the goal rather than finding and enacting a solution.

  35. Sumner401 says:

    By the way, ais: SAYING that something is a fact that is NOT a fact sounds like, well…a lie.

  36. Sumner401 says:

    Still waiting for you to prove you wild lies aislander.
    Just how did the evil Govt. force….or ‘put pressure’ on banks to write bad loans?
    Spelling smack is for losers and so far that is the best you’ve been able to come up with.
    So knowing you have nothing to back up your wild lies, why do you stick with them?
    Common sense would dictate you look else where for a reason, but you don’t…why not?

  37. aislander says:

    Keep up the charade, sum, but we’re turning this thing around…

  38. aislander (because I’m ignoring Sumner) — in a nutshell, how the govt pressured banks into creating crappy loan products was the passed the CRA in the 70’s which said banks had to invest in the community or get shut down. Then, in the 90’s, to see if it was being done the OCC and HUD started mandating HMDA information for everyone who inquired about a loan. If the HMDA info showed that loans weren’t being made in proportionate numbers to minorities the bank got in big trouble. In fact, if there wasn’t a proportionate number of minorities even applying for loans the bank got in trouble. Since a disproportionate number of minorities are below average income and people below average income are more likely to have lower credit scores, it became necessary for banks to create loan programs tailored to those with lower credit scores and the only way the investors who back those loans would go for it was if the loans were priced and structured to reflect the extra risk of default. (Sure wasn’t much of a fair shake for minorities trying to climb up the ladder after the civil rights movement to get caught unknowingly in this political power-play, was it?) Now, fill in about 4 million details and that’s why the government shares some of the blame.

    How can anybody NOT understand that after the entire loan industry has been dissected in the press over the last 3 years?

  39. aislander says:

    ronniew: I’ve covered this ground in other threads, but I think sum’s agenda causes a reflex that, no matter the evidence or the source, results in a denial and the accusation of lying. His problem, not mine. I don’t think anybody believes that the federal government was not an integral part of the the economic collapse–except for sum…

  40. Sumner401 says:

    Keep up the charade, sum, but we’re turning this thing around…

    The only ‘charade’ ais, is the one you keep trying to tell.
    Where is your evidence ais?? Surely you have some……..don’t you?

    And I do agree, you will turn around the recovery and head us right back into depression.

  41. Sumner401 says:

    ronniew: I’ve covered this ground in other threads, but I think ais’s agenda causes a reflex that, no matter the evidence or the source, results in a denial and the accusation of lying. His problem, not mine. I don’t think anybody believes that the federal government was an integral part of the the economic collapse–except for ais and his far right propaganda puppet master.

  42. Sumner401 says:

    ronnie, it’s nice that both you and your sock puppet aislander tell the same tale, but then you got it from the same place so it stands to reason.

    I’ve tied for months now to get ais, to provide some proof or some evidence to back up his/your wild and false claim, he hasn’t been able to do it.
    He did try and he has backed off his claim of the big scary evil Govt. “forcing” banks to write bad loans. At least he is smart enough to know that much is a lie and doesn’t want to get caught telling it again, even though he and you firmly believe it.
    I’ll ask you again ais….ronnie, to provide some proof or even some evidence to at least back up a little tiny bit of your wild lies.
    Can you do what no other rightie will?

  43. aislander says:

    ronniew (and whoever may be interested): Here is an article published in the Boston “Globe” from Sept. 28, 2008 that pertains:

    http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/

  44. aislander – look at your cited URL – “/editorial_opinon/oped/articles”

    Two mentions of it being an OPINION piece as opposed to one saying it was an article. I could cite some OPINION pieces by a much loathed by the right, Nobel prize winning Economist. Not sure how it would change anyone’s own opinion.

    ronnview (because I’m ignoring Sumner) Ummm………that isn’t really ignoring him…….

  45. about your cited article:

    Jeff Jacoby’s column has been published on the op-ed page of the Boston Globe since 1994, when he was hired as a counterweight to the paper’s liberal columnists[citation needed]. From 1987 to 1994, he was chief editorial writer for the Boston Herald. Within months of his debut at the Globe, he was described by the left-leaning Boston Phoenix as “the region’s pre-eminent spokesman for Conservative Nation,
    [....]
    In 1999, he became the first recipient of the Breindel Prize, a $10,000 award (since increased to $20,000) for excellence in opinion journalism awarded by Rupert Murdoch’s News Corporation.

    Ah….gee…..Rupert Murdoch likes him. And….he was suspended for being a “recycler” of other people’s words (his employer refused to call his plagiarism for what it was)

    http://en.wikipedia.org/wiki/Jeff_Jacoby_%28columnist%29

  46. aislander says:

    Very interesting, bB. So, where’s he wrong?

  47. Thank the Community Reinvestment Act and the Democratically lead congress of 1977-1979 for the bad loans and current financial crisis.

    Community Reinvestment Act (from http://financial-dictionary.thefreedictionary.com/Community+Reinvestment+Act)
    A 1977 U.S. law encouraging banks and other lending agencies to extend credit to low and moderate income persons wishing to buy a home. The original contained no penalties, but prohibited lending institutions from discriminating against a potential homeowner based on where he/she lives. Regulatory changes in 1995 and legislative amendment in 1999 are often blamed for encouraging banks to make excessively risky loans in exchange for the ability to offer investment and insurance services. Because of this, some believe the CRA is responsible for the housing bubble that contributed to the recession that began in 2008. See also: Credit Crunch, Gramm-Leach-Bliley Act

  48. To start aislander……by totally ignoring the re-packaging and reselling of subprime loans on multiple occasions so that the risk was exponentially increased to the point that it represented an upside down pyramid. Or ignoring the Reagan-era legalization of sub-prime loans. Or the “investment” in financial products that were essentially wagers on whether these derivatives created out of sub-prime loans would go south..

    Where he went wrong – as I tried to point out to you by noting that I could cite biased articles from the other side – was in writing a poltically motivated polemic rather than a fully nuanced analysis.

  49. I thought we were discussing people losing their homes to foreclosure and whose fault it is. Are we also concerned with people who lost their money in the markets because of the whole debacle? (I am, but I mean are we concerned within this particular discussion?)

  50. aislander says:

    So, beerBoy, Fannie and Freddie DIDN’T act as guaranteed buyers for that bad paper and derivatives thereof? Careful, now…

  51. aislander – please cite where Freddie and Fannie bought derivatives.

  52. And……while we are at it……please explain how the FED (not a government agency) had nothing to do with the manipulation of interest rates and therefore has no blame in this.

  53. And……explain why the widespread fraud with MERS and fake courts employed by the Banks in order to foreclose upon properties they cannot demonstrate legal title to should be supported.

  54. aislander says:

    They provided a market for bad paper (mortgages), and doing so supported the market for derivatives of that bad paper. I don’t believe they bought the derivatives directly, but they really didn’t have to…

  55. And therefore the banks are………..?

  56. aislander says:

    The Fed IS a quasi-governmental agency. Which office appointed Bernanke again?

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