New and Improved 3-ply election thread...

[NightOfJoy]

values voters -

 

I refer to them as morons.

[John Smith]

I'm not referring to the credit markets here.

 

The money from the initial transactions didn't disappear. The seller got their equity, their inital mortgage (if there was one) was paid off and the realtor received their 3 to 6% commission.

 

Yes there was that money in the initial transaction. It's what has happened since then that I am referrign to.

[quarter23cd]

You are an aberration in today's housing market. The majority of people didn't put down 5%, much less 20%.

This is true. Partly just due to the fact that market conditions got so wacky for a while there. We bought our first house in CT in '04 when the whole northeast was turning into one big super-mega-bubble that was just escalating and compounding itself by the year. It was nuts.

 

We were in a situation where we just had our first kid and were asked (politely) to move out of our dirt-cheap (by comparison) apartment in White Plains by the older couple we rented the upstairs of their house from so their son could move home. Multi-bedroom apartments in the area were going for >$2300K per month and condos were selling for anywhere upwards of $300K. We were starting a family and knew we wanted to have a house at some point and felt like if we didn't buy right then we never would, so we ended up buying a modest 100 year old house out in CT as far out from the metro area as a daily commute would allow (50 miles to work, one way) and we spent $280K on it. Our mortgage was $1800, which meant we felt like we got a steal compared to rents in the area. Nevermind that we were only able to put maybe 5-10% down. Just the fact that we were approved was a relief.

 

Was it irresponsible to buy a house and barely be able to put much of anything down? I dunno, at the time we felt like we did what we had to. We never missed a payment. We certainly weren't being trying to be greedy by biting off more than we could chew. Renting wasn't any better of an option, price-wise. Everything was going up so fast in price, it was dizzying. I think this is a situation a lot of people found themselves in. Sure there are a lot of foreclosed McMansions out there these days, but at least in certain areas of the country with ridiculously high housing markets, a lot of people just grabbed whatever they could and tried to hold on. (not to mention hoping the trend of rapid price increases would continue long enough that they could "flip" them for big bucks later on, but that's a whole other thread in itself)

[JUDE]

Was it irresponsible to buy a house and barely be able to put much of anything down? I dunno, at the time we felt like we did what we had to. We never missed a payment. We certainly weren't being trying to be greedy by biting off more than we could chew. Renting wasn't any better of an option, price-wise. Everything was going up so fast in price, it was dizzying. I think this is a situation a lot of people found themselves in. Sure there are a lot of foreclosed McMansions out there these days, but at least in certain areas of the country with ridiculously high housing markets, a lot of people just grabbed whatever they could and tried to hold on. (not to mention hoping the trend of rapid price increases would continue long enough that they could "flip" them for big bucks later on, but that's a whole other thread in itself)

 

 

Not irrespolsible in the least to not put a down-payment down, it is what it is. That was the industry. I just find it laughable that we have this giant "forclosure" problem when the majority of the homeowners in that situation were really just renters for all practical purposes. The banks and lenders are the ones in a real crisis. I do feel for the homeowners who actually put a substantial amount down or re-fied and ended up in a junk loan though.

[NightOfJoy]

I do feel for the homeowners who actually put a substantial amount down

 

Why do you feel this way?

[quarter23cd]

I just find it laughable that we have this giant "forclosure" problem when the majority of the homeowners in that situation were really just renters for all practical purposes.

This is true. It boggled my mind, when buying my first house, to learn that it was possible to do such a thing as "buy" a house without putting anything down. As a philosophical question, anyway, how much equity do you have to have to be considered a "homeowner"? That's neither here nor there, I guess.

 

These "renters", as you call them, that are being foreclosed upon--they're losing their homes and having their credit decimated, which is plenty to feel for them about.(even the ones that didn't have a ton of equity to be lost, it still blows, to put it mildly) The ones that did have a lot invested in their homes I feel for even more, obviously.

 

The banks? Maybe its just harder to feel empathy for corporations? Yeah, they're feeling the brunt of this. Getting slaughtered, actually. But the thing about the "bailout" that I've been having trouble wrapping my head around from the start--it takes (at least) two parties to make a mortgage deal, and maybe there are consumers out there who were irresponsible or uninformed or simply ran into some bad luck--but I guess the problem I continue to have is that the lenders are the ones with the financial gurus--the dudes who crunch numbers and assess risk and who are far more sophisticated in the nuances of finance--and by bailing them out, it seems that the guys who are supposed to know what the hell they are doing are being held to a lower standard than the people on the other end of the transaction. Does that make sense? I'm really just thinking through this.

 

I think the really interesting thing about this issue is that most of us have to fess up to being clueless about how this stuff actually works, and that includes the vast majority of the politicians working to "fix" it right now.

[watch me fall]

I didn't put a down payment on my first house and I was screwed accordingly on the interest rate and the type of mortgage I took out.

 

Definitely learned my lesson and did things differently with my second house. Of course, having a big check in hand from the sale of my first house didn't hurt.

[quarter23cd]

I didn't put a down payment on my first house and I was screwed accordingly on the interest rate and the type of mortgage I took out.

 

Definitely learned my lesson and did things differently with my second house. Of course, having a big check in hand from the sale of my first house didn't hurt.

Right, that's the thing. But for a lot of people (me included), these "risky" loan products were a great foot-in-the-door kind of deal. Most people (who lived to tell about it) chose to refi and/or buy another house with a more "traditional" loan at the first opportunity. For some people, though, the doorknob hit them on the way out, so to speak.

[JUDE]

Why do you feel this way?

 

 

This is true. It boggled my mind, when buying my first house, to learn that it was possible to do such a thing as "buy" a house without putting anything down. As a philosophical question, anyway, how much equity do you have to have to be considered a "homeowner"? That's neither here nor there, I guess.

 

These "renters", as you call them, that are being foreclosed upon--they're losing their homes and having their credit decimated, which is plenty to feel for them about.(even the ones that didn't have a ton of equity to be lost, it still blows, to put it mildly) The ones that did have a lot invested in their homes I feel for even more, obviously.

 

The banks? Maybe its just harder to feel empathy for corporations? Yeah, they're feeling the brunt of this. Getting slaughtered, actually. But the thing about the "bailout" that I've been having trouble wrapping my head around from the start--it takes (at least) two parties to make a mortgage deal, and maybe there are consumers out there who were irresponsible or uninformed or simply ran into some bad luck--but I guess the problem I continue to have is that the lenders are the ones with the financial gurus--the dudes who crunch numbers and assess risk and who are far more sophisticated in the nuances of finance--and by bailing them out, it seems that the guys who are supposed to know what the hell they are doing are being held to a lower standard than the people on the other end of the transaction. Does that make sense? I'm really just thinking through this.

 

I think the really interesting thing about this issue is that most of us have to fess up to being clueless about how this stuff actually works, and that includes the vast majority of the politicians working to "fix" it right now.

 

So you don't see a difference between someone who walks into closing with $36,600 (20% of$ 183,000) from saving, selling off stuff, scrimping, etc. and someone who walks into closing with a receipt for $600 for 6 months of pre-paid homeowners insurance?

 

If scenerio A goes into a foreclosure they are out a substantial ammount of real money, scenario b is out what? Some rent and a dinged up credit score.

 

Also:

 

Also, I think Congress should just fund the FDIC to cover the depositors under $100,000 per their charter and let the chips fall where they may. The huge banks that played fast and loose with their money will fail, small banks will do what they need to survive and eventually this will all take care of itself. We

[watch me fall]

Right, that's the thing. But for a lot of people (me included), these "risky" loan products were a great foot-in-the-door kind of deal. For some people, though, the doorknob hit them on the way out, so to speak.

Exactly. And I went into it knowing that, even though having a mortgage broker who could not have cared less really didn't help matters. I also knew I would not be in that first house for more than 10 years (ended up being 8 years). You do what you have to do. And even though you didn't have a down payment, at least you have a mortgage you can afford. It's the borrowers who take out these mortgages knowing there's no way they can afford them that bother me. Just because you qualify doesn't necessarily mean you'll be able to afford it.

[watch me fall]

JUDE, just curious, but do you agree with this?

[JUDE]

JUDE, just curious, but do you agree with this?

On it

[quarter23cd]

Of course I have 30 years until I can retire so I won’t be too terribly put off when my 401K loses 87% of it’s value.

Right...well, I know at least a couple people who have less than 30 years to go and might be a bit freaked out about that 87% thing.

 

Just because you qualify doesn't necessarily mean you'll be able to afford it.

Oh, absolutely. I think part of what I was trying to allude to earlier is that a lot of this "no money down" stuff kind of muddied the line between buying and renting. In many cases, buying suddenly looked like a more attractive and affordable option than renting in some markets if you could do it without dropping a substantial down payment and could frequently end up with cheaper payments than the apartment building down the street. Hey, who wouldn't like that? Except, when things get rough, a 30 year mortgage is just a little more difficult to wiggle out of than 1 year apartment lease. So those people clearly aren't without blame for not realizing what they were getting into. Some people clearly overlooked the fact that their payments would go up alarmingly at some point down the road--I can remember my first loan guy trying to downplay that. "Meh, you'll sell by then and with the market the way its going, you'll make a killing on the house when you do. Don't worry about it." That's pretty close to a direct quote and felt like BS to me even then when things were booming and it sucks to see that I was right and sucks more that I know people who fell into that.

 

This bubble was a pretty wacky thing, though. I personally knew quite a few people who's sanity I remember questioning when they made ridiculously risky purchases of properties they really could not even begin to afford and yet (at least while things were booming) voila! they magically made huge profits off of flipping them. Some of them quit their jobs a few years ago to do that full time. I wonder how many of them are still doing ok. That was such a reassuring thing a few years ago--no matter what, you can't not make money on your house. That was the mantra not too long ago. You want to blame somebody? Lets grab our pitchforks and go after the "Flip This House" people.

[fatheadfred]

The more I hear from financial folks the more the sounds like it needs to be done. Has to be done.

 

Here is an investment dude that addressed the situation on his show this weekend. His shows are archived, as well as individual fund discussion, too if you are interested.

http://www.mutualfundshow.com/shows/show1.asp?ID=96

[Sir Stewart]

I didn't put a down payment on my first house and I was screwed accordingly on the interest rate and the type of mortgage I took out.

 

Definitely learned my lesson and did things differently with my second house. Of course, having a big check in hand from the sale of my first house didn't hurt.

 

You wouldn't have bought your first place, knowing what you know now?

[gogo]

"Meh, you'll sell by then and with the market the way its going, you'll make a killing on the house when you do. Don't worry about it."

When we were looking for our house (and this was during what was, in retrospect, only the very early beginnings of the housing bubble out here), we looked at a place that was priced for some amount, but the agent showing the house told us "but that's totally underpriced, it's really worth (some price approximately $100K above the asking)". Umm... what? A house is only really worth what someone can and will pay for it. Real estate people were just starting to go nuts then, and it only got worse, around here anyway.

 

 

You want to blame somebody? Lets grab our pitchforks and go after the "Flip This House" people.

[NightOfJoy]

So you don't see a difference between someone who walks into closing with $36,600 (20% of$ 183,000) from saving, selling off stuff, scrimping, etc. and someone who walks into closing with a receipt for $600 for 6 months of pre-paid homeowners insurance?

 

If scenerio A goes into a foreclosure they are out a substantial ammount of real money, scenario b is out what? Some rent and a dinged up credit score.

 

Also:

 

 

Sure, I do see a difference (I'm a scenario A person, btw). I wasnt sure if there was some sort of risk out there for people in my situation that I wasnt aware of. Thanks for explaining your perspective.

[JUDE]

Sure, I do see a difference (I'm a scenario A person, btw). I wasnt sure if there was some sort of risk out there for people in my situation that I wasnt aware of. Thanks for explaining your perspective.

 

The only risk you may face is if you HAVE to sell your house at a deprciated price due to market conditions. If you are happy where you are and with your payment I don't see this being adverse unless you need to tap your equity (or lack there of). It will come around again.

[John Smith]

Rumor: Gingrich scuttled the bailout plan by back door politicking republicans to note vote for it.

 

Rumor: Hitting the cutting room floor from the Couric interview was a question where Couric asked Palin to name or talk about a Supreme Court decision other than Roe. The question was answered with silence. This rumor was from a Palin staffer.

 

Fact: McCain and Palin appeared together in an interview with Couric and hammered gotcha politics. Their gotcha moment was Palin answering a direct question about cross border incursions into Pakistan where she emulated Obama

[Good Old Neon]

Ladies and Gentlemen, I give you, Glen Greenwald:

 

Retired New York Times reporter David Cay Johnston, writing at The New Republic yesterday, makes a critical point, in a piece entitled "Celebrating the Bailout Bill's Failure":

 

Whether you favor the $700 billion bailout or not, the House vote today should make you cheer -- loudly.

 

Why?

 

Because the majority vote against it shows that Washington is not entirely in the service of the political donor class, by which I mean Wall Street and the corporations who rely on it for their financing. These campaign donors, a narrow slice of America, have lobbied and donated their way into a system that stacks the economic rules in their favor. But faced with as many as 200 telephone calls against the bailout for every one in favor, a lot of House members decided to listen to their constituents today instead of their campaign donors.

 

Johnston's celebration that "Washington is not entirely in the service of the political donor class" is probably premature given that Congressional leaders are falling all over themselves to assure everyone that this deal will pass in a few days after it is tinkered with in one direction or the other. I recall all too well celebrating a similar "victory" back in March, when House Democrats astonishingly refused to comply with the demands of the "donor class" -- and the entire political establishment -- to pass Bush's FISA bill to grant retroactive amnesty to the entire lawbreaking telecom industry, only to watch them jump into line and do what they were told a few months later. The corporate donor class and political establishment may lose a battle here and there, but they almost never lose the war, since they own and control the political battlefield.

 

Still, Johnston's overarching point is absolutely right. For better or worse, yesterday's vote was the rarest event in our political culture: ordinary Americans from all across the political spectrum actually exerting influence over how our Government functions, and trumping the concerted, unified efforts of the entire ruling class to ensure that their desires, as usual, would be ignored. Time's Michael Scherer described quite well what a stinging repudiation yesterday's vote was for those who typically run the country without much opposition:

 

There was a lack of trust, a loss of confidence, a popular revolt.

 

Nearly every major political leader in America supported the bailout bill. The President of the United States. The Vice President. The Treasury Secretary. The Chairman of the Federal Reserve. The Chairman of the Securities and Exchange Commission. The Democratic and Republican nominees for president. The Democratic and Republican leadership of the House and the Senate. All of them said the same thing. Vote yes.

But the leaders anointed by the U.S. Constitution to most reflect the will of the people voted no. This is a remarkable event, the culmination of a historic sense of betrayal that the American people have long felt for their representatives in Washington D.C. Roughly 28 percent of the Americans approve of President Bush. Roughly 18 percent of Americans approve of Congress. These numbers have been like that for years.

Now those bad feelings have manifested themselves in the starkest of terms. Not enough of the American people believed their leaders. And so the politicians that were most exposed ran for cover.

 

Can anyone even remember the last time this happened, where the nation's corporate interests and their establishment spokespeople were insistently demanding government action but were impeded -- defeated -- by nothing more than popular opinion? Perhaps the failure of George Bush's Social Security schemes in 2005 would be an example, but one is hard-pressed to think of any other meaningful ones. We're a "democracy" in which nothing is less important in how our government functions than public opinion. Yesterday was an exceedingly rare though intense departure from that framework -- the kind of citizen defiance of, an "uprising" against, a rotted ruling elite described by David Sirota in his book, "Uprising." On the citizenry level, the backlash was defined not by "Republican v. Democrat" or "Left v. Right," but by "people v. ruling class." As Johnston argues, yesterday's events should be celebrated for that reason alone.

 

It's true that we don't live in a direct democracy where every last decision by elected officials must conform to majoritarian desire, nor should we want that. In general, elected officials should exercise judgment independent of -- in ways that deviate from -- majority views. But the opposite extreme is what we have and it is just as bad -- a system where the actions of elected officials are dictated by a tiny cabal of self-interested oligarchs which fund, control and own the branches of government and willfully ignore majority opinion in all cases (except to manipulate it).

 

Moreover, even in a model of representative rather than direct democracy, the more consequential an action is -- should we start a war? should we burden the entire nation with close to a trillion dollars in debt in order to bail out Wall Street? -- the greater the need is to have the consent of the governed before undertaking it. From all quarters, Americans heard the arguments in favor of the bailout -- "agree to have this debt piled on your back for decades or else face certain doom" -- and they rejected it, decisively, at least for now.

 

Anyone arguing that their views should be ignored, that their judgment be overridden by the decree of the wiser, superior ruling class (see David Brooks and Kevin Drum as good examples), is simply endorsing the continuation of the predominant framework for how our country has been run for the last decade, at least. Whatever else that is, there's nothing "wise" about that framework. Even if one believes in principle that the country is best entrusted to the elevated wisdom of a magnanimous and superior ruling class, and that majoritarian opinion should be systematically ignored, our ruling class -- the one we actually have -- is anything but wise and magnanimous. It's bloated, incestuous, reckless, inept, self-interested, endlessly greedy and corrupt at its core. Ye shall know them by their fruits. It's hard to imagine anything less wise than continuing to submit to its dictates.

 

Liberation from -- one could say "destruction of" -- the system run by that ruling establishment class is of critical importance. Yesterday's rejection of their decree, on such a momentous matter, was a shocking first step towards that objective (and the doom and panic of yesterday has given rise to calm and even optimism today, as those with cash have taken advantage of the market drop of yesterday and, around the world, are madly buying). There may be, almost certainly will be, even greater financial distress in the near future, and perhaps Americans will come to view these matters differently. But regardless of whether yesterday's bailout was a good idea on the merits, the defeat -- for now -- of those who have enjoyed an unbroken (and ill-deserved) line of victories is something that ought to be cheered.

[John Smith]

Jude, the difference in your scenarios is that the 20% downpayment person probably got or could have gotten a favorable fixed rate, probably makes more and is probably not in foreclosure today. It's the marginal clients who got the sub-prime mtges and who are facing foreclosure.

 

Do you see the difference between GM posting huges losses with thousands or tens of thousands of jobs on the line and the Wal-Street firms losing similar amounts? Realistically I know there are no comparisons other than the losses,but each is vital to the ecomony (heck toss in the airlines too) and each are losing money, yet only one group is going to get saved.

[viatroy]

I cheered, knowing that a revised solution still needs to happen, but apparently we can still have some influence on Congress. Of course that probably has more to do with re-election concerns than taking care of the people they represent, but I was heartened nonetheless.

[explodo]

Fact: McCain and Palin appeared together in an interview with Couric and hammered gotcha politics. Their gotcha moment was Palin answering a direct question about cross border incursions into Pakistan where she emulated Obama

[ih8music]

"[After] all my discussions with presidents, both while in office and after they left, and their advisors, while in office and after they left, and in my reading of history, particularly presidential history, I am ever more convinced that a leader cannot make tough decisions unless he or she is asked tough questions. It is the only vehicle that brings them to closure, that forces any sense of intellectual rigor, that forces them to find a way to reconcile the political advice or the political pressures brought to bear. It will not be enough in a democratic society to simply have those on the left or right who are the pamphleteers and unwilling to challenge the views of people they support. Tough questions need not be the loudest or most sensational or the most theatrical, but rather probing and, hopefully, incisive." -- Tim Russert

[NightOfJoy]

The only risk you may face is if you HAVE to sell your house at a deprciated price due to market conditions. If you are happy where you are and with your payment I don't see this being adverse unless you need to tap your equity (or lack there of). It will come around again.

 

I'm in it for the long haul so I suppose we're ok. Thanks again.

 

Also, never, EVER change that avatar. Its like a ray of sunshine on a cloudy day.