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Mortgage Giveaways - Perspectives

Today we've learned that Obama Administration indeed intends to force mortgage cramdowns upon banks as well as increase federal purchases of private mortgages, in order to provide substantial cash gifts to 'underwater' borrowers.  The only reasonable responses I can imagine land on a continuum between rage and despair. A collection of useful and perceptive comments I've written or collected from various online contributors follows.*   This first one is mine: 

The major media continue to agitate for mortgage cramdowns, which will further punish responsible taxpayers and shareholders--the same ones who've now bailed out half the country and all of Wall Street.  But consider that perhaps people shouldn't live in homes they cannot afford.

Forcibly rewarding an extremely irresponsible segment of our populace with subsidized homeownership--at everyone else's expense--may just well be the death knell for American civilization.  Because a society cannot persist indefinitely whilst punishing responsible people and rewarding irresponsible people.  And the media have yet to explain why New York City renters, for example, deserve to be fleeced to reward sunbelt homeowners and real-estate speculators.
 
Even in the best of times, homeownership is expensive, and renting a home is not actually a fate worse than death.  In many ways it's much better than owning.  Hard-luck cases trumpeted in the media obscure the fact that foreclosure 'victims' move to rental housing, not onto the street.  But instead we're continually shown this false dichotomy between subsidized ownership and homelessness.

What's not often noted is that a large proportion of those 'underwater' mortgages are the result of 'cash-out' home refinancings to enable the purchase of frivolous and expensive toys like giant SUVs, vacations to Cancun, plasma-screen TVs, boob jobs, motorcycles, ATVs, swimming pools, boats, jet-skis, snowmobiles, and so on.  (In their infinite wisdom, our fearless leaders chose to make this 'free' money tax-deductible as well.)

Now, why on earth should our pockets be picked by people like this?  Why should we have to pay for their extravagant, irresponsible lifestyles?  To keep home values artificially high?   Let them fall to their natural level.  If they do, then more responsible people can afford to buy an extra house to rent to people like the above while they learn the abc's of financial propriety.


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How many of those walking away from their mortgages--or demanding writedowns--would feel like splitting their gains with the bank if their house had instead gone up in value?

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Almost all Americans homeowners have watched their homes lose value over the past two years. Why should the government only help those that put down a much smaller--or no--down payment?

More importantly, here is another government program that will just extend the crisis. JP Morgan showed over a hundred years ago, you cannot salvage everything and everyone during a major market meltdown.

And, Obama is betting our money! Its nice that he plans to have a Deficit Reduction Taskforce whose only contribution will be to recommend "low energy lightbulbs in Government buildings", but this on the other hand could be significant liability.

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Absolutely infuriating. This is changing the rules of the game mid-stream. The government has no idea how much anger is generated by policies like this that are, or that are perceived to be, fundamentally unfair. People lose faith in the system, in the government, in their country! The long term consequences to the country will be devastating -- much more so than any short term economic hardship that defaults and foreclosures would otherwise bring.

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The federal government has no business compensating individuals directly (or indirectly via their lending institution) for the decreased market value of their homes. All homeowners have been affected by falling values, yet the only people who they want to help are those who got themselves in over their heads. If we are going to pursue this compensation plan, let's cut checks to every homeowner in the country who has lost value. These people need to cut their losses, and move to rental units. We need to revisit the concept of the 'starter home' in this country. Most of these people had no business being permitted to purchase a McMansion on credit. They will also NEVER be able to afford the upkeep and property taxes on these homes. I am a Democrat, but I am really disgusted with the Barney Frank/Maxine Waters mentality that I do believe fueled this disaster by insisting that homeownership is somehow a 'right' for everyone.

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"From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances, which would restore equity for underwater borrowers, giving them greater incentive to make payments?''

Yes, it has drawn criticism -- from fools who have no sense of decency and no regard for this country.

But sensible people know that handing out homeownership to a selected few -- by dint of their lack of qualification to own property -- undercuts government's ability to provide for true needs. Health care. Social Security. Education. Infrastructure. Food stamps. Unemployment benefits. Job creation incentives.

Only an appalling elitist would call for government handouts to sustain these mortgages. A socialist-created aristocracy would be the result.  Government already provides excessive incentives and tax breaks to property owners. Let's stop gutting renters' paychecks to protect ''homeowners'' who own nothing more than debt. Until everyone owns a house in this country, ownership does not qualify as a baseline expectation. A job does. Support the latter.

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Mr. Zandi "proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses." So we taxpayers are supposed to just pay off the home loans of everyone that bought a bigger home than they could afford? Why don't we just save time and put a savings penalty in the tax code for anyone that is responsible, and a bonus (what do they call it, oh yeah, Earned Income Credit) for going bankrupt. That's essentially where we are headed - and quickly.

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Restore equity? You can't restore something that didn't really exist.

Say what you really mean.

"Hand over wealth to a select group of people, who helped create the housing bubble, at the expense of people who did not.''

The favored group's handout, supported by government bailouts of the banks, will eventually gut Social Security and Medicare benefits for everyone else. The Times fails to see the real dangers -- not just the moral hazards -- inherent in propping up a privileged class.

If the (NYSE:NYT) editorial page had railed this fervently against all the crazy mortgages that blew air into the housing bubble, maybe its solutions to the bust could be taken seriously. It did not. Its short-sightedness was disturbing then; it's terrifying now.

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We need better language. An underwater borrower, owing, say $300,000 on a $200,000 house, should not be called a 'homeowner'. He owns nothing; he owes much. He is a mere debtor. And though painful in the short run, falling prices for a family necessity is good. Its the dependency on rising prices that's bad. The next generation will thrive if they are paying a way smaller portion of their earnings in mortgage payments; just as they would benefit from cheaper oil prices. No object built of wood that rots, roofs that wear out, pipes that rust, and appliances that become obsolete should be expected to rise in value. Inflation has fooled people into thinking houses go up when it's just the dollar going down...

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Sorry to be selfish but: what about me?

I've paid my rent. I have not gotten into a questionable mortgage or financial arrangement. I have restricted my expenditures to be in keeping with my income. Oh, and yes, I've lost my job in the recession.

And now my President (whom I voted for, increasingly to my regret) is allocating our tax dollars to those -- like the "too big to fail" banks -- who got us into this mess to begin with.

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...And so we slide past moral hazard and all the way into moral bankruptcy. I refused to overpay for a house and sat out the bubble, renting for years. Now, I am pushed to the back of the line as my tax dollars are used to pay for people to stay in "their" houses, which they got but putting 0% down. I guess housing really is a "can't loose" investment, since the government has decided it will be. And we all know renters aren't real people anyway, right?

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Ridiculous. Whatever happened to living with the consequences of your decisions? Why are we rewarding the idiots?

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Instead of bailing out 'home owners' who can't pay their mortgage bills, why not offer these homes to people who now responsibly rent, whereby they pay whatever the mortgage payments are, and earn equity over time. This gives renters a break for once, and lets those who bought homes they couldn't afford rent apartments in line with their ability to pay, instead of being subsidized by society in homes they haven't earned the right to reside in.

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Why don't we start prosecuting people responsible for this crisis instead of throwing more money at distressed homeowners. Let the real price of housing correct itself instead of the US artificially propping up prices. Or, give everyone 2-percent mortgages. This new proposal is not fair.

What's Obama going to do about all the people who have already lost their homes? Nothing?

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I'm just about at the point where I say, if you can't beat them; join them. I think I'll just quit my job, stop payments on my house, and let the government take care of me. Anybody who is still working hard, making good money and espousing the value of personal responsibility is beginning to look like a loser.

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So people who took out liar loans with no down payment and dodgy documentation now are going to be rewarded a second time? Something is truly wrong with our system. We don't need to drag this out anymore, but should allow the banks to foreclose and recover what they can from what's left. The faster it is over, the faster the market recovers.  I also read that 50 percent of those who renegotiate their house mortgages subsequently default. These are deadbeats and failed gamblers who hoped to make a killing on ever-escalating house prices. Do we now have to rush government assistance to people who lose their savings in a Las Vegas casino?

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I did not think it would or could happen so soon, but I am now reconsidering my support for Barack Obama.

All we do in this country now is reward the irresponsible and the criminal. Wonder what the results of such a policy might be?

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Why reward those who made mistakes? That only encourages more of that kind of behavior. How about the rest of us who are barely hanging on? We get nothing while the deadbeats get a free ride. Enough of this nonsense. I say it's time for a major change in Washington before it's too late.

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Why should tax dollars go to people who made foolish decisions about buying homes they could not afford? Are taxpayers who lived within their means supposed to ante up for eveyone who decided to spend and spend with no end in sight? People who bought too much house should have to live with the consequences of their actions.

If the U.S. government keeps rewarding spendthrifts, I think I will just buy all I like without thinking of having to pay for it. After all, I can simply pass the bills to Uncle Sam.

The new America is to reward spendthrifts while shafting those who made sound financial decisions. If that is not turning sense on its head, I do not know what is.

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I look forward to the government program for those of us who bought stock in Compaq or Clintrials Research at the top and watched the value of our purchases slide toward nothingness.

Oh, no such program coming? We paid our money and made our picks, and now we get to live with the consequences of our investment choices? Exactly!

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I suppose the argument is that keeping people in their homes creates stability, which benefits us all in the long run. Perhaps, but this is extortion -- "give me money to live beyond my means or else I'll cause trouble". Rewarding bad and foolish behavior certainly can't be good for society in the long run. A child can make a mistake, and no matter what it is, there's a way to fix it. An adult doesn't have that privilege. You reap what you sow.

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All those who made out like bandits (from the local subprime lender to the middle-man and ultimately the wall-streeter who packaged these into "toxic mortgage-backed securities to get their dirty commissions/bonuses) during subprime boom should pay up to finance this disgraceful fiasco. Call it sub-prime tax of shame. Also the people who flat out lied about their incomes to get these loans, who were too lazy to read the fine print, and were too lazy to do the math that they can't really afford their homes, they shouldn't just get free handouts either. I agree with reducing monthly payments but they'll have to pay the entire principal on their loan to learn a lesson so they'll never repeat such a mistake again.

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WHAT???!!! There are many responsible renters waiting for housing prices to come down so they can buy. LET THE MARKET CORRECT ITSELF!!! There are plenty of rental apartments for these people. 

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No No No No No No No No No No No No PLEASE DON'T. I support Dems on so many issues. But this is just stupid. It's unfair to all the people like me who have been responsible borrowers. All those rescued should be taxed 30% extra until the Government recovers every penny with interest.

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Renters need to mobilize and march on Washington.

The government has become a reverse Robin Hood, stealing from those who have less to prop up an elite class that can't support its superior lifestyle.

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This is a slap in the face to my parents and their friends who worked hard and lived within their means for decades to pay off the mortgages on their homes. To them a home was not a speculative investment; you bought what you could well afford, and made sure you had enough in the bank to cover for rainy days.

As a Democrat this does make me sick.

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Seriously? Have we not spent enough taxpayer money and racked up enough debt already on proping up industries and people that overextended themselves? Real estate values are in NEED of a correction. This will let more prudent buyers enter many an artificially overvalued market. Yes, there are sad stories out there, but after-the-fact intervention by the government only serves to take from the populace and reward bad decisions and or outright gambles by home owners AND lending institutions. You can't separate the "well intended" from the "speculative" when it comes to home purchases. They are all degrees of one and the same. The banks and the end-purchasers of CDO's should be forced to eat their share as well for fueling and previously profiteering off of the hype. It's only too bad that many of the transaction-driving middle-men who got rich on the churn aren't on the hook for some of the bad deals they helped promote.

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Ok, I give. Uncle. I've voted for my last Democrat for a while.

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In this country there is no prize for being responsible, living within your means, and paying your bills. LIterally every US citizem has now been given a license to go bananas with debt because the government will ensure that you do not have to live with the consequences. Let's party!!!

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Great. Another govt program to reward those who made bad decisions and prevent the housing market from finding its bottom, thereby exacerbating the problem. Is there a problem in existence that Obama doesn't think the answer to is throwing a ton of borrowed cash at? Obama has no idea how markets work, and what is worse is he doesn't care.

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Obama is so out of control. He is the kid with his hand in the cookie jar and no parent to stop him from gorging himself. I feel really bad for my kids future.

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Responsible homeowners and Renters: Let's show the courage to make sure Obama and friends don't win the next election! Rewarding the reckless the way Obama does should be severely punished.

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Believe me, this isn't about the poor old homeowner in distress. Once again, this is about the banks, and the financial institutions that can't believe people have decided to play the game like they do and walk when the numbers show it isn't worth sticking it out. You can bet the banks know the government will be very reluctant to throw the kind of money at troubled institions like they did the first time around, and when the next 1-3 million foreclosures arise there will be a whole lot more hell to pay. If this was a good strategy for the US homeowner it should have been applied right out of the gate, not when the cows are already out of the barn.

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I am no Republican. I am a true liberal who believes that the government should invest in people. But real estate is not human. In fact, paying for one person's property with another person's taxed wages is downright feudal.

No true liberal would support this homeownership handout. It's discriminatory, classist and elitist.

A true liberal would never bail out a property owner without first demanding nationalized rent control and huge capital-gains taxes on all future property transfers.

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I, too,am tired of those who were irresponsible getting the BIG BREAKS. We have paid our mortgage on time. We have acted responsibly and no one is doing anything for us. I went through the "burst bubble" in the real estate market in California in the 80's and it recovered. I agree with the reader above--if breaks are to be given, those homeowners are still to be held accountable for their entire mortgage like I am. How DARE they make it easier for those who did not make the best choices and do nothing for those of us who did. Doesn't that make it just that much more appealing for people to be irresponsible because they will be bailed out? Does anyone not see this? Stop, already!

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Its free, all freee!!!Free home, free food, free clothes, free televison, free vacations, free health care, free to do what you please. Come to America, the land of the free!!!! 

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Contemptible. Take out a home equity loan, by a car, a vacation, live beyond your means. Now, you owe more than your house is worth. And my family picks up the tab. More give aways from this administration.

My S&P 500 fund is worth less than I paid for it. Will you folks give me some money.

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Thank God for Father Obama. Starting tomorrow I shall review my financial situation and stop paying my mortgage. Why because since Obama's election my business has gone south and my wife has been unemployed for 16 months.
Like a fool I have been paying the bank out of savings. No more shall I be the fool. Thank you father for all that you are about to do for us poor folks.

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Is this an April Fools joke? We the tax payers paying off speculators' sins? Let's all take out the max mortgage on our houses and sign up for the program before it's too late. Are there any half-awake grown-ups left in this country?

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I voted for Obama, and was really excited about his election and the changes it might mean for our country. I started second guessing the health reform plan, but now that it passed I think it is a good thing. I have always questioned bailing out the banks and never bought the load of bunk the financial goos were telling the american public. Now this, I am really tired as a tax payer of handing money out to everyone who screwed up and made very bad and greedy investment decisions. I will be writing Mr. President and all my senators and congressman to emaphasize my opposition to this plan. This has to stop, I am regretting voting for a democrat now.

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This is a terrible decision because it rewards bad behavior. I would have much rather seen people give up part of their equity for a lower payment. For example, give 20% of the ownership to the bank for reducing the principal and thus the monthly payment by 20%. That way, only those who really are in need will opt to reduce their payments. No cash required for such transaction and everyone comes out ahead.

Owners win because they still have a house to live in, even if it is underwater (remember that when the owners go through foreclosure, they take a hit on their credit and still have to find a place to live). Banks win because they are much better off keeping the houses occupied. Government obviously wins because they don't have to add more red ink to the existing deficit, and thus the tax-payers win.

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I feel like an idiot now. Even though I was proven right by the collapse, I should have jumped into the real estate bubble without thinking about future consequences. I should never have gone to law school or worked hard to build my own firm since I could have just waited to be rewarded for poor decision making.

I voted for Obama and while I have misgivings on the health care bill, I can live with it. This is a bridge too far. I'm done with the Dems.

Furthermore, this is bad economic policy. Real estate needs to continue to drop in value or we will create another bubble artificially holding the prices up.

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Yet again responsible taxpayers are being asked to shoulder the risk for those who should never have purchased a home. This administration continues to penalize personal responsibility, hard work, intelligence, marriage, and individual financial success. This is our reward for playing by the rules, becoming educated, working hard, and paying our taxes? Will responsible taxpayers awaken from the American Nightmare, or will we follow Michael Jackson? Our fates rest in Uncle Sam's hands now, having been forcefully and involuntarily wrenched from the hands of individuals. American taxpayers lie paralyzed and powerless, at least until November.

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I'm fearful for my autistic son whom we've saved carefully for, lived frugally to do so...in a world where what we've struggled for security and stability in our lives, limiting our purchases, living beneath our means in an effort to be responsible, but others who do not adhere to responsible actions and careful decision-making are jeopardizing all of our futures and the value of being an American in general. Buying their votes...it must be the reason. What other justification is there? Create jobs and have them become tax-paying citizens (again, perhaps) but don't throw money toward bad investments gone wrong. Insisting that banks provide loans for people who don't have the means to pay for it or don't have the history of paying back regularly was the beginning of this. Now, when liberals insist that the right to own a home without fear of losing it is a basic right...we'll just have to find another country.

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"Many details of the administration’s plan remained unclear Thursday night,..."

Let me guess.....

1. A household able to pay more than 35% of their income for mortgage, taxes and insurance but looking for a principal reduction on the taxpayers dime..... QUALIFY

2. Milking the runup in your house with cash out refinancing knowing full well you will never be able meet the terms of the mortgage once the bubble bursts.... QUALIFY

3. Working two jobs to prepay your mortgage so you can build up equity and now find your house is not underwater... DO NOT QUALIFY

4. Remaining in a rental because the home prices have become unaffordable with a conventional mortgage.... DO NOT QUALIFY. Wouldn't it be terrible if prices came down so first time buyers could finally afford them?

The overwhelming number of comments in a newspaper with a readership about as pro-Obama as you can get are against this irresponsible giveaway of taxpayers money.

CALL, EMAIL and WRITE the White House!!!!! The Obama Administration must know exactly how we feel and the consequences in the Congressional elections if they continually attempt this nonsense. 

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How about rewarding people who didn't screw up? Pay us a percentage of the equity we have in our properties.

It is so infuriating to work so hard to do things right and then my hard-earned money goes toward bailing out crooks and dummies.

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So those people who were greedy and knew they couldn't afford the house but entered into a contract to buy anyway are 'forgiven' their debts. Meanwhile those of us who scrimped and saved, put down a significant down payment and have made all our payments on time but whose home has lost value are screwed.

What fools we are. Now is the time to be reckless and irresponsible. No fear, Mr. Obama is here to save the day. No need to be responsible, the government will simply force our neighbors to pay for our irresponsible behavior.

It's akin to someone going into a casino and placing a million dollar bet on a roll of the dice. Turns out when they lose, they don't have the million dollars, no problem all the others at the table will simply cover the bet.

Now there's a change we can all embrace, yes??

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Dear Reader: I have to stop here, I'm nauseated.  

The only other relevant quote I can think of comes from Shaw:

"A government that robs Peter to pay Paul can always depend
on the support of Paul."





*None of the contributions quoted are professional or subject to copyright


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