Affordable housing is what families hope to live in, so it seems a vital policy issue to be discussed. I am not a consumer science major, so my comments and opinions will become more informed as the semester progresses.
In last Thursday's Deseret News, Thomas Sowell wrote about the negative aspects of government intervention in the housing market. Sowell relates his own experiences leading up to home ownership. He feels that people now want to skip the steps leading to viable home ownership and jump right into a house that is out of their price range. Unfortunately, many of these homeowners get in trouble soon after they get into the home. This comment by Sowell struck a chord with me: "It is certainly no longer considered to be the individual's own responsibility to acquire the work skills and experience to be able to earn enough to afford better housing as the years passed. Why do that , when the government can simply 'spread the wealth around...'" Barack Obama stated in his inaugural address that it doesn't matter if government is big or small, only that it works. Hmmnm. Sounds like socialism to me. Both of these men are African-American, but have very different opinions about what should drive policy.
In 2004, I worked for a home improvement marketing company. They did windows and siding. I went door-to-door setting up sales appointments. I ran into a homeowner (and I think he wasn't the only one) who didn't want to make any improvements; he was just going to wait until the home value went up, then take out another home equity loan to live off of. Frightening. I wonder how this homeowner is doing now.
A story in today's Deseret News concerning homeowner's aid discusses the ramifications of government intervention for overextended homeowners. Our hearts go out to those that are in danger of losing their homes, yet what about the ramifications for potential homeowners in the way of higher costs and interest rates? What precedent does this set for contract law if judges can violate the terms of a contract to help these struggling homeowners? One comment attached to this story used the poor practices of banks as justification. Hey, if the big boys can do it (violate contracts), why can't poor homeowners? Both need cleaning up to right this mess.
It gets tricky in other ways as well. Even existing companies who have worked with borrowers to change bad loans are getting drug into court, but not over bankruptcy.....but from the share holders of the financial investors who purchased the loans on the secondary market. They argue that the banks are changing the terms of the loan they purchased and effecting the interest they were essentially promised when they purchased the mortgage backed security. So naturally they are suing the banks and loan servicers for their potential losses as a result of the mortgage default workouts. Either way the bank can only take so many losses via litigation, whether it is from the consumer via bankruptcy or from the investor via breach of contract.
ReplyDeletetake a look at this article and you will see what I mean....
http://loanworkout.org/2008/12/investors-prove-countrywide-lawsuit-100-valid/
Looking forward to reading more Paul!
Thanks Lucas, it is tricky. These decisons have more ramifications than I realized. What a domino effect!
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