rssMortgage Relief and a Generational Divide
Wednesday, July 30, 2008 at 10:40 am
- 4 Comments
Laura just raised a good question about how people who aren’t baby boomers and who haven’t yet bought homes should feel about any attempts to prop up falling home prices versus just letting them fall. It’s a timely question, given that President Bush signed the mortgage rescue plan into law today. And it’s one that didn’t get enough attention during the debate over the bill.
To answer her, I’m going to refer to a recent piece by Housing Wire publisher Paul Jackson, who commented that Congress, in supporting the bill, seemed to be responding to "the whines of boomers" who overleveraged themselves in real estate, at the expense of younger homeowners and would-be borrowers. I’ll let Jackson explain this:
I left Southern California — and all of my immediate family, too, for that matter — behind in 2005 when my daughter was about to be born, because I found that I couldn’t justify paying $800,000 for a junked-up, 1,200 square foot cracker box. I especially couldn’t reconcile how a broker was telling me that we could afford 100 percent financing at that absurd price point, given that I was a PhD student making $17,000 per year at the time, and my wife was making the median for a science geek working in the R&D trenches. It’s not been easy raising a family in Texas, where we ended up, far away from family members that could otherwise help. But we’ve made do. We’ve found new jobs (obviously, yours truly is now running the most-read news source in the mortgage trade). We’ve managed the middle-of-the-night emergency hospital trips for our sick newborn son, with a 3-year old sister in tow, and no family nearby to help. We’ve managed to teach our kids who their grandparents and aunts and uncles are through pictures we’ve pasted to some posterboard. We’ve saved and bought the house we wanted, and we did all of it because we wanted to provide a stable home for our kids. We’ve paid what I think is a steep personal price.
After what my wife and I have gone through, the mere thought — taxpayer funded or not — that less responsible homeowners in California, duped or not, might get a lifeline that helps them keep their home and their credit intact, just incenses me. Actually it does more than that. It makes me want to have Barney Frank and Chris Dodd — and any other House or Senate member that talks in broad terms about stopping the downward spiral of housing prices — explain to me personally why the price my family was forced to pay matters less than the housing prices they’re so focused on trying to prop up. I want them to explain to my kids why they’re helping the very people that helped make grandma and grandpa into a picture and a phone call. A housing price correction is exactly what’s needed to prevent other young families — families like mine — from having to make the same painful choice we were forced to make two and a half years ago. Unfortunately, that viewpoint seems to carry little currency in the current political climate. And that’s a shame for anyone under the age of 40 trying to raise a family in this country.
For neighbors who pay their mortgages on time and don’t want their home values sunk by nearby foreclosures, falling home values are a disaster. They expect the government to act. But I can’t tell Laura or someone who doesn’t own a home that it’s wrong to think that falling prices might be beneficial to them someday. When it comes to the mortgage crisis, where you stand on declining home values may very well depend upon how old you are.
4 Comments
Comment posted August 5, 2008 @ 7:15 pm
Everyone’s a critic, I guess.
Kevin, if you want a PhD’s opinion, here you go: I’m sick and tired of hearing everyone reflexively pull out the “blame the victim” line anytime someone suggests that a borrower might, actually, not be a “victim” and may instead be facing a foreclosure that is at least in part their own fault.
It’s far too easy these days to decide that borrowers in trouble got there because of lenders’ misdeeds.
And I began Housing Wire in December 2006 for the very reason you lamented; I’ve spent years in the trenches dealing with borrower defaults, and I knew first-hand what was coming.
Solving this problem means coming to terms with how we got there. That means being honest about the fact that the vast majority of foreclosures, while unfortunate, are as much the borrower’s doing as the lender’s/
Comment posted July 30, 2008 @ 12:43 pm
On thing strikes me about the beginning of Paul Jackson’s story. Here is a highly educated couple, one who ends up writing for a mortgage blog, and his reaction to 100% financing was that he “couldn’t reconcile how a broker was telling” him that he could afford it. I would have imagined that his reaction, especially in hindsight and given his critique of Congressional foreclosure relief, would be a little more dramatic, something to the effect of “I knew on the spot that this was a terrible idea at the time and that massive floods of foreclosures would occur as a result.”
Maybe I’m reading too much into his phrasing. But my point is simply that many people without PhDs did not have the resources to move to Texas or the credentials to get a job there, and even if they did, do we think that at the time, with everyone promoting how wonderful home ownership was, with no regulation on the way that loans were made and advertised, that everyone who got caught up in this deserves what they’re getting now?
I don’t know enough about this issue to say whether or not the current Dodd legislation is good or bad, but stories like the one above seem a bit more blame the victim than looking at why brokers like the one mentioned weren’t being monitored or regulated more effectively.
Comment posted July 30, 2008 @ 7:43 am
On thing strikes me about the beginning of Paul Jackson's story. Here is a highly educated couple, one who ends up writing for a mortgage blog, and his reaction to 100% financing was that he “couldn't reconcile how a broker was telling” him that he could afford it. I would have imagined that his reaction, especially in hindsight and given his critique of Congressional foreclosure relief, would be a little more dramatic, something to the effect of “I knew on the spot that this was a terrible idea at the time and that massive floods of foreclosures would occur as a result.”
Maybe I'm reading too much into his phrasing. But my point is simply that many people without PhDs did not have the resources to move to Texas or the credentials to get a job there, and even if they did, do we think that at the time, with everyone promoting how wonderful home ownership was, with no regulation on the way that loans were made and advertised, that everyone who got caught up in this deserves what they're getting now?
I don't know enough about this issue to say whether or not the current Dodd legislation is good or bad, but stories like the one above seem a bit more blame the victim than looking at why brokers like the one mentioned weren't being monitored or regulated more effectively.
Comment posted August 5, 2008 @ 2:15 pm
Everyone's a critic, I guess.
Kevin, if you want a PhD's opinion, here you go: I'm sick and tired of hearing everyone reflexively pull out the “blame the victim” line anytime someone suggests that a borrower might, actually, not be a “victim” and may instead be facing a foreclosure that is at least in part their own fault.
It's far too easy these days to decide that borrowers in trouble got there because of lenders' misdeeds.
And I began Housing Wire in December 2006 for the very reason you lamented; I've spent years in the trenches dealing with borrower defaults, and I knew first-hand what was coming.
Solving this problem means coming to terms with how we got there. That means being honest about the fact that the vast majority of foreclosures, while unfortunate, are as much the borrower's doing as the lender's/
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