Rob Schofield over at Policy Watch offers up this painfully shallow piece on the subprime/foreclosure mess. It’s amazing at the incredible lack of depth in Schofield’s “analysis.” He understands economics about as well as I understand women’s fashion.
"How the heck did we get into this mess? There are a lot of reasons, but it mostly boils down to some toxic byproducts of Bushanomics – namely, a wildly under-regulated market of predatory corporations and a distressed middle class that’s having a harder and harder time staying afloat. As Banking Commissioner Joe Smith said, we used to talk about the housing downturn as being only about the "subprime" market. Now we know its reach is much deeper."
He blames things on a “wildly under-regulated market” while not mentioning a single regulation that has been stripped recently. More telling, there’s no mention of:
1) the HUD rules mandating that Fannie and Freddie finance a certain percentage of loans to “underserved” people
2) the fact that HUD had recently praised the lending industry for its “creativity and innovation” in developing new loan products (i.e. subprime and no doc) to help the underserved communities (mostly minorities) to attain a loan
3) the recently revealed fact that a large share of defaulted loans were taken out by people who lied on their loan application
4) international banking regulation which in the end directs large investor firms to increase their share of (high-risk) mortgage backed securities into their portfolio
5) the government-created oligopoly of credit rating agencies and the resulting perverse incentives for them to give high ratings to these risky securities
Then there is this statement:
"North Carolina
is actually not as bad off as some states. This is mostly attributable to the fact that our state legislators and regulators have done a much better than average job in defying the right wing’s deregulatory push in recent years by passing anti-predatory lending and mortgage servicing legislation."
Actually, the states that are worst off are those experiencing the largest decline in housing values. NC is lucky to have experienced (until very recently) solidly growing housing values due to the population influx. As housing values in the state decline, watch the foreclosure rate increase.
Rather than examining some of the real forces at work, Schofield jerks his knee and takes his typical intellectually lazy route of blaming “Bushanomics.” Why look into the actual incentive structure of the process when you can just blame Bush and call it a day?
Gideon S. Band says
I’m more inclined to blame it on anyone who has been in office while the subprime market picked up its affinity for predatory loans. That includes Bush Jr., Clinton, Bush Sr., and – perhaps – even our venerated Reagan.
Chris says
As long as we can blame anyone but the people who bought houses they couldn’t afford with mortgage payments that exceed what they could pay, I’m ok with it.
Eric Weaver says
I am real estate broker, and I do some work in the foreclosure arena of real estate. Do you know who gets foreclosed on?
The stupid and lazy.
This means that if you are too lazy to work, and don’t pay your bills, you will lose your home to foreclosure.
BUT ONLY IF YOU ARE STUPID, TOO. I represent some lenders. For example, I have a lender who has asked me to offer an unsolicited loan modification to a borrower who has an adjustable rate mortgage(ARM) that they have not paid in the last 3 months. Instead of foreclosing, they want me to get the borrower to agree to this modification, which gives them a fixed rate loan, forgives the past due amounts, and lowers their payment significantly. BUT IF YOU ARE TOO STUPID TO CALL ME BACK, like these folks, then I guess that you will get foreclosed on and then bellyache about it.
Yes, there are people with lenders who are not as nice as this one. So, what can you do if you fall behind on your mortgage? You can:
– Sell your house.
– Refinance into a fixed rate loan if your credit rating and finances will allow it.
– Ask for a repayment plan. (Make your regular payment and pay extra to get caught up.)
– Ask for forbearance (Allow you to miss a payment or two without recourse.)
– Ask for a loan modification. (You can change the interest, term, or principal amount, if the lender agrees.)
– If you have an FHA loan, they will let you do a “partial claim.” (This puts your status back as current, and takes the back payments and places them in a special lien where no payments have to be made, but it comes due when you sell the property.)
– If you are “upside down” on the house (owe more than it is worth) then you can do a short sale, where the lender agrees to take less than what is owed on the property. (This is a pain, but we can do them!)
– If none of the above work, you can do a “deed in lieu,” which means that you move out voluntarily and sign the deed back to the lender. Many lenders will do a “cash for deed,” in which they will give some cash (I have seen up to about $1500) if you to sign over the deed and leave the place undamaged and broom clean. That way, you can rent a truck and pay deposits on an apartment.
Only the most stupid and stubborn actually get foreclosed upon. The lenders do NOT want your house. They only average getting back about 65% of what a borrower owes during a foreclosure, due to the legal fees, Realtor fees, trash-out and repair fees, and missed interest.
I have some sympathy for people who have faced dire financial straits. Heck, I used to live paycheck to paycheck when I was younger, myself. But I never thought that it was someone else’s fault if I didn’t have enough money. Until I got into real estate, I frequently worked two jobs at a time. People who work hard and hustle rarely get foreclosed upon. If someone is disabled or elderly, there may be other ways of dealing with foreclosure. No lender wants to be seen throwing grandma out onto the street.
Trust me, foreclosure is avoidable. Contact me if you have questions about it. (eric@electweaver.com) And answer the darn phone if your lender calls you, or call me back when I stop by! Ignoring it makes things worse!
Gideon S. Band says
Stupidity, ultimately, is the root problem. I’ll certainly agree with that.
What I want to know, is how such a trainwreck happened when plenty of people could see it coming from miles away.
There’s certainly plenty of blame to be spread about here — no matter whether we’re talking about policymakers or morons buying houses they can’t afford.
Max says
Good point, Gideon. Plenty of blame to go around. A perfect storm, but the villain is not a monolith, like Policy Watch would have us believe.
Jerimee says
Re: Foreclosure victims are stupid and lazy.
I love this. This is totally what conservatives think about low-income people and people who are taken advantage of.
A) It makes plain the GOP preference for the elite. The elite are, by their very nature, not stupid and lazy, because they are the ruling class.
B) It makes plain the contempt the GOP has for working class families.
C) It emphasizes the point that GOP activists are generally incapable of Christian love and compassion.
Rock out Max. You do my work for me.
Brian Balfour says
Jerimee,
FYI, the comment you reference was made by Eric Weaver, not Max.
Rock on.
Max says
Jerimee, while I’m not particularly religious, it’s a funny thing to think that expropriation via the coercive state is somehow compassionate. At least Christians stare into their own hearts when determining how and how much to help the poor. You’re content to point guns and collect taxes. Nice.
Gideon S. Band says
Re: Foreclosure victims are stupid and lazy.
I love this. This is totally what conservatives think about low-income people and people who are taken advantage of.
A) It makes plain the GOP preference for the elite. The elite are, by their very nature, not stupid and lazy, because they are the ruling class.
B) It makes plain the contempt the GOP has for working class families.
C) It emphasizes the point that GOP activists are generally incapable of Christian love and compassion.
Rock out Max. You do my work for me.
Ah, it’s good to see the Democrat minions hard at work. (That’s right — “Democrat” minions.)
Jerimee, I think the Republican Party simply prefers people who have the sense and basic understanding of modern society to read a contract. I agree that the predatory subprime lending market should not exist. However, if people took the time to read their contracts, the market would not exist to begin with. I’d be inclined to say that the Republican Party is for an educated consumer. I see that you’re fundamentally against that principal.
The Republican Party isn’t contemptuous of the working class – it is made up of the working class. I’m no party representative, but my perception has long been that we have more respect for people who are willing to take responsibility for themselves and their actions. Your statements indicate that you have more contempt for the working class because you don’t believe they can be either intelligent or hard working. If we’re going to make broad, overreaching generalizations, let’s look at your take of the elite class. If you think they are — by nature — all intelligent and hard working, that indicates you think those who are not members of the elite would lack those traits. It is not the Republicans showing their true colors here, it is the Democrats.
I’d be interested to see just how many of those heartless GOP activists gave to charity last year – and I doubt it was solely for another item to claim on their taxes. It must have been the the Seal Poaching Society, or some other “worthy” cause. Did you ever stop to consider in your sweeping generalization of the Republican Party and its members that those greedy, heartless GOP activists simply prefer the government to stay out of people’s business, preferring instead to give their funds directly to worthy causes? Of course not – the Democrats believe they know better than individual citizens, who must be too stupid to make their own decisions.
Once again, it is not the Republicans showing their stripes.
–Gideon S. Band