21 February, 2009

Nothing but the Bill

Housing rescue plans are ridiculous.  I’m pissed off.  We saw this problem coming.  We planned for it.  Now, all the people in the tank are getting a bailout, and I’ll get nothing but the bill.  There!  It’s in black and white digital ink and now maybe I can unload this seething, consuming anger.  I’m pissed that I played by the rules and got burned.


Maybe if I let a little of my reasoning spill upon the backlit page, I can start to let go of some of this rage.  So here it is.


We purchased a condo in 2002.  We borrowed the down payment from family to avoid mortgage insurance.  Thank you family!!!  The mortgage was an 80/10/10.  That means for the purchase price of $327,000.00, we were financing 90% of the home.  The 80% was a fixed rate 30-year loan.  The 10% loan was a 5 year variable.  Each month, we paid something extra on the variable rate loan.  I hated variable rate loans.


In 2005, we started to become nervous.  Reports of potential problems with interest only mortgages began leaking into the public consciousness.  Delving into a multitude of articles, we enlightened ourselves about the problem.  Not all at once, but over time.  Slowly, a very scary picture began to emerge.  Living on the cutting edge of East Oakland gentrification, we began to realize that there could be a high rate of interest only loans within our community.  All this time, we made good salaries and couldn’t figure out how our neighbors were affording their units.  People were flipping their units constantly.


We made the decision to get out.  Why?  Because we didn’t want to be tied to property that could backslide into disrepair, or own in a development that would become a haven for foreclosures and desperate owners renting their losing investments.


The condo was sold in January 2006.  We sold at the top of our local market.  Did we have special inside information?  No.  In fact, I had tried to convince a friend in the real estate business to sell.  He calmed me down and, for a time, I decided to stay put.  Then he sold a couple of weeks later.  That was the final straw.


People thought we were completely nuts when we sold.  They practically wanted to commit us when we told them our next move was to rent for a while.  They said we would forever be out of the housing market if we didn’t “upgrade” to a house.  Instead, we paid the loans from our families, paid off all student loans, sold our gas-guzzling van and bought a new fuel-efficient VW with cash, and went on a 10th anniversary vacation.  It was great.  We had a great apartment, no debt, and money in the bank waiting for housing to return to a reasonable level.


Enough background.  This is where I get angry.  You see, this was our plan.  We could see that the market was inflated.  IT WAS OBVIOUS!  All we had to do was weather the ridicule until the market declined to a reasonable level and purchase the home of our dreams.  It’s not going to happen.  Not with the “solutions” to the foreclosure crisis being floated by the government and pundits on the right and left.  The rules are being changed all around us and not necessarily for the better.


Now I do not want to be just your average complainer.  I’m not a Republican representative or radio host after all.  So now that I got some whining out of the way, here is my suggestion for getting us out of this screwed up mess.


Home foreclosures should continue as the terms dictate.  That’s right, you’re still going to get dinged for your involvement.  Here is the fun part.  You will not have to move out when the foreclosure is complete.  The people living in the house have the option of moving out, or stay for market-rate rent.


At this point, the title-holder will have the opportunity to sell the property for current market value.  They will have six months to sell the property.  This will force the title-holder to market the property and not play games with the housing market; holding on to properties for years while neighborhoods deteriorate. 


What happens next is downright fun.  If the title-holder does not sell the property within six months, eminent domain becomes an option.  That’s right.  The government can take the property.  Cry me a river for the financial institutions on this one.  I doubt many will listen, but Californians will be appreciative for the extra water.


That takes care of the title-holders.  What about the families who are being “robbed” of the American Dream?  Oh, please.  Like I really want them thrown out into the evil American Dream crushing rental market.  Let’s call the current occupants, The Trumps.  So, The Trumps would have a first right of refusal on the fair market offer.  John and Bob VarsityFootbalStar put an offer on this foreclosed home.  The title-holder determines it is acceptable.  The title-holder would then make this same offer to the Trumps.


Now remember, the Trumps credit has been ruined by the foreclosure.  Wait!  What’s that glint on the horizon?  It’s coming closer.  Ah!  It’s an armored car with government plates and a big dollar sign on the side.  That’s right kids!  It’s government bailout money.  You probably didn’t recognize it.  There was a trail of money spilling out the back until January 20, 2009.  That made it very recognizable.  At least the new administration seems to know how to close the back door.


Anyway, the Trumps would qualify for a government loan.  It would be a 30-year fixed-rate loan, with an attractive rate, and since they were the “victims” of the foreclosure crisis, they would qualify immediately.  If the Trumps decide not to take it, they’ll move out, and Mr. and Mr. VarsityFootballStar get the house.


See how well this works?  The icing on the big stimulus cake is that we would have to employ a lot of people to administer the program.  Can you say win-win?  Probably not.  I know I’m still kinda pissed, but I’m sure I’ll get over it when the housing prices come down and some new regulation gets enacted.

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