Chapter 8: Bailout talk riles Kate

We knew that Kate in the Valley was a patient house-hunter; this week she tells us, in her weekly diary, where her patience runs very thin: when anyone starts talking about direct aid to homeowners at risk of foreclosure.

"So, earlier this week, I was pretty unhappy about mortgage rates going up even though this is probably necessary to put more downward pressure on housing prices.  And, just I was swallowing that bitter pill, I read that Hillary Clinton said she supports a bailout for homeowners with bad loans.  This statement pushed me over the edge:

"'The unfortunate fact is, many people have gotten into the mortgage market who are being exploited and abused by boiler-room mortgage-lending operations that are just like selling phony penny stocks or the old traveling salesmen with the snake oil.'

"Cry me a river. First off, how are you going to separate the homeowners who knowingly misrepresented their income to qualify for a loan from those who had no idea that the loan officer plugged in make-believe numbers without their knowledge?  Certainly you can't expect me to support the government using my tax dollars to bail out the many people who got into the mortgage market thinking they were going to get away with something by fudging the numbers.  I also don't think government aid is necessary when other remedies exist, like suing the mortgage broker for fraud (if in fact a fraud has been committed upon you) or just selling your house.

"And don't tell me about the tragedy of people losing their homes.  First off, we are talking about people who bought in the last several years using high-risk loans to fuel spending beyond their means.  It's not like they are losing the family farm, the very land that their father and their father's father built up with blood, sweat and tears.  It's just a house they lived in for a couple of years – a house they very likely bought with zero down.  It's not like an act of God is depriving them of all their worldly possessions; their own fiscal irresponsibility is forcing them to forfeit something that they have almost no investment in anyway.

Read more of Kate's anti-bailout rant below.

"And let's not forget that those homeowners who are drowning in debt have hurt many people.  They've damaged the residential real estate market such that young, honest, hard working families can't afford to begin building their lives in a home.  And think of all the people that Countrywide is going to have to lay off.  Innocent people who worked hard to get hired by a big stable company will soon be out looking for entirely new lines of work, forfeiting seniority and abandoning their training.  All because certain people thought it wouldn't hurt anybody if they just fudged the numbers a little bit.

"For once, I was cheering after reading a quote from George W. He has repeatedly stated he won't support grants to individual homeowners.  Amen, Brother. Amen. And, Hil, I am so not voting for you.  I guess you think that there are more fiscally irresponsible voters than there are people like me.  But do you really think the Casey Serin's of the world even vote?  Something tells me they don't."

Thanks, Kate.
Read Kate's blog here.
Comments? Insights?

Comments

[JR]

How long do we have to continue hear that people don't like HC's proposal? The horse is dead, Kate, put the whip down.

[vultur]

HC is running an ELECTION CAMPAIGN for the POTUS! Of course she's going to jump on this crisis just like BO wants to nuke Pakistan! They are pandering and get to win the leadership race!

Kate's incessant whining and bittersweet tales of being shut out of the market are growing exponentially more tiresome and increasingly more irritating.

I could care less about this girl- if she had any common sense she'd just rent until she can buy something that can afford and keep her amateur opinons thoughts to herself!

[Susan C.]

Three cheeers for Kate! I couldn't have said it better myself. Any type of government bailout in this situation will just reinforce the premise that no one should have to suffer the consequences of his or her bad choices. It doesn't take rocket science to figure out whether you can afford the loan payment once it is fully indexed, and if you don't ask what that amount will be when you are applying for a loan, then you get what you deserve. If you were defrauded or misled, I am certain there are hundreds, if not thousands, of plaintiffs' lawyers that would love that class action. As for the mortgage companies, they deserve all the pain they get. Their actions have overfueled the financial and housing markets, and now that the bubble has burst, these companies, which are supposed to have been "experts" in their field and which made millions in returns, are whining. Gee, I'd love to have someone to bail me out every time a financial decision I've made hasn't gone my way. Is the government going to send me a check for the losses I'm taking on my stocks due to the mortgage fallout? I won't hold my breath.

[Paul]

The point is that there should be no proposal. The market should correct itself and people who bought homes they clearly could not afford will lose them. That is the way the market works. Also, let lenders go bankrupt; the economy will recover and home prices will slowly rise to their prior levels once incomes catch up with prices. The government will only misrepresent the market further by devaluing our currency for the benefit of lenders. Let the market be free.

[Jim Jones]

A huge portion of these folks purchased way beyond their means. And now that they past their fixed\teaser rate period they want me to bail them out?? I don't think so!

[kate]

JR:

Sorry to disappoint you with more Hilary chatter. But if you have topic suggestions or questions you can send them to kateinthevalley (at) gmail (dot) com and I will do my best to accommodate.

Vultur:

And yet you keep coming back. Methinks thou doth protest too much!

Paul:

Where were you when I was writing this? I really should've addressed market self-correction. Thanks for bringing it up.

[anon]

Kate, you've just jumped the shark.

Your insights about wacky realtors, overpriced hovels and the superiority of peaked roofs to flat roofs were great, but no one wans to read about your righteously indignant opinions on economics and national politics.

You're a good local vintage that doesn't travel well.

Sorry.

[AnnS]

"Kate's incessant whining and bittersweet tales of being shut out of the market are growing exponentially more tiresome and increasingly more irritating.

I could care less about this girl- if she had any common sense she'd just rent until she can buy something that can afford and keep her amateur opinons thoughts to herself!

Posted by: vultur "

I'm with vultur on this one.

She has become, and is, a gigantic BORE with her whining and complaining and idiotic ideas on how to game the system with relator fees and other nonsense.

She is worse than useless with no credential or experience to backup her incessant (and often silly) ideas and behavior. Anyone who is out there trying to buy "just because they want to own omethingright this minute" when the market is racing downwards is utterly clueless.

Gag her. Who is she? Peter's sister, cousin, girlfriend????

[Pete Viles]

AnnS asks, "Who is she? Peter's sister, cousin, girlfriend????" None of the above. I found Kate's house-hunting blog (http://thefifthofmay.blogspot.com), and I liked it -- I think it taps into a certain buyer mentality right now, which is cautious, picky and web-savvy. So I asked her to write an item a week for LA Land. Different strokes... Sorry you don't share my enthusiasm.

[sheesh!]

Wow! What's up with the personal attacks?!

If you don't like Kate's postings, why are you reading them? I don't necessarily agree with everything she says (e.g., the bailout question is tremendously more complicated than this post makes it out to be), but she still provides some insight into what it's like to be trying to buy a house in today's crazy times.

Why are you wasting your time attacking someone you've never met?

[Kate]

Anon:

I'll give you righteously indignant (I've been accused of worse) but my opinions above aren't so much about national politics as they are about the fundamental tension between buyers and sellers right now. We hate each other. And maybe that's always been the case but as the gap between purchasing power and list prices widened the hostility grew exponentially.

Anyhoo, I'll be back to local listings soon enough. Don't worry.

AnnS:

It's not the case that I'm the one destroying your real estate practice; it's tens of thousands of people just like me. People who are, contrary to your statement, NOT racing out to buy right now but instead are shopping and waiting for the right deal to come along.

Glad you're still reading,
K

[JamesW]

I think reading Kate gives some insight into the minds of today's average SoCal houseseeker, that have helped blow this bubble up.

My only question for Kate is why she would be willing to pay over 600K for a 1600 square foot pad in the Valley. Would she pay 35K for a Toyota Camry as well?

[reader]

"Cry me a river."

Translation:
Screw 'em. I don't care.

Kate, you went from writin' to fightin' with that.

You went from HGTV entertainment to CNBC/Fox News opinion.

That's your choice, but don't be surprised at the vociferous response.

BTW:Bail-out?

No one has proposed anything close to a bailout.
A bailout will be in the multiple hundreds of billions or trillions of dollars. (Iraq is a bail-out.)

Anything under $100 billion is chump change these days considering the $40-50 Trillion in under-funded and unfunded benefits coming due.

[Anon 2]

I enjoy Kate's posts. Like her, I would like to buy, but feel very cautious about it for obvious reasons. I agree with Peter's feeling that there are a number of us in similar situations out here, and it's fun to read about her peregrinations. What are you naysayers writing that's so incredibly insightful, anyway?

[Terry Robbins]

So let me get this straight - it's bad to suggest rescuing the homeowners, but it's OK to rescue the fat cat hedge fund guys? Like they weren't as greedy and ignorant as the lay people trying to buy homes.

[candice]

I really like hearing Kate's personal anecdotes of what it's like out there. And yes, even her opinions. I think it's a great addition to this blog which can get dry and technical. While all these Econ 101 things are happening around us (the Fed, the subprime market, etc), it's important to see how they're actually playing out in the field for real people. Real people looking to buy, real people who are trying to sell, real people who work in the housing industry and are all doing it in this crazy LA market.

While we wait for all these events to trickle down in whatever magnitude they will, it's important to keep checking in with the field reporters. And that's how I see Kate. She puts in her time, and reports back on the valley. Housing Watch 2007.

I only wish she widened her valley search to include more of it.

[LA-renter]

I'm new to LA, and this is the first I've heard from/about Kate.

Being a fellow renter, Kate speaks sense to my ears.

Why is it that people find what's irrational so reasonable? Have we become so comfortable with the untenable, that we want it to somehow freeze.

It seems to me that the housing market is 90% psychology: It's what you believe it's worth --or lately, how much more it'll be worth in a year. If much of the "bad" unsustainable loans were made on the premise that increased worth could be converted into "good" loans, then no amount of money is going to "fix" new perception.

People's realization now that housing is not an investment tool --and just a necessary purchase-- changes the equation, and no amount of money will alter the mind of the masses... for another several years.

[Kate]

James W:

I haven't bought anything yet and I am in a bit of a holding pattern while the market corrects. But, in fairness, I absolutely tried to buy houses at that price earlier this year -- before I had all the information I have now. The realization that there were plenty of buyers out there that didn't have all the facts is actually what got me to blogging about Valley residential real estate in the first place.

Reader:

Indeed, it's no surprise that there's some backlash. For the record, I don't hate Hilary -- I just hate the idea of rewarding wrongdoing.

Terry:

I don't think it's okay to bail out the hedge funds either. They knew better than anybody what they were buying.

Candice:

Will do! I have recently been reviewing some stuff in Chatsworth and WOW! It is a very interesting part of town. Stay tuned!

[LA Expat in Arkansas]

"And think of all the people that Countrywide is going to have to lay off. Innocent people who worked hard to get hired by a big stable company will soon be out looking for entirely new lines of work, forfeiting seniority and abandoning their training. All because certain people thought it wouldn't hurt anybody if they just fudged the numbers a little bit."

Kate- who do you think fudged the #'s in the first place or didn't require any documentation? Why? Because loan agents were PAID big bucks to close sales regardless of who really qualified. I'll be glad when you finally become a homeowner as you will get a great big reality check about how the lending process works.

Contrary to others,Kate, I find your posts a refreshing distraction to the War in Iraq and the foreclosure Armegeddon.

[BetterVillage]

Kate-Hillary Ticket in '08!

Expat: most were. I got a call from a borrower today that wants to purchase a $400k home. Ok credit.. not great... not "subprime." Long, good job histories. Might be able to get some cash for down payment / closing costs, might not. Their incomes qualify them for the purchase at current rates (current hourly rates in any case). What's the concensus.. should I do this loan? I will make a maximum of $3,500 if I take the job... and the kids do need to eat. Anyone? Should I -- ethically speaking -- even try do do this loan for them?

[pugtv]

I don't want the taxes I paid to go to some fiscally irresponsible and undeserving home owner.

KATE FOR PRESIDENT =)

[noah]

I fear that prices will not come down.

What will happen is that within next 5 years there will be hyperinflation.

If you are making 100K now, you will be making 400K a year.

That will make a stagnant price of 600K VERY ATTRACTIVE even with upward adjustment.

If you're saving money for downpayment, forget about it. Inflation will eat it away. Go travel around the world.

Why am I saying this? There is a load of ARMs resetting in 2008. There are loads of boomers retiring starting 2008. There are deficits. There is Medicare, Social Security.

Government must print more and more money to cover the losses. US is an empire and has big appetites.

And we make very little stuff that others wanna buy. All the while Russians, Euros and Chinese want to spend their dollars and get out of them.

This means dollar will go down 1:4 versus euro, and hyperinflation will come our way (much more than 10% a year, more like 20-30% and up).

That will rub off in face of hard workers and savers who will see their work and savings dissapear. And they will no longer work hard and save hard.

Which will simply accelerate aforementioned process.

Yes, prices won't come down, but you will be able to buy your 600K house quite easily, whatever it may cost, because prices can't follow wage inflation in hyperinflation environment.

Then there will be tipping point where due to economic breakdown, there will be less and less work and buying and selling will come to a stop.

Broken economy needs a new deal.

[Mr Income Stream]

noah-

Rehab is in your future...

[Inland Empire]

I like to read Kate's bits because some of the things posted are just odd (reducing the commission amounts for one). I don't feel sorry for people working at Countrywide and getting layed off. There is no guarantee you will have a job tomorrow no matter who you work for. Kate is too young to remember all the outsourcing in large companies in the 90s. It happened every day then. Lots of people lost their jobs.
Like Noah, I can see a period of inflation could occur. (one of many possibilities). Again, Kate never lived thru the 1970s when we seem to have had it last.
I do think that in two years or five, Kate will still be a renter. While there is nothing wrong with being cautious or picky or shopping for the right deal, I have the feeling she is one of the folks who don't realize the value of sweat equity but instead wants everything to be new and out of the box.

[rant]

Without trying to repeat it all, I agree with the positive comments about Kate. Her experience and frustration is mirrored by many responsible people. I say NO WAY paid these ridiculous prices brought on by irresponsible people with too much exposure to cheap credit. The time to pay the piper is near, and neither the government or us should bailout the greedy. Let them go bankrupt and experience foreclosure. All actions should have consequences, this no different.

I have zero sympathy for realtors/lenders/brokers. Hard working Countrywide employees? Give me a break. Many of the CW (and the other defunct/gonna be defunct brokerage house) employees that are fixing to get axed tried that line of work because they AREN’T hard working and it looked like a short-cut to easy street. Same philosophy as the bag-holding owners/sellers right now.

I say give Kate a larger voice and bigger platform.

- end rate