Dems push foreclosure aid

Housing blogs have been aflame with "no bailout" comments for months, but now that the housing slump has turned into a crisis, Washington is alive with ... yes, talk about the best way to help troubled homeowners.

"The question is, how can we keep people in their homes?" asked Sen. Christopher J. Dodd (D-Conn.), left, who chairs the Senate Banking Committee. CNBC reports that Dodd will meet Tuesday with Fed Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. to "discuss steps that might help stabilize mortgage and financial markets and aid U.S. homeowners."

The New York Times reports "Democrats are seeking more aggressive, interventionist moves to protect homeowners." Would that be a "bailout"? The Times thinks so -- it uses the "b" word: "Senator Hillary Rodham Clinton, the Democratic front-runner, recently proposed a $1 billion fund to help distressed families catch up on their mortgage payments ... John Edwards, the former senator from North Carolina, is proposing a similar bailout fund... "

Our take: Watch out for the language police on this one. Just as they tried to take the word "amnesty" out of the immigration debate, they'll try to take "bailout" out of this debate, saying it's a loaded, inflammatory word. Our feeling is that if you think the government should offer special financial aid to homeowners who can't pay their mortgages, that is a kind of bailout and you should stick to your guns and explain why you think this particular bailout is necessary and appropriate.

Comments? Insights? Email story tips to lalandblog@yahoo.com.
Photo Credit: Dodd.senate.gov.

Comments

[Jonas]

Sure I don't like the word bailout as much as the next regular guy working for a meager living, but the fact is this "bailout" will hopefully keep our economy from tumbling into a disastrous situation; which if it were to happen, would only make our already crappy life crappier. Economics 101 classes are now starting all across your local community colleges; enroll now for a refresher, or for new insights.

[butterflysoup]

Mr. Viles, you write: "Our feeling is that if you think the government should offer special financial aid to homeowners who can't pay their mortgages, that is a kind of bailout, and you should stick to your guns, and explain why you think this particular bailout is necessary and appropriate."

Who is the "our" as in "our feeling" above? Is it the our of the royal we? Or is it "our" as in the L.A. Times' editorial "our"? Is the "you" we the readers, or "you" as in "you" the politicians? This writing confuses me.

Mr. Viles, in previous posts you support bailing out Wall Street, but the above language implies you don't support bailing out home "owners."
Am I mistaken? If not, how do you support bailing out one and not the other?

The problem with home "owner" bailouts is similar to the problem with bankruptcy "reform." Some people were totally abusing Chapter 7 bankruptcy, and they fueled the congressional "reform." Other people who genuinely needed and deserved a fresh start in Chapter 7 are having a harder time getting one under "reform." Likewise, some people totally gamed real estate and lost their bets while some were simple, hard-working souls who got snookered. Hard to sort 'em out.

Let the mortgage brokers who made the liar loans etc. help pay for the bailouts out of their pockets. Yeah, that'll be the day. One thing for sure: No bailouts for Wall Street.

[Jack]

What better superhero to rush into the fray -- the federal government, in debt to the hilt, stepping in to rescue careless homeowners who are in debt to the hilt.

[Raul Garcia]

It was greed and ignorance which created this housing fiasco, and neither should be awarded and justified by a bail out. It's time for people to take personal responsibility for their actions.

[AnnS]

"Think beyond your "village" and stop painting all landlords and tenants with the same brush. Posted by: investorguy "

My "village" before retiring were, in reverse order, CHICAGO, and CLEVELAND and DC.

You have such a lousy opinion of your tenants, I have serious doubts about your claims.

[Raul Garcia]

It was greed and ignorance which created this housing fiasco, and neither should be awarded and justified by a bail out. It's time for people to take personal responsibility for their actions.

[AnnS]

" we're gonna vilify people for being greedy and stupid, and deny them guv'ment cheese, then let's start with ExxonMobile, Halliburton and our Hedge Fund guys, and move on down the list. we'll get to the greedy stupid homeowners in due course, don't worry. Posted by: sheila |

Shelia -

Grow up

Stay on the issue

Don't blather on about things which can not be altered since they are already in existence. General social justice is not the topic

And exactly when does you ARM, interest-only or option-ARM reset or balloon? Eh?

[Pete Viles]

Butterflysoup wrote:

"Mr. Viles, you write: "Our feeling is that if you think the government should offer special financial aid to homeowners who can't pay their mortgages, that is a kind of bailout, and you should stick to your guns, and explain why you think this particular bailout is necessary and appropriate."

"Who is the "our" as in "our feeling" above? Is it the our of the royal we? Or is it "our" as in the L.A. Times' editorial "our"? Is the "you" we the readers, or "you" as in "you" the politicians? This writing confuses me.

"Mr. Viles, in previous posts you support bailing out Wall Street, but the above language implies you don't support bailing out home "owners."
Am I mistaken? If not, how do you support bailing out one and not the other?"

Butterflysoup, thanks for the comment, and I'm sorry I confused you -- clearly that passage was poorly written. The "we" and "our" in blog posts is just the royal we, a silly conceit. The blog represents my thoughts and interests -- It's just me, just my thoughts and opinions, those of a free-lance blogger. I certainly don't speak for The Los Angeles Times or its editorial board.

To further unravel that tangled and confusing passage, I was trying to make a point about politicians and others who support government aid to homeowners: don't quibble about whether this is a bailout or not, just defend it and explain it if you think it's good policy.

No, I don't support a bailout for home owners. I think banks and lenders should be encouraged to avoid foreclosures, but ultimately it's their call: do they want the house back, or do they want to restructure the loan?

I think the Fed is probably doing the right thing by injecting liquidity into the markets, and I don't consider that "bailing out Wall Street." Wall Street is still on the hook -- it sold, and bought, roughly $4 trillion (Lou Barnes' estimate) worth of mortgage-backed securities whose value is now in question. Those securities are still sitting there, damaged, unwanted, stinking up the entire financial system and threatening to ruin numerous balance sheets. The Fed hasn't bailed out the owners, and it shouldn't. But it should do what it can to make sure there is a functioning market for debt.

[Tex]

The Dems are hoping to gain some political leverage with this bailout idea. Either the opinions expressed on this blog are not representative of public opinion, or the Dems are extremely out of touch. Which do you think it is? Did the Demos bother to do any pollling on this bailout issue before running their mouths about it?

Here's my $.02 on what their logic is. The states with the most expensive real estate -- California and New York -- will vote for the Democrats anyway. Therefore, the Democratic candidates don't give a rat's ass what we think here in California. They care about "swing" states like Florida, Nevada, and Ohio.

Mousebender also pointed out that the bailout proposal is directed only at current homeowners, and ignores young families who have been saving diligently with hopes of someday becoming homeowners. Again, the Dems are trying to maximize votes. Voter turnout among young people is low, so they don't care about alienating young voters. Also, conventional wisdom is that homeowners are more likely to vote than renters (in part due to burdensome voter registration laws). So again, they are catering to those who they expect to vote (homeowners) and ignoring those who they think won't vote (young people and renters) and whose votes don't count (e.g. California and NY, since those states will go for Democrats regardless).

[Teresa Rothaar]

Absolutely not. No one put a gun to these people's heads and FORCED them to take out these crazy mortgages.

When my husband and I bought our home (in DE) in early 2006, our broker tried to talk us into an option ARM, claiming "you can just refi in two years." I grilled him, asking what would happen if we couldn't "just refi in two years." He just kept saying that we shouldn't worry about it.

We made the CHOICE not to fall into his sales pitch, and insisted on a fixed-rate. We got a 30-year fixed, interest-only for the first 10 years. Yeah, our payments will go up 8.5 YEARS from now...by about $100.00 to $150.00/month, NOT by double, triple or quadruple. If we can't afford another $100/month 8.5 years from now--heck, if we still own this house in 8.5 years--we've got problems that go way beyond our mortgage.

The broker was visibly unhappy, but he gave us what we wanted because we made it clear that if he didn't, we'd go find someone who would.

All these people losing their houses because they took out nutty loans could have done THE SAME THING we did. They could have CHOSEN to say NO. Some of them whine that they couldn't understand the papers they signed. Then they shouldn't have signed them. If they were unable to understand the papers, they should have hired an attorney to help them. If you can't afford to flip an attorney a couple hundred bucks, how in the world are you going to afford a $300,000+ house????????

[Teresa Rothaar]

>>>>>> Just as many refied to get the $4000 motorcycle or the $40,000 kitchen added to a $140,000 house (while over 6 years they ran up $100,000 in credit cards while having an $85,000 income - the top 21% in the US. )>>>>"Catching them upon their mortgage" is throwing good money after bad. It merely delays the foreclosure.>>>>>>The least offensive proposal is to revamp the bankruptcy code so the court can alter the terms of the mortgage by lengthening it, reducing the interest or reducing the amount the lender will eventuallly receive as principal with the proviso that if the house is sold, the lender would receive the lesser of all the proceeds from the sale or an amount which would satisfy the original debt.<<<<<<<<

Agreed again. It seems only logical that if you can restructure other types of debt in bankruptcy, you should be able to restructure a mortgage.

[butterflysoup]

Peter, you wrote above: I think the Fed is probably doing the right thing by injecting liquidity into the markets, and I don't consider that "bailing out Wall Street."

I would respectfully say that observers of the economic scene ranging from Allan Sloan of Fortune magazine to Ralph Nader and Eric Janszen (www.itulip.com) do consider liquidity injections a "Wall Street bailout."

Clearly there is room for difference of opinion here.

Again, thank you for your thoughtful work on this blog. We are all learning.

[Norma Ramirez]

It is election time and the Dems want to win more votes. These homeoweners got over their head knowingly. They refinanced once, twice maybe three times to buy a car, fix their homes, take a vacation, etc. Why should they be helped out? Where is this money to "BAIL" them out going to come from? Taxpayers? Raise property taxes? I DON'T THINK SO!! I am a homeowner, I know very well what and how much I can afford. These people knew what they were doing.

I don't think it's fair to help them out...besides, someone, somewhere will abuse this "BAILOUT" process and people will continue to get in way over their heads.

Use that money for something else more worthwhile

[investorguy]

AnnS: Yawn.

Read what I wrote. I NEVER said I have a low opinion of my tenants. I love my tenants, and because I rent a nice place to them, they appreciate it. They pay on time, and they keep up the house.

I have a deal to close... buh-bye.

[sheila]

poor AnnS. so angry at all the strangers. honey, do you need a hug?

i am not talking about "general social justice" nor are the wasteful government bailouts for others that i mention "off topic" because some of them exist already (for all those degrees, it's frightening that you never took critical thinking). several of them are being reconsidered by Congress at the same time as the "bailout" for the RE industry is being test-marketed. or do you only read this blog?

all the people who are truly outraged because the govt. is "helping the unworthy" should think about those other enormous, undeserved bailouts first, but i suspect that most of those people really just want their shot at a lower-priced house, and don't really care about govt. waste of their tax dollars. fine with me, but at least be honest about it.

and i bought my house for cash, don't want to sell it and don't want to buy anything else, so your petty dig, which was quite off-topic, missed it's intended target by a mile. i have no sad little self-interested agenda here. can you say the same?

[AF Retiree]

Not only should the Dems say no to this stupid idea, they should be blasting all those who need help now.How pathetic can this idea be? So it was fine when everyone was getting in the act of overpricing homes but now when they decide they do not want to or cannot pay their mortgage, bail them out!
If that happens, then I demand a free house. As a 26 year, soon to be reitred from the Armed Forces, veteran, I demand that my lawmakers but me a house for all my years of service. Sound stupid; sure. But why should I not be above these clowns who overspent!
So who is next? If we bail them out, then the govt is obligated to bail out every enterprise that fails......welcome to the Democrats Socialist Republic!