Housing Boom and Housing Bust: Federal Loans and Foreclosures


Remember when houses were worth more than they are now?  Remember when the value of a home would go up almost overnight?  You could buy one on Tuesday and sell it for a profit by Friday.

Yeah…good times.

Until the bubble hit.  And then it wasn’t such good times; in fact it was bad times.  Really bad times.

The housing bubble hit all of us in some way or another.  For many of us, our homes are worth less now than they were before; we still haven’t caught up.  And the economy?  Well, we know how THAT has played out.  So, with the the downside of such a bubble being so, well, down, the lessons we learned just a few short years ago should still be fresh.  Should still be pertinent, right?

Wrong.

We haven’t learned the lessons from the past.  In fact, you could say there WERE no lessons learned at all; it’s been business as usual.  Which, when you have people who keep their jobs by winning votes running things, shouldn’t surprise you.

For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states* like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.

Is there no hope?  Can we actually stop the madness?  Maybe:

But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.

Michael S. Barr, a former assistant Treasury secretary, said the federal government’s retrenchment would be painful for many communities. “There’s always going to be a line, and for the person just over it it’s always going to be an arbitrary line,” said Mr. Barr, who teaches at the University of Michigan Law School. “But there is no entitlement to living in a home that costs $750,000.”

Not a bad start.  At least these people understand that we can’t continue down this path.  When the government backs loans, people make bad decisions.  They are much less careful with other people’s money than they are with their own.

So, when the government says that we’re no longer going to back loans more than $750,000, that’s a good thing. Well, a goodish thing.  The problem is that pesky little comment quoted by Mr. Barr:

“There’s always going to be a line, and for the person just over it it’s always going to be an arbitrary line,”

Fair enough.  And while I think that houses costing more than $750,000 is over that line, I would like to go on record saying that even THAT line is too generous.  If it were up to me, MY statement would be:

There is no entitlement to buying a home that costs ANY amount of money.

There.  Pino’s line.

$0.00

* By the way, note the states receiving these loans.  All of ’em, every one of ’em, MASSIVE Liberal havens.

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14 comments
  1. 750k is about what a 3 bedroom condo costs in silicon valley. Those folks are f—–.

    • pino said:

      Those folks are f—–.

      Well, yes. The price of their homes will continue to fall. However, on the other hand, we’ll have a more healthy housing market and, while bad news for some, will be good news for others. The affordability of housing in these states should become more attractive.

      But to me, the best news is that were getting back to where we need to be:

      Brokers and agents here in Monterey said terms were much tougher for nonguaranteed loans since lenders were so wary. Borrowers are required to come up with down payments of 30 percent or more while showing greater assets, higher credit ratings and lower debt-to-income ratios.

    • Wow. Buy in Vegas for $150k, then commute to SFO or LAX for $200 a day. haha! Sounds crazy, but you’d still be saving a grand a day!

      • pino said:

        Sounds crazy, but you’d still be saving a grand a day!

        See? It’s exactly THAT type of economic thinking I love!

  2. When you think about it, have you ever had any “good” economic thinking in your government? I think 14 TRILLION dollars of debt pretty much answers that question.

    • pino said:

      When you think about it, have you ever had any “good” economic thinking in your government?

      Probably not, no. And THAT’S depressing.

    • Haha – yah, but look at all the cool toys we got in the meantime! Ignoring our fiscal problems by staying focused on iPads, Xbox releases, and Lindsay Lohan’s latest court dramas made sure we were at least entertained while the country was going to $hit.

  3. Vern

    It began a long time before ipads and Xboxes…………….though, if Lindsay got both of them on credit, that may have been a good purchase. 😉

    • It’s true, it did start a long time ago but I think it is fed by the same need for excess. I think Canadians have similar want for excess, just not on as deep of a level so it’s not as hardcore or damaging as an actual need. There are pros and cons to that which is why I love both countries but as far as the economy is concerned, “excess” (or more specifically, a lack of restraint) hasn’t worked well at all for us in the U.S..

      This same “excess”, however, is what I think will be what actually pulls us out of this funk because when we do something big, it’s REALLY big on a gamechanger level. Consider me biased, but to me it’s largely only a U.S.-style freedom that allows for that sort of advancement or improvement. I just hope whatever that gamechanger is, it’s a right and healthy thing.

      • Capitalism does not work in its current format. Im not even sure it can work because at its core its all about inequity on some level. I dont know what can or will replace it but I do know this, we are certainly getting ready for the hammer to come down.

      • pino said:

        Capitalism does not work in its current format. Im not even sure it can work because at its core its all about inequity on some level. I dont know what can or will replace it but I do know this, we are certainly getting ready for the hammer to come down.

        t4t,

        The problem isn’t the system that simply recognizes our nature; it’s our nature.

        If we as a society really DID care about our fellow man and live a life that better resembled anything of value, we could get by with a more “fair” system. But we don’t.

        Human nature is currently set to look after our own selfish self interest. As such, the nature of our economic system should be one that is in line with that human nature.

        In other words, legislating morality isn’t the answer.

      • In other words, legislating morality isn’t the answer.(Pino)

        We legislate morality all the time. Its just that with capitalism the ones with the money ensure that they govern the legislation. 😉

      • pino said:

        We legislate morality all the time. Its just that with capitalism the ones with the money ensure that they govern the legislation.

        I don’t disagree. And to the extant that we do that; it’s wrong.

  4. We probably diverge in opinion on the working and sustainability of capitalism. I believe we are all born unique, not necessarily born “equal” as in nature, but regardless I do think there’s a couple bubbles left to burst over how bad we as a public have bungled capitalism up. So like you, I look for that hammer as well.

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