I just love these fucking sob stories run by the MSM. I’m supposed to feel sorry for these dimwits who bought a $415,000 home with no money down in 2002 and then took another loan of $65,000 on top of that when prices hit a peak in 2006, and are now $245,000 underwater? Guess what? You fucked up!!! Accept the consequences of your actions and take your bitter medicine. Instead you are whining about the unfairness of your own stupidity. I’d love to know what kind of cars this couple drove in the mid-2000′s and what kind of vacations they took. I bet that house has ceramic tiles, granite countertops and stainless steel appliances. I bet they have 5 HDTVs and every gadget known to man. You never get those details in these MSM sob stories.
And what does Obama and his Democratic slimeballs in Congress want to do? They want to force Fannie and Freddie to write-off the principal for these fuckwads and millions like them across the land. They want you and me to foot the $100 billion price tag. These lowlife politicians want me, who has made every mortgage payment on my house on time for the last 17 years, to foot the bill for deadbeats across the land who bought too much house and leveraged themselves to the maximum so they could live the good life. The Democrats want to fire Ed Demarco from the FHFA because he refuses to screw tax paying Americans who have lived frugally, honored their obligations, and lived within their means. If the Democrats get their way, than it will behoove all of us to just stop making our mortgage payments and wait to be bailed out.
Underwater and locked in
Job mobility hurt by housing woes
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — Jose, 47, hoped to build a life with his wife Maria, 43, and three children in Phoenix, Arizona where he took a new job at a plastic bag factory in 2007.
Unfortunately, he was unable to sell a home he and his wife bought in 2002 in La Puente, California, six hours away by car. After five years of frustration, Jose moved back there in September to take a lower-paying job at a factory he had previously worked at.
Like many of their neighbors in La Puente, a community of about 40,000 located 15 miles from downtown Los Angeles, they are “underwater,” which means they owe more than their home is worth.
The couple bought the home for $415,000 and later took out a $65,000 second mortgage. Today, Maria and Jose owe $245,000 more than their home is worth (which is $235,000) and have a loan to value ratio of 204%.
Selling the home without harsh negative consequences seems impossible without government assistance, a prospect that is unlikely at best.
Either a foreclosure or a bank-assisted short-sale would, in the best scenario, stain their credit rating and make it harder to buy a new home in the next few years. So they continue to pay monthly into a mortgage where they have no equity.
“He [Jose] is frustrated because he would like to find another job that makes more money, but in the current situation he is taking the job that is near where we live,” said Maria.
The trouble Jose and Maria are experiencing — being trapped in a mortgage or “locked in” as economists say — is something they share with millions of other homeowners around the country, though borrowers in California, Florida and Arizona are the most constrained.
In fact, more than 11 million U.S. residential properties are underwater with borrowers owing more on their mortgages than their homes are worth, research firm CoreLogic reported March 1. Other studies have shown that U.S. re-location rates have slowed down substantially in recent years, with a significant reduction in long-distance moves.
What can the government do
The question of whether the legions of borrowers like Jose and Maria should receive help from the government to gain some equity in their home so they could sell it and move to a better job is at the center of a heated battle in Washington being waged between a major U.S. housing regulator and the Obama administration.
The White House and some Democratic lawmakers have been pushing Ed DeMarco, the acting director of the Federal Housing Finance Agency, the chief regulator for the government-controlled mortgage giants Fannie Mae and Freddie Mac, to cut the amount underwater borrowers owe for mortgages owned by the two firms, a process known as principal reduction. Roughly, 56% of all U.S. mortgages are owned or guaranteed by Fannie and Freddie.
Amanda, 36, and Jamie, 40, of Ipswich, Mass., owe more than their home is worth and are unable to move to take advantage of better job opportunities elsewhere.
Democrats contend that principal reduction would give borrowers more money to spend and make it easier for those who have no home equity to sell their homes and move to another city to take a job, driving the recovery. (Jose and Maria’s La Puente home is owned by Fannie Mae and is, so far, ineligible for principal reduction).
DeMarco has been opposed to such cuts and he has argued that such action would cost taxpayers $100 billion. The dispute became heated last week, when a group of Democrat House members called for DeMarco to step aside if he wasn’t going to cut principal.
DeMarco told MarketWatch on the sidelines of a conference last month that issues like job mobility are the type of broader judgements that are the responsibility of elected officials in Congress and not the FHFA. Read about Democrats urging DeMarco to cut loan principal
The academic argument
Academics and economists have jumped on the issue in recent months.
A study done last fall by two University of Pennsylvania professors and a Federal Reserve Bank of New York vice president, says homeowners with negative equity are about one-third less likely to move than other borrowers. It notes that longer distance moves, particularly those that cross a state border, tend to be job-related.
In contrast, a report issued last month by an economist at the Minneapolis Federal Reserve, concludes that negative equity does not reduce homeowners’ mobility. The report says owners can still move if they find tenants to rent the property, and notes that homeowners who are deeply in the hole are more likely to move and abandon their homes than borrowers who are only slightly underwater.
Seeking middle ground, a study produced in October by an economist and research associate at the Boston Federal Reserve concluded that policies aimed at cutting negative equity may enable some households to move to better job opportunities. But the main author, Alicia Modestino, said they are unlikely to have a “measurable” effect in reducing unemployment.
Georgetown University Law Professor Adam Levitin said while the problem of underwater homes may not have a measurable impact on national unemployment, it does impact what he calls “optimal employment,” because it makes it difficult for some employers to find the best employees by cutting the pool of prospective hires.
The real-life ramifications
Academic arguments aside, the situation has had a real-life impact on many borrowers. Amanda, 36, her husband Jamie, 40, and their two children, ages 2 and 4, had hoped to move from Ipswich, Mass., to either Baton Rouge, La., or Houston, Texas, for employment, but their underwater mortgage has forced them to stay put.
Jamie, an economist in the oil and gas industry, was laid off in February 2010, three weeks after his son was born. Since then he has received job offers in Houston and Baton Rouge but the couple decided it would be devastating to sell the home they bought in 2006 for $540,000 at a major loss and find themselves on the other side of the country away from family and friends in an uncertain labor environment.
“We were worried about job security and the impact of a sale on our credit rating,” Amanda said. “We just can’t move at this point. We would have considered the job offers seriously if we could sell our house. You just don’t have the freedom of movement right now.”
Other people wish they could sell for other reasons.
John Shore, age 62, said he would like to retire and move to the central coast of California but can’t because he has to make mortgage payments on a home on the outskirts of Fresno, Calif. that is severely underwater. Shore said Social Security wouldn’t pay him enough to keep up with his health insurance and mortgage payments.
John Shore, age 62, says he can’t retire and move because he’s locked into mortgage payments on his severely ‘underwater’ home outside of Fresno, Calif.
“If I had something physically go wrong with me I would be the next person to lose my house,” Shore said.
Shore, director at the Community Housing Council of Fresno, a housing counseling agency, said that anyone who bought a home in Fresno in the past seven years owes more than their home is worth and about 65% of homes are severely underwater.
Meanwhile, Jose and Maria have been struggling with their home in La Puente for over four years. Twice Maria and her three boys, age 19, 13 and 8, moved to Phoenix to be with Jose, once for a year and another time for ten months. But both times tenants renting their La Puenta house stopped making their monthly payments, driving her back. In the other years, Maria and Jose had a long distance relationship, driving the six hours back and forth to see each other. She is happy Jose is back but wishes they could sell their home and move for better employment.
“If we could sell the property, we would have moved to Arizona,” Maria said.
Tator says:
“I’m supposed to feel sorry for these dimwits”
My sentiments exactly. I get all kinds of bad looks when I blame the buyers instead of the Bankers. Granted the Bankers were unscrupulous, but the world is full of people willing to part a fool from their money.
It must be an education thing. My high school Home Education teacher was a tough women that did not take crap from the students (1972). She drilled into our heads READ every word in contract, take it to a Lawyer, calculate what you payments will be so you know what you will actually pay over the course of the loan, create a budget based on reasonable estimates. NEVER pay more than 30% of your income for housing…and on and on.
When Adjustable Rate mortgages came out, I thought people were fools (except in very rare cases) to use them, but they did by the millions.
When I read stories like these and see that millions of people did this kind of stupid stuff, I just shake my head. This is not an IQ thing, but a judgement thing.
I have said all along the Bankers could not have done this to a educated, reasonable person.
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12th March 2012 at 1:07 pm
howard in nyc says:
i have a patient who was successful in the corporate business world, and periodically advised (democrat) policy makers in dc. he is retired, he writes and does some consulting, and he provides some guidance on the latest mortgage modification scam from the barry administration.
we got into a heated discussion on the the plan, and on the whole approach of taxpayer dollars to bailout bad mortgages. (hint–engaging in arguments with people recovering from anesthesia gives you quite the debate advantage.)
our disagreement boiled down (mostly) to a point made in this article. that the bailout of the debtor is necessary to avoid a horrific consequence. i quote from above:
“…make it harder to buy a new home in the next few years.”
my friend, quoting one of these heartbreaking anecdotes, protested, “how is this person going to be able to buy a house when he moves to another city to get a new job?”
my counter–he can’t buy a house in the new city–SO FUCKING WHAT! he can rent; he will be protected from repeating the same sequence of events that led him to this end.
the false assumption that home ownership is the sine qua non of financial stability, middle class status, economic advancement, still runs wide and deep in our american culture/society. despite the overwhelming proof of the past six years.
people still think the silliest things about so-called home ownership. even after having lived though the burst housing bubble, the masses maintain this deep belief in a dogma proven false. convinced that a resumption of the appreciation of house prices is not merely likely, but inevitable. even really smart people making policy.
just amazing. what are you gonna believe, your deep beliefs, or your own eyes?
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12th March 2012 at 1:19 pm
matt says:
It’s called a “short-sale”, you sell the house at market value and both the homeowners and bank take a bath. What dumbass plastic bag factory worker would take a $415,000 first, then a $65,000 equity line with that salary? And what dumbass bank would do the lending? They are all fucked and should take the hit and become renters. End of story.
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12th March 2012 at 1:19 pm
Hope@ZeroKelvin says:
I don’t know what is stupider: Bailing out banks that gave out easy money for overpriced houses OR bailing out stupid homeowners who borrowed more than they could possibly repay. That the fed.gov has done essentially both just goes to show you how doomed we are.
Also, I think when you get a principal reduction, which is what the Dems want, you have to pay taxes on that difference, so the homeowner ends up paying the fed.gov instread of the banks. Same same.
Let ‘em all default. Wipe the debt off the books. We, as a nation, will be the stronger, and hopefully wiser, for it. (Although our history does not necessarily suggest this.)
Oh, and cry me a fucking river.
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12th March 2012 at 1:19 pm
Kill Bill says:
Yeh, I realize these people shouldnt have gotten such big mortgages, but I cant help but think this is also to save the MBS investors as well.
I dont pity either one.
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12th March 2012 at 1:39 pm
underfire says:
I scanned the article and comments earlier on MW. What struck me was the shear numbers of ignorant comments, which of course are the norm for many sites. They fit to a tee what would you would expect from a populace that has slumbered through the last few decades, to now suddenly wake to see this crises upon them.
There’s so many huge storms bearing down on us: debt, energy, job loss, corporate/political policies, the consequences of generations of handouts. And a mentally numb population.
There’s not going to be any “getting our house in order”, we had that chance and squandered it twenty years ago and we’re showing not the least bit of inclination to fly right now. I know I’m preaching to the choir here, it’s sickening what we’ve done with our country.
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12th March 2012 at 3:10 pm
bigargon says:
we really have gotten into a cultural mindset that other people need to pay for our screw ups, be it a Multinational bank or owners of 2 bedroom house in the slums. It all about the avoidance of pain, a society that believes that pain, suffering or even discomfort is to be avoided at ll costs. The problem is pain deferred or almost never pain eliminated. It just the pain is greater later on.
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12th March 2012 at 3:14 pm
AWD says:
The whole problem is the statement “what can the government do”. The fucking government should stay the hell out of the housing market, period. The Fed.gov fucks up everything it touches, like our president, for example. Why would any sane person believe the government could or should “fix” this problem? All they seem to be able to do is throw billions, or hundreds of billions they DON’T have at problems, and only create bigger problems. Bail out the banks, and the criminals created even bigger banks, leading to an even bigger collapse in the end. These idiots screwed the pooch, and they should pay the consequences. Our entire country wants a handout from the government, it’s pathetic.
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12th March 2012 at 3:22 pm
Tator says:
“my counter–he can’t buy a house in the new city–SO FUCKING WHAT! he can rent; ”
I have always believed it was just stupid to buy a house while moving to a new city because you don’t know the city well enough. Heck, your new job maybe a bad choice.Every time I moved I rented the first year to figure out where the traffic problems were, the crime areas, best location to stores and gym…it take a year to get a feel for that.
After that year then make a well informed buy.
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12th March 2012 at 3:23 pm
Wyoming Mike says:
I assume this is a follow-up on the stupid Americans article. Dumbfucks. The question is, why would this dipshit ultra-breeding moron assume he could afford a half million dollar home when taking a job in fucking phoenix making glad GD sandwich bags was a step up?? Slap some honey on this dumbass and drop him in yellowstone, that’ll fix his problem.
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12th March 2012 at 3:34 pm
Stucky says:
Couple things to keep in mind.
1) These laws — like HAMP — have ALWAYS been written to be VOLUNTARY actions taken by the lender.
For many legal reasons (beyond my inderstanding) it is damn near impossible for the government to force the lender to do anything. It doesn’t matter if it’s a government-backed mortgage. The choice to modify a loan, reduce principal, etc. is always up to the lender. Maybe Obama’s new proposal is different. I haven’t read it. But, I doubt it.
.
2) These reductions, modifications, etc. are never given carte blanche. There are always a shit-load of hoops the borrower must qualify for.
For example, HAMP was supposed to help 9 million homeowners. Bwaahahaha! The actual results are just a small fraction of that lofty bullshit goal.
.
Here is my humble conclusion. This is just another massive bullshit law .. that sounds good (to some) on paper …. meant to make people feel good that Obama is “doing something” …. it’s nothing more than a pre-election Obama give-a-way ……………. and won’t amount to a fuckin’ hill of beans when it’s all said and done. This HAS been his track record.
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12th March 2012 at 4:05 pm
sensetti says:
I can’t believe they would write down the principle, rewarding bad behavior never works. We are so fucked, where does this crazy shit end?
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12th March 2012 at 4:24 pm
IndenturedServant says:
The ironic thing here is that if the govt had just bailed out the borrowers in the first place (all of them) with the trillions they printed up to save the banks, we could have been in nearly the exact same place as we are today. Homeowners would be free and clear, banks would have substantially reduced their mortgage exposure and the tax payers would still be on the hook for all of it. I know that is a stupid idea but there seems to be no limit on “STUPID” these days.
In example #1 of the story above, they are in over their head by $245k. Even if they were bailed out for that amount they would still have no equity. Even if they did, I doubt that housing prices have bottomed yet so most would only end up underwater again.
My opinion is that this is only a ploy to get the ignorant, underwater masses to to sign a new mortgage that will be promptly & properly filed as the originals should have been but weren’t. This will then make things all legal-like so that the banks can foreclose quickly and efficiently when homeowners fall behind again. I’m sure there will be plenty of legal speak in there about surrendering rights sue for the robo-signing and MERS messes. These deals will not cost the banks a single penny in the end. If I were underwater and giving any thought to taking one of these “deals”, I would damn sure get some competent legal advice.
Personally I think all of these people, my dear brother included, should have been hung out to dry right along with the banks! Fuck ‘em! Life is tough, it’s tougher if you are stupid. You do not need a public or private education for the lessons taught by the school of hard knocks to take root!
The collapse is not going to progress, or end well at all.
I_S
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12th March 2012 at 7:41 pm
TJF says:
I just sold my home 2 weeks ago. I had to write a check for nearly $40k at closing. That sucked. I guess I should’ve stopped paying my mortgage and hope that I would be bailed out.
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12th March 2012 at 8:12 pm
Axel says:
Geezus Christ. I’m a SURGEON and I couldn’t afford a $415K Home. Jose works in a PLASTIC BAG FACTORY?
ARRRRRRGGHHHH
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12th March 2012 at 9:56 pm
Obama's hemorrhoids says:
Axel
Proletariats that work at factories DESERVE to live in mansions. You smart ass fucks who are educated and think you deserve it all are doomed. Our boss, uncle Obama, will redistribute everything you make so people without education, without opportunity and ambition get what they deserve. You deserve shit college boy.
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12th March 2012 at 10:13 pm
Yojimbo says:
Axel
Plastic bags are a key component of the new health care mandate. When surgery becomes too expensive relative to the worth of the patient, the Obamacare worker simply wraps a plastic bag around the head of the patient until the patient expires, thus producing the healthcare savings.
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12th March 2012 at 7:08 am
Administrator says:
Axel
He couldn’t afford it either. But do you want to keep plastic bag factory workers from experiencing the American Dream? Do you have no heart? Now pony up your fair share so we can help this poor family out.
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12th March 2012 at 8:05 am
DaveL says:
At last, comments I can 100% agree with. But am I wrong in reading elsewhere that the 100 billion goes to the 5-6 largest banks, and people who have their mortgages with Fannie and Freddie cannot participate in principal reduction?
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12th March 2012 at 2:13 pm
newsjunkie says:
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12th March 2012 at 2:23 pm
DaveL says:
Yes, I was wrong. A different story.
http://money.cnn.com/2012/03/13/real_estate/mortgage-settlement/index.htm?hpt=hp_t2
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12th March 2012 at 2:51 pm