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.