a lifelong renter contemplates the mortgage crisis

the times had this to say about obama’s plan for hapless homeowners:

It could ultimately cost taxpayers as much as $275 billion — $75 billion in direct spending to keep people in their homes and the rest in additional financial backing for the government-controlled mortgage giants, Fannie Mae and Freddie Mac.

But analysts and administration officials alike cautioned that it would not come close to halting the tidal wave of foreclosures. Nor would it provide much help to millions of homeowners who are “under water,” or holding mortgages that are bigger that the market value of their houses.

as a taxpayer, i’d rather hand hundreds of millions to homeowners than trillions to the goddam banks that are at the root of today’s economic disaster. you know, those banks who suddenly decide they may not need bailout money after all if it means accepting some very generous limitations on how much their execs can be paid. (limitations! sorry, but i can’t quite see a half-million dollar salary cap as a “limitation” of any kind.)

but i have to question the…plight?…situation mentioned in that second paragraph, homeowners who are underwater because the present value of their house is less than their mortgage total.

if you buy a house that you plan to live in, and you know that it will cost you X dollars per month for the next X years in order to own it completely, then what difference do either of those numbers actually make? it’s only if you bought the house as an investment rather than as a home that this really matters. right? you know, physical things tend to lose, rather than gain, value over time. think about buying a new car. five minutes after you drive it out of the showroom it drops like 20% in value. the day after you get it you can’t sell it for anywhere near what you paid. we all know this, and it doesn’t stop anybody from buying cars (though it might be a helluva good thing for our rapidly deteriorating environment if it did).

how did we get to a place where houses are expected to automatically, through no effort nor improvements on behalf of the owner, supposed to appreciate — and appreciate substantially — due to nothing more than the inevitable passage of time?

there’s your bubble. seems pretty clear that if people bought houses in order to live in them, rather than profit off of them, and then did just that — lived in the house and willed it to their kids — the market value of the house becomes entirely meaningless.

so don’t treat your house like a piece of preferred stock and you don’t have a bubble problem. right? or am i missing something here?

our president gets it:

“It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell,” he said, adding, “And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.”

when i was growing up in brooklyn, people who were fortunate enough to own homes (less than 50% in my neighborhood) took it for granted that they would stay there, and mostly took it for granted that they’d leave the house to their kids when they died. nobody obsessed over market values, nobody was stupid enough to take out a home-equity line of credit (not sure they even existed in the seventies) (i remember them being called the “lose-your-house” loans) and they threw little parties when the house was finally paid off. got drunk with their friends and barbecued the mortgage paperwork, a nice little ritual.

now, the house is supposed to make you a millionaire (or close to it), and finance your entire world-traveling retirement. or your home equity loan on house #1 gives you the deposit for house #2, which will “pay for itself” as you rent it before selling that one at double whatever you paid.

there is nothing normal about any of this. the shame is that so many otherwise-intelligent people fed into the myth of eternal growth and so destroyed their prospects. but if many of those same people change their expectations and just LIVE in the fucking house, and just PAY the fucking mortgage (as millions did without complaint for decades until now) then there is not a problem.

i’m not making light of the economic crisis here. there’s no doubt we’re in disaster mode. but i don’t include the class of “underwater” mortgage holders as a group that has been treated overly harshly by the bubble. unless you’ve lost your job, you should be able to make your payments. if you took out a mortgage with payments higher than you are able to make, then you’re an idiot (or a speculator), not a victim. and i’m glad we’re not handing you a get-out-of-jail-free card.

there is one exception to the idiot rule, and that’s for people who got these goddam complicated balloon payment mortgages and did not know enough to read (or understand) the fine print. there’s no doubt that fast-talking salespeople from corrupt lenders like countrywide got very good at talking people into financial commitments that were way over their heads and which they did not have the ability to comprehend. sorting those true victims out from the semi-speculator class might take a bit of homework. but it can be done and it should be actioned.

as for the rest of them? just stay where you are and pay your bills on time. there are far worse things happening in this world than a drop in the paper valuation of your house.

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