From Bloomberg news:
As many as half of the 450,000 subprime borrowers whose mortgage payments increase in the next three months may lose their homes because they can’t sell, refinance or qualify for help from the U.S. government.
No one can take joy at the family turmoil that is about to become real after these years of marketplace fantasy. But it’s a huge stretch to make a case that most of these borrowers — many of whom put no money down, or signed up for loans on which they paid only the interest for several years, or used what equity they did have as a piggy bank to spend on other things — own the property at all. Legally, yes. In reality? No.
Calling it home ownership when someone has zero equity (or less) is absurd. Some of these people are not victims in the slightest, except of their own greed or foolishness, or both.
Which isn’t to deny that there’s been some major-league sleaze going on in executive suites. I’m all for going after the sleazeballs who engaged in things like forging documents, etc., or who lied outright to borrowers. There are undoubtedly many of them.
And we should come down hard on the mortgage industry, top to bottom, which helped engineered this bubble in ways guaranteed to cause such woe. But the fact that the game came to an end does not — in the slightest — make me want to let people off the hook for some incredibly bad decisions.
(Of course, the Fed’s latest rate cut is going to bail out the people at the top of the housing food chain, and leave the ones at the bottom just as screwed as they were. That’s scandalous, too, rewarding the financial engineers for their recklessness.)
But I’m not feeling much sorrow for the people who signed for loans that they had to at least suspect were going to be risky at best — loans that would make sense only if property prices continued to rise indefinitely and consistently. Maybe, shedding all common sense, they bought a line of bull from the media (and probably their neighbors and definitely the mortgage industry) that prices would never stop rising. But they were willing participants in making this mess, not passive bystanders or victims in any standard sense.
The bailout proposals in Congress are crazy. We should give people taxpayer subsidies to pay down loans they never should have qualified for in the first place? Insanity.
A lot of these folks are victims of their own greed and/or willingness to believe the impossible. They have my sympathy if they’re forced to leave the houses they never really owned, because that’s a disruptive situation for anyone. But they don’t qualify as victims in my book.
Meanwhile, the media will continue get this story wrong. Nobody cares, apparently, that you can’t logically own something when you have a negative equity and no plausible way of paying down the principal. But never mind. The meme is being well-established — victimhood for a new class of people who, by any rational standard, don’t deserve it.
Look. The system is absolutely rigged against the people in lower incomes, particularly the working poor. No question. Let’s change the tax system. Let’s make opportunities more level. But let’s not encourage speculation from top to bottom. It’s bad for everyone.