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Radical Fixes For The Housing Crisis

With mortgage increases at historic lows and foreclosures still all over, we’re talking about radical and practical fixes for housing.

Fixed mortgage rates fell to at or near record lows Thursday, Aug. 11, 2011. That's good news for the few who can afford to buy a home or are able to refinance. But the rates have done little to lift the ailing housing market. (AP)

Fixed mortgage rates fell to at or near record lows Thursday, Aug. 11, 2011. That's good news for the few who can afford to buy a home or are able to refinance. But the rates have done little to lift the ailing housing market. (AP)

Historic low home mortgage interest rates right now, after the Fed’s latest low-interest vow. Around 4.3 percent for a 30-year fixed mortgage. 3.5 percent for a 15-year mortgage.

The irony, of course –- the people who need to refinance most badly can’t. Their home values are underwater. Their credit scores have gone the way of lost jobs.

So the foreclosure tide rolls on. Some big economists are saying we won’t restart the economy until we fix housing. Some radical plans are out there. A housing reset. Should we do it?

This hour On Point: thinking big on American housing.

-Tom Ashbrook

Guests

Christopher Mayer, professor of real estate, Columbia Business School, and co-director of the Richard Paul Richman Center for Business, Law, and Public Policy at Columbia University. You can find his plan here.

Diana Olick
, real estate correspondent for CNBC.

Zachary Goldfarb, covers President Obama’s economic, financial and fiscal policy for the Washington Post.

From Tom’s Reading List

The New York Times “In a normally functioning mortgage market, almost all homeowners would have refinanced their mortgages to take advantage of low rates. Yet today, low interest rates are doing little to stimulate the housing market because of other stresses, including declines in house prices, falling household incomes and banks’ wariness of making loans. “

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  • Jvalk

    I was listening to today’s (Tuesday’s) On Point broadcast about unemployment. Has no one considered the possibility of reducing hours of work as a way of increasing hiring? I believe the taxes on employers could be arranged in such a way as to make it advantageous for employers to reduce their work weeks to 35 hours, thereby opening the job market to unemployed workers. I won’t go on – no doubt thjere are pros and cons for the presently employed and for employers, but the advantages seem, to me, to outweigh the problems.

    • Dpweber83

      People have considered reducing hours, but the historical precedents are not promising.  

      -dan
      Boston, MA

  • Yar

    Stop and think for a minute just who owns most of these underwater mortgages.  In many cases it really comes back to the taxpayer.  The bank is only the mortgage servicer.  They get fees for collecting payments, and when they foreclose.  They don’t have an incentive to write down the mortgage.  As a taxpayer I don’t like the idea of leaving these houses empty for months while thieves strip them of copper and sell it as scrap to China for three dollars per pound.  I would rather have the house occupied and maintained than see it destroyed.  
    Like it or not the US government is in the housing business, and we better start managing these assets like we own them because nobody else is.  Instead of dumping these homes on the market for pennies on the dollar, why not set up management contracts where returning vets and youth to work together to rent and maintain these houses for the community.  This could be a part of public service to employee youth.  They can live in some of the houses while they maintain others.  A government representative needs to be at every auction where we hold the mortgage.  They need to bid if it is selling too cheaply.  In some cases maybe it could be rented to the original buyer.  This will set a price floor and stop destruction of these homes.   How about this for out of the box thinking?
    Also a bank should have to produce original documents proving they have the right to foreclose.  If I had a loan,I would demand to see the documents  signed, to prove they still own the mortgage.

    • Dpweber83

      I like the vets idea!

    • Dave in CT

      How about we use Wall St. CEOs personal wealth to keep the bids up, instead of taxpayer dollars, until they are all in poverty.

      After that we can use government (our) money.

  • AdolfJamima

    “With mortgage increases at historic lows and foreclosures still all
    over, we’re talking about radical and practical fixes for housing.”

    “. . . and foreclosures still all over, . . ”

    Did the author of this copy graduate from high school?  Talk about the degeneration of the language.

  • Jasoturner

    How do you fix a burst bubble?  Interesting question to which I have no answer.  But it does seem to me that until consumers reach a consensus on the proper valuation of housing, instability will rein.  The risk introduced by fears of unemployment and fears of catastrophic government decision making only add to the turbulence, not to mention to collapse of the price bubble.  Time seems to be needed as we wait for many interconnected phenomena to settle out further.

    I look forward to hearing the proposed fixes.  Because it would be highly desirable to restore stability to our housing market sooner rather than later.  And also highly desirable to get the empty housing stock occupied to prevent further price slippage.

  • Anonymous

    The only way to fix this burst bubble is to let the market get back to the long term trend line.  Weather we want the housing market correction to get there or not, in the long run all we can do is speed or slow the return to normal and why waste money slowing the inevitable.

    • Jasoturner

      Ah, but might not money also speed the inevitable and get us back on track faster?  You are assuming failure without hearing the debate.

    • Dpweber83

      “all we can do is speed or slow the return to normal”

      That’s exactly the question this show is asking.  

      “why waste money slowing the inevitable.”

      Because it’s possible that you’re not actually wasting money slowing the inevitable but rather using money to speed up the imminent.

      How early do you have to wake up each morning to construct these straw-men?

      -dan
      Boston, MA

      • Anonymous

        Exactly how does spending money to pay people to stay in homes they could never afford speed the process?  The only way to speed the process would be to foreclose on all delinquent mortgages now, so the market clears!

        • Dpweber83

          “Exactly how does spending money to pay people to stay in homes they could never afford speed the process?”

          Because it frees up those households to spend their money on something other than a mortgage payment.  The housing overhang keeps a lid on aggregate demand, which in turn keeps a lid on job growth.  

          “The only way to speed the process would be to foreclose on all delinquent mortgages now, so the market clears!”

          That’s simply not true, and if you think it is, then yours is a barren imagination.

          Honest to god, do I seriously need to explain to you how refinancing mortgage terms would free up households’ balance sheets?

          -dan
          Boston, MA

          • Anonymous

            Dan in Boston,
             
            What you advocate can only be true if you believe that both of the following are true; we can create money from nothing for any reason, and printing money without abandon will have no effect on the value of the dollars in circulation.  If your belief in this is true, why don’t we just print new money to pay the national debt with, eliminating all of the interest on the debt that gets sucked out of the economy each year?
             
            You are advocating taking the debt of a person, “irresponsible person”, and moving it to the US government.  This movement of debt from one hand to the other can be stimulative in the short run, but in the long run it does nothing since now the responsible people have to pay off their debts along with the bailed out irresponsible persons debt.

            Why will the bailed out person not spend their new “bailout” money on anoter risky get rich scheme since when it didn’t work for them last time the government bailed them out?
             
            Your “magic ferry” solution of money creation sounds great to the ignorant, but once you think about it for about 2 minutes its allure is found to be a folley!
             
             
             

        • Anonymous

          @Brandstad:disqus Because many, and most of those who are struggling now are doing so because they have lost a good job due to the freeze-up in the economy. Many of those underwater now would still be paying their mortgages and those that decided not to would be acting much like some businesses which defaulted on their commercial real estate (bankruptcy) without the follow-on penalties of homeowners.

          For those who were tricked into accepting mortgage terms they did not understand, because that was the way many mortgage brokers wanted it, should be totally responsible for the result is basically unfair. America has long ago decided that certain deceptive practices should not be allowed; but “caveat emptor” is apparently Branstad’s highest value. 

    • Anonymous

      @Brandstad:disqus @b23228a332c7d97e2433659f23d4b822:disqus There is almost never an “only way” to solve a problem; there are any number of ways, each of which has different efficiencies and effectiveness and has different side effects, particularly in who benefits and who pays. It would seem from a number of comments, Branstad feels that the rentier class should escape from this problem, caused largely by their risk-taking (unwise/overuse of CDOs, etc.). What this would mean is that the “risk-takers” did not take any risk; wouldn’t everyone like that!

      What is Branstad’s definition of “normal?” Why is his path to that condition inevitable? He doesn’t say, most likely because he can’t.

      The path of de-leveraging private debt, and massive private debt is what is holding back the economy and hurting EVERYONE with the exception of the RICHEST 1-2%, needs to include a contribution from the rich because then the whole economy will recover quicker and the TOTAL lost will be LESS. Right now the U.S. economy is around $900 Billion short in GDP from what a full employment economy would produce.

      • Dpweber83

        Where, exactly, did I use the phrase “only way”?

        • Anonymous

          Branstead did ,not you

  • Dpweber83

    The easiest way I see out of this crisis is to soak the entities that hold underwater mortgages.  So long as they’re sitting on old contracts and refusing to restructure, the pain will be felt by homeowners and everyone who benefits from consumer spending.

    Create something like Resolution Trust for mortgage-backed securities, and be ready to wind down a couple banks.  Getting out of this will create pain for someone, so I’m in favor of limiting that pain to the financial sector as much as possible.

    -dan
    Boston, MA

  • Sara Giannoni

    I’d like to hear an estimate of homes that are not currently occupied verses and estimate of people/families currently with out homes.  I’d like to also here about any programs that are suppose to help, if they are working and/or what the status is of them.

  • Dave in CT

    I’ve got it!

    The government can make a financial institution that subsidizes low interest loans, so that more people can buy homes, the demand of which, will keep housing prices stable or higher. Sure some might default, but we will use taxpayer dollars (they won’t miss it) as a back stop, so that if the scheme fails, tax payers will bail us out.  Of course, our government doesn’t have enough money to subsidize on this scale, so we will “ask” the Federal Reserve (they are independent you know!) to keep interest rates historically low, and since they are unaccountable to democratic oversight, the risk of this venture need not be defended.

    Even if the Fed has problems down the line from any failure, we can always print more money to pay it back.  Don’t worry, the resulting inflation only hurts the non-investing, working class, who with stagnant wages, see their real buying power decreased, but hey, that’s what their backs are for!

    • Jasoturner

      I see what you did there…

      • Dave in CT

        Reinventing the wheel? Aw, don’t be a spoiler!

    • Dave in CT

      Oh yeah, I have these Wall St. buddies too, and they said they’d loooove, to participate in this great patriotic plan.  Think of the liquidity they could bring, and that is always great the academics like Mr. Summers tell me, and sure they might make a little on trading fees…..

      They said they just need some kind of wink, nod backstop themselves. Something about if their leveraged investments go bad, they not be left to the “whims of the market” and will be “bailed out” I think was the term.  I said no problem, we have taxpayers and a Fed for that! It’s a win, win, win!!!

  • Tina

    Meanwhile, some CREDIT CARD interest rates are usurious — why can’t a cap be put on those?  THEN people would have money for a mortgage!  Thanks!

    • Dpweber83

      A cap has been put on those.  It happened two years ago.  A Democratic Congress and Obama pushed through a bill protecting consumers against arbitrary rate hikes: http://en.wikipedia.org/wiki/Credit_CARD_Act_of_2009

      -dan
      Boston, MA

      • Jasoturner

        This may be true (and welcomed), but it is also true that many credit card holders are paying 14%, 16% interest, maybe even more.  Sure, consumers made the decision to accept these cards, but the fact that someone willingly accepted a deal that is usurious does not change the fact that these rates are indefensible unless one wishes to defend voracious exploitation.  Capping CC interest rates relative to the Prime or some other indicator for “good standing” credit cards would have been great (but politically impossible.)  Say Prime plus 8%.  They’d still be making a killing.  Without, maybe, killing the card holder.

        • Dpweber83

          That’s totally true, and if you sign on to a credit card with a 1,000% interest rate, well, sorry, that was probably a dumb idea.  But the Credit CARD Act prohibits card issuers from unilaterally changing rates without notice, and I think that’s pretty darn good.

          -dan
          Boston, MA

          • Jasoturner

            As someone carrying a fair amount of debt on cards that were in the 6% range (I closed them to lock the rate), I assure you I totally agree.  If they could jack that rate up on me they’d do it in a heartbeat.

          • Dpweber83

            Gobama :-)

          • Jasoturner

            Thousands of Chrysler, GM and associated supplier company employees concur.  Can you imagine if McCain had tried to manage the initial financial meltdown?  He had that crazy ex-Senator as his financial adviser – Phil Gramm.  Most of us would be living in cardboard boxes.  Not that there’s anything wrong with that…

      • Anonymous

        It is working great isn’t it!  NOT

      • Anonymous

        It is working great isn’t it!  NOT

        • Dpweber83

          Another brilliantly constructed and well-supported argument from Brandstad!

          You’ve suggested that the Credit CARD Act of 2009 is not “working great.”  Care to provide any specifics to back that up?  Or would you prefer to keep using “not” like it’s 1996 all over again?

          -dan
          Boston, MA

      • Tina

        Dpweber83, Thanks for the information.  My question is based on the fact that I know someone whose credit card interest rate is 34%!!!  I just got home, so I’ll check your link next, but no matter what it says, I’ll be checking for what they consider “arbitrary” — there seems little excuse for 34 % interest rates, especially when the young adult I know was first sent this credit card at age 18, unsolicited, and without parental notification (adult status, but adult maturity?  PLEASE!  the credit card companies KNOW there is often a HUGE discrepancy there!!!!  I don’t even want to type out the entire word for it:  exploi _ _ _ _ on!  AND, this took place in the context of parents who DID speak to their child/ren about financial matters!!!)

  • Dave in CT

    The only fair solution is to directly take Cash back from the Banking institutions that were instrumental in inflating home prices in the first place, and directly rebate all mortgage holders a $ level that reflects the bubble inflation.

    1. Punitive, we need it for closure, let alone justice.
    2. Brings housing prices back to reality, without hurting the people, instead hurting the crooks.

    • Jasoturner

      Don’t drag fairness into this.  He who has the most lobbying power shall win the day.  And that ain’t the mortgage holders.

  • Dave in CT

    Wall St./Banks to people. DIRECT ONE TIME PUNITIVE TRANSFER.

    Simple, fair, and satisfies urge for justice.

    Please discuss.

    • Anonymous

      What are you talking about?  Are you living in North Korea?

      • Dave in CT

        Your not a fan of Rule of law?  Why don’t you want it applied to the Government and Banking colluders who cooked up our boom and bust?

        Oh that’s right, your more of neocon, defender of the Republican moneyed elite at all costs, not more of a peoples libertarian type, that sees a need for laws against corruption and collusion to maintain a true free market.

  • Freeman

    Tom & Guest;
                      What is the correlation between the local assessment program ( TAX revenue) and the house being assessed way beyond its worth vs its mortgage.

  • BHA in Vermont

    Market tanked and 3.5% mortgage loans. Good time to get a mortgage. WAY better than the one I got on my first house in 1983: 13 7/8% OUCH!

  • cd

    The federal government could buy all the mortgages from people who are ‘under water’ from the banks at a rate of 50 cents on the dollar, and people who qualify will pay this money to the federal government over ten or fifteen years.  People will then be able to keep their jobs, avoid the stress of dislocation, and communities could remain intact.  The lending institutions would get less money but it would be now, and be released of the burden of book keeping.

    • Dave in CT

      Whose the Federal Government?

      Why don’t you put Wall St. Banking CEOs in the front of the line until they are standing in the rain in their underwear.

  • Anonymous

    Didn’t we bail out the banks to fix this problem?  Why are we talking about continuing failed policies.  I didn’t buy a house I couldn’t afford, so why should my neighbor get a house he couldn’t afford?

    • Dave in CT

      Yeah, I thought we paid the crooks for their scheme, and we are still in trouble?

      What? We should TAKEN money from the crooks, and given it BACK to the people???

      Ohhhhhh..  I thought we were supposed to just give more money to the crooks so they have the liquidity to do the right thing. Silly me.

    • Dpweber83

      Are you joking?

      No.  No, we did not bail out the banks to fix this problem.  Do I honestly need to explain this to you?
      -dan
      Boston, MA

    • Steve T

      He was probably told he could (lied to) and to him the first few payments were affordable, then his loan was sold and the house payments went up. Way up.

      • TFRX

        No matter how possible your scenario is, you might not get far saying “a corporation lied to a person” in front of Brandstad.

        He’s one of those Dagny Taggart types who’ll just whine about “personal responsibility”. You watch.

    • Jasoturner

      Interesting take.

      It seems to me that first, we should try to understand whether the overriding goal of TARP was to shore up the housing market, or whether it was intended to prevent widespread bank failures and a potential fiscal panic, which might have left us in much worse shape than we find ourselves today.

      As for the merits of a neighbor being bailed out, I think specific conditions merit consideration.  Did you neighbor simply over-spend?  Or did he or his spouse also lose a job?  Or get ill?  And I suppose one could also speculate on the effect of the value of your own house if there were multiple properties nearby on the market.  In which case, one might have a selfish reason for seeing one’s neighbor not be foreclosed upon.

      I do find somewhat unfortunate the seeming growth of the attitude that, if a fellow American citizen is in trouble, that should be his problem, and not the community’s or the country’s problem.  We speak of the county as a woven fabric, but it seems to be rather fraying these days.

      This would seem to underpin the almost angry vehemence with which the far right is intent on cutting discretionary spending, a fair enough chunk of which provides assistance to the less well off.  We are not citizens, but economic cogs, and the less functional cogs should not be pampered.  I get that.

      • Anonymous

        Charity can only be done by people, churches, and small local organizations and these charities are well needed.  The federal government should never be run like a charity since it takes money with force and gives it to others!

        • Jasoturner

          I am not sure the citizens of New Orleans would agree, although I can only speculate on that point.

  • Donny

    Here is a radical AND practical fix that will help the housing market – more accurate pay for skills and education.  College grads and americans that have several years of experience in a field are being forced to take jobs that pay way less than what they deserve.  This demographic, especially the college grads, are stuck between a low paying job, student loans, forcing them to stay in a renters agreement rather than looking for a house (which is typically what college grads would begin to think about a few years after graduation).  I have been out for 4 years and the thought of buying a house hasn’t even crossed my mind.

  • Vinny

    Professor: No underwriting? Okay, but what about lien priority in lien states?

    • Vracaniello

      What position would the new mortgag take? Also, some states, like New York, charge a 1% mortgage tax.  You need to modify the existing mortgage contract, but since Fannie/Freddie aren’t the holder, you’re talking about either getting the holder to assign the lien to Fannie/Freddie, or paying off the the true lienholder and providing new money under a new mortgage, (That’s a mortgage taxable situation)

  • Vinny

    Professor: No underwriting? Okay, but what about lien priority in lien states?

  • Dave in CT

    Take money from Wall St Banker CEOs and pay down our Principal.

    Forget leaving them all the interest payments. 

    PRINCIPAL PAYDOWNS NOT KEEPING INTEREST ALIVE FOR THE DEBT SHARKS WHO DID THIS

  • John

    rewardeing those that have found a way to stay current seems like a good plan to me. We have struggled month to month but for the most part we have kept our mortgage up to date. 

  • Guest

    The realitors need to accept a good chunk of the blame for the problems that we’re facing.  The realitor is paid based on a % of what the house sells for, so it’s always in their best intrested to maximize their profits by encouraging bidding wars and price inflation.

    The sellers need to accept that their house isn’t worth what some realitor says it’s worth.

    The buyers need to accpet that their buying broker is actually working against them, as they to are paid on a % of the selling price.

    All of America’s big shocks to the economony have been based on real estate issues (1920s, Saving n Loans of the 80s, and today).

    Remember the Tupli mania- what goes up, will come down.

    Henry

  • Nathan

    While lower mortgage rates are a welcome relief to homeowners, as well as those seeking to purchase new homes, what about the high prices of homes in general?  Has the growth of home prices outpaced the growth of the average salary?  If this is the case, surely lower mortgage rates can only help so much.  If people don’t have the income to purchase a home in the first place, then home sales will continue to suffer.

    • Donny

      EXACTLY.  This is exactly whats happening, the growth of houses is being compounded by the decline of salaries.

      • Nathan

        Thank you Donny, I agree completely.  What friends and I wonder about is how this might be reversed.  Do you think this is just something that must be ridden out until home sales are so low that prices must drop in order to stimulate sales?  Or do you feel that workers must begin to hold out, or even demand, higher salaries?  I fear that either road could lead to more severe damage to the current economy.

        • Donny

          Well I think it is inevitably going to be ridden out until house prices start dropping.  Right now they’re talking about the economy picking up again. Well then lets all go grab a brew! We’re on the path again.  Just because there are more jobs being created doesn’t mean we are doing anything different.  Guaranteed these are minimum waged jobs being worked by struggling college grads or laid off skilled Americans.  Anyways to answer your last questions I don’t believe its fiscally possible for workers to hold out for anything.

  • Anonymous

    Aren’t both Fannie and Freddie asking to be bailed out with several BILLIONS of dollars from the taxpayers?
     
    Isn’t this just a scheme to transfer individual’s mistakes and debts onto the responsible people?  Shouldn’t the irresponsible people pay for their own mistakes?
     

    • Dave in CT

      “Shouldn’t the irresponsible people pay for their own mistakes?”

      Ahhh now you get it. Your finally asking for the CEOs of Coutrywide, Fannie, Freddie, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Lehman Brothers etc etc, to have their wealth confiscated to be pay down the principal on the house prices they inflated. Of course I’ll throw Rubin, Summers, Geithner, and Congressional Fannie/Freddie cheerleaders in there for you, but your on the right track!

      • John

        i propose we just take their home away from them and see if they get the point, maybe just the beach house in Tahiti

        • Dave in CT

          Its a start, but I’m serious. We have laws and consequences to dissuade criminal behavior.  We have gone decades without seeing a devastating white collar collusion judgment and punishment.  Its about showing that class of hucksters that such behavior will not be tolerated and will be harshly punished.

          • John

            hard to do when the lawmakers put the fox in the henhouse to create policy.

      • Dpweber83

        Well done.

      • Anonymous

        What laws have the CEO’s of banks broken?

    • Ellen Dibble

      Apparently you never sat yourself in front of an irresponsible mortgage broker, assuring you, sickly and with a tenuous business, that there is Something for You.  Pie in the Sky.  The “system” is designed to make your dream — if it is a single-family house — come true.  Now.  Before I take my children to their soccer game in my large new car.  My wealth will continue but you have to play your part.  Sign here.  Unfortunately, I wanted a multi-family home.  So he was very disappointed.  But if I wanted a single-family home, this supposedly informed and responsible agent of the system was NOT about to advise me.  He was about to push me, hard.

  • Ellen Dibble

    It has never seemed me a boon to the economy to have so much mortgage interest money siphoning itself out of the economy.  The guest is saying that money goes to the bondsholders who are prepared to have these callable bonds changed to lower rates. 
        I think in terms of “the banks” are making all this money which people could otherwise have to pay for “real needs.”  Bondholders I suppose are also “people” who could be siphoning those interest payments into the “economy.”
        I suspect it’s senior citizens with 401(k)s who will take a 2% haircut if a mortgage is reduced 6.4 to 4.4%, something like that.  If it’s “the banks” taking the haircut, okay.  The banks would probably not loan it out to new businesses.  If it’s senior citizens, I’m not so sure.

  • Dave in CT

    Tom, the great housing bubble swindle was a pre-meditated crime.

    Why do we keep talking about it as some natural phenomenon for us to work through?

    Usually in law, if people are victims of a crime, they are entitled to damages from the perpetrators.

    Perhaps we could touch on justice, and taking money back from thieves and returning it to victims?

  • Kate Mortimer

    I am a retired teacher living on a fixed income, with few resources, no retirement account, and no part-time job as yet to make ends meet.   I am truly distressed by the frequency of Tom Ashbrook’s programs that focus on the economic woes of people like me.  Yes, I know what it feels like to have one’s home threatened, and to be out of work.  (After I left teaching I tried to find another job for the last three years.) 

    However, I do not need to have this situation reinforced by Tom’s negative programming.  It seems that some weeks, day after day he presents a program that focuses on unemployment and home foreclosure, loss of benefits, etc.  No better are the programs in which politicians denigrate each other.   I find this depressing at a time when I need to keep my spirits up and my attitude positive.

    Please leaven the dire forecast programs with more poetry, more positive programs to help us feel that there is hope for a brighter future.  After all, it is a fact that during the Great Depression people were drawn to jazz clubs, funny radio programs, and comedic movies – which alleviated the
    sad situation of Society at the time.

    Thanks for listening,

    Kate

    • Dpweber83

      More poetry???  Which show have you been listening to?

      -dan
      Boston, MA

      • Ellen Dibble

        Bread and circuses.  On network new last night, I’m thinking ABC, that one in three American stores suffered a flash mob coming in to rob the establishment clean, sweeping in and out before the cops could get there — one in three in the last 9 months.  Maybe it was on the NewsHour.  Maybe it was 6 months, not 9.  But it was a factoid that reminds us that the mobile-phone generated Arab Spring, and central England disruptions of a week or two ago — that is part of the unrest here as well.  
            You can do drugs.  You can do distractions.
             Or you can confiscate all the mobile phones, 5 billion of them or some such.  Or you can ask yourself about the economy, and the hidden drags on it that are making us look sort of third-world.

        • Dpweber83

          Buh!?  33% of American stores have suffered mob looting in in the last 9 months?  I find that hard to believe.  Do you have a link?

          -dan
          Boston, MA

          • Ellen Dibble

            Just as I was typing that, top of the hour news on NPR, two more cities hit with flash mob looting last night.  I’ll see if I can find the link from last night.  The anchorwoman was as shocked as I am — as you are.  I wanted to know where the stats were from too.

          • Dpweber83

            Slow your roll on the conspiracy theory—install a free ad blocker and let me know if you still think the FBI is hot on your trail…

            -dan
            Boston, MA

          • Anonymous

            No, Ellen is right – I heard the same report on NPR the other day (I don’t watch network “news”) – Teh FBI is helping Retailers to take steps to prevent/decrease these incidents which are happening w/ more frequency by monitoring social media sites. The world is rapidly becoming a free-for-all  

  • Scott Hanley

    Idea:
    Home worth $150,000. Mortgage balance $200,000. Lender is TOLD:
    Loan balance is hereby $140,000. Of the $60,000 writedown, you, lender will eat $30,000. American taxpayers will eat the other $30,000. Next case.

    • Dave in CT

      Why do you let the Wall St Bankers off the hook?  You think this could have happened without them?

    • BHA in Vermont

      First: Why should the underwater home owner end up with a mortgage balance LESS than the current value of the home?
      IF this happens, every penny the homeowner gets when they sell the house (between the written down value and the mortgage before write down) should go to the U.S. Treasury.
      Second: Why should I, the taxpayer, have to eat anything?

      MOST of the homeowners in the country are NOT underwater, did not buy houses in the ‘bubble’ and are paying or have paid their mortgages. Tax payers are ALREADY subsidizing the underwater people and everyone else who writes their home interest off as a tax deduction.

  • Ellen Dibble

    Back in March 2010, a few postal clerks about to be laid off asked me what prospects people their age might have, and in short order we zeroed in on a multi-story building across the street that was no longer in use.  “You mean, you think we should be out there transforming that building into rental units?”
       Bingo.  It still hasn’t been done.

  • Eric

    My wife and I lost 4 jobs, 68% of our income, and $40,000 in home value yet we were unable to refinance through Obama’s HOPE program because we refused to default on our payments, assume the negative impact on out credit score.  We struggle to pay out bills as our neighbors walk away from their homes.  We agree with Professor Mayer that we should be able to help those who attempt to struggle and remain current on their mortgage with a mass refinance to 4% minus the underwriting fees.

  • Mary Ellen

    RE:  Outlook for increase in property taxes

    As deficit hawks decrease funding to states and hence from states to  municipalities, the municipalities (already facing lower assessments) will will turn to raising rates on property taxes to make up the difference in their budgets and to prevent layoffs. But many homeowners either cannot or will refuse to take on more taxes.  Many will sell! Causing further destabilization of the housing market.  Public unions will have to make some compromises or face layoffs…. more destablization.

  • Dave in CT

    700 Billion?

    Sounds about like the bailout.

    So we should have given it to ourselves!

    Incredible!

  • Scott Hanley

    Refinancing a 5.5.% loan to a 3.5% loan. If the loan amount is still more than the property is worth, not sure how that helps things more than reduced payments for the short, maybe medium term. . Or is that in and of itself the point?

    • Steve T

      Best question yet!

    • Dave in CT

      Ensures banks/investors keep getting at least some interest payments, regardless of it helping the homeowner. That of course is the point.

      Our unwillingness to claw back massive wealth from the financial elite who cooked up this debacle, and use it as a one-time, punitive, redistribution back to the people, in an act of both economic relief and justice, let alone dignity, will continue to haunt us.

  • John

    30 million foreclosures, 15 million unemployed, any connection or are the people that lost their job just irresponsible?

  • CS

    What are the banks doing with all these foreclosed homes? 

    • Ellen Dibble

      All those new bank employees?  They’re out there mowing lawns, fixing roofs, painting clapboards, reinforcing windows and doors.  Watering the tulips.  
          Just kidding.  

      • TFRX

        Seriously, though, doesn’t foreclosing on a house mean it threatens to become rundown?

        Too much of that can’t be good, can it? My instinct (subject to correction) tells me that Bank XYZ, holding a % of mortgages in some market, doesn’t want to foreclose on too many of them; it would devalue the remainder of their stock in that locality.

        (For you engineers, think “thermal runaway” in reverse.)

        • Ellen Dibble

          I believe plenty of communities are finding whole blighted neighborhoods.  Where I live, one apartment building that was closed up because it was going to be torn down eventually to make room for a research center, that building was empty for a while, months.  And local homeless people found ways in, and used it for various things that homeless people do, “hanging out,” lighting candles, etc.  Eventually it burned down.  Was burned down.  So that’s just one house, a short-term emptiness.  But it is a huge invitation for trouble.
              Cities like Detroit are tearing down empty houses, turning the acreage into city gardens, for people to use to grow vegetables or what have you.  If the jobs don’t come back, the people won’t come back, and the jobs won’t come back if the city is full of blight.  What happens to all that wood and copper?  Where I live, there are businesses that recover and repurpose such stuff.  It might be better for Detroit to reconstitute the way it was in the day of the pre-robotic assembly line, in the days before low wage labor in China was stealing their golden age.  But it’s unlikely.  

          • Ken

            I have an idea to fix the housing market, create jobs, increase home
            values, reduce the escalating rental prices, assist social security
            recipients and aid veterans and their families without hurting banks or
            costing the government much money, if any.

            Here goes:

            The US Government buys all the foreclosed properties from the banks, no money down, interest only, rate to be determined.

            Properties are made rent ready…evaluate, fix, paint, manage.

            Properties
            are rented below market rates to Social Security recipients, veterans
            first. The rent could be deducted from the SS recipient’s checks…no
            rent to collect.

            Finance with Housing Bonds, like War Bonds from a bygone era. Make tax incentives and a creative and possibly lucrative return on investment rate to entice investors.

            Results
            would include downward pressure on rising rental rates, job creation to
            fix and manage properties, an immediate increase in the value of
            everyone’s home in the worst hit foreclosure areas of the country (more
            value means more equity money available to homeowners + spending =
            stimulus to economy), a virtual subsidy to some SS recipients and
            extraordinarily deserving veterans…

            Then, in future years, when these houses are vacated, gradually
            over time as people move out (assisted living) or pass away or possibly
            buy them or another property), the government could decide to sell them
            or continue the program. If/when they sell them at some future date(s),
            it stands to reason that the price they get for them will be more than
            they owe the banks. That money could be shared with the banks and/or go
            toward the cost of the bonds.

            Option: Democrats could raise taxes
            on the wealthy and Republicans can give them the opportunity to avoid
            the higher rate with a dollar for dollar reduction in their tax
            liability when they buy Housing Bonds. Then they could truly be job
            creators. Everybody’s happy.

            Two or three months ago, I sent the
            essence of this idea to the House Democrats in the Financial Services
            Committee but have heard nothing back.

            I know that for every
            complex problem there is a very simple wrong answer. I may be missing
            something fundamental to the problem but everyone I have run this past,
            conservative and liberal, likes it.

      • CS

        I was trying to ask if the banks, and other institutions that own these foreclosed properties are holding onto the properties, or trying to sell them as fast as possible, and if its a combination in which areas are foreclosed properties being held and in which areas are properties being quickly sold?

    • Anonymous

      The Bank is reselling them as fast as they can without ruining the economy.  The problem is they can’t put them on the market to be sold as fast as they should be foreclosing on them, so they hold onto a large number of homes waiting for the ones for sale to clear and they postpone foreclosing on new houses even though the household hasn’t even attempted to make a single payment for 18+ months.

    • nj

      A significant number of foreclosed homes end up getting trashed, just making the situation worse.

      http://www.washingtonpost.com/wp-dyn/content/article/2008/04/26/AR2008042601288.html

  • Dave in CT

    1. Confiscate Wealth of all connected to Housing Bubble Scam. From CEOs to Congresspeople.

    2. Use above as downpayment on Principal curtailment for all, down to pre-bubble price point.

    3. 3% or whatever interest for the rest of life of all mortgages originated in this criminal era.

    We need some sense of justice, if we really want a total recovery, economic and political, in this country.

  • Ellen Dibble

    How can it “wipe out” banks not to be taking in mortgage moneys?  What do they do across 30 years to earn that money?  If they are just raking it in, then I don’t see this is a big loss.
        Renting houses, by the way, is a lose-lose proposition.  The big advantage of renting is you get to hire someone else to do the house management.  If you have better things to do, it is a no-brainer to have someone else do the actual “owning,” assuming you can find a better way to make your money “grow.”  If you sink it in a house and then have to spend hours each week that you don’t have to tend it, wouldn’t you rather have someone else do it?  The suggestion is to have Uncle Sam own all the houses and have us rent from Uncle Sam (at a stretch metaphorically), but the big advantage of renting locally is you get an automatic set of connections to people with deep roots in the community.  Uncle Sam is not your local plumber, roofer, shrub cutter.

  • becky

    It sounds like a great idea to me.  We are retired, but still work (can’t afford to quit and do all the things we thought we would be able to).  I know a lot of people our age who are in the same situation

  • Cpt1971

    Bought a 2 family home in 2005 – underwater by $60k and cannot refinance, was deemed a jumbo then @ $565k, not a jumbo under today’s terms. 6+ years of on time payments @ 5.875%, with a second mortgage @ 5.99% paid on time, a combined loan with 4% interest rate would save hundreds each month and allow me to replace aging vehicle or other economic items “on hold” for past few years.

    I am not looking for a bail out or hand out, I am not an irresponsible borrower – I am just caught in the middle. Banks, businesses and Wall Street have all refinanced, their irresponsible lending practices made this bubble – I only want what they are receiveing – lower rates for responsible borrowers.

    Chris

    • UnemployedinMiami

      Hey Chris, Be glad you have a home! No job, no home and I drive a 20 year old car. When it breaks I have to drive a 25 year old car until I can get the 20 year old car fixed. But good times are coming…the government is going to inflate all that debt away by taking interest rates to 20% again. Great news…you can increase the rent on your rental side! Bad news…we will be at war with China in 2020! Lets party till then! Cheers

  • Anonymous

    If this helps the economy recover, I’ll support it but I’m tired of bailing out people who couldn’t afford to buy houses that had inflated prices.  I couldn’t afford to buy so I rent and do not receive a mortgage interest subsidy on my taxes and won’t get anything out of this as my debt is in student loans. 

  • http://www.facebook.com/timechick Penelope McFadin

    I say do it.  That and reset everyone’s credit card debt while your at it.

    • Ellen Dibble

      And reset all the sovereign debt while you’re at it.  At first glance, the losers would be nations like Sweden and the Netherlands.  Could you give them a big plus sign, and a big goose egg for everyone else?  Some a bigger goose egg than others?  Can inflation/deflation of certain currencies achieve the same thing?

      • Dave in CT

        Whatever happens folks, don’t trade in global bankruptcy proceedings, for a one-world currency or governing structure. Please, please, pretty-please.

        Haven’t we seen what corrupted government/corporatist rule brings?

        There is no reason to think a one-world government would be more benevolent and less corruptible. But once there, there will be NO ALTERNATIVE ever again.

        Power will always be corruptible, so lets keep it as distributed and competitive as possible.

  • Tlaelarson

    Please don’t lower the interest rates! Every time the government lowers the interest rates, my local developer develops more new homes thereby increasing housing supply and reducing the value of my home. If you want to increase the values of homes, please stop the local developers from developing new homes… 

    • Anonymous

      That does not make any sense whatsoever. Why would any developer build homes if there is no demand?

      • Steve T

        A lot of reasons he can insure his investment if it goes belly up no problem. We end up paying for it either way.

      • twenty-niner

        Let prices fall to their natural level in concert with wages. There will be plenty of demand.

  • Mary

    There would have to be no closing costs to make this work; I tried the Making Home Affordable program two years ago and they said closing costs would be $8000 on a $150000 mortgage.   I do agree with rewarding those who are current on their mortgage- I took a job 4 hours away from my house for nearly two years in order not to default, and now am working from home and want to be able to stay, and a break on my mortgage would enable me to be able to maintain and fix up the house.

  • Dave in CT

    I wish we could ask the guests whether perhaps giving the 700 Billion bailout directly to homeowners for principal curtailment would have been better than giving it to those who created the problem?

    Money in the pockets for consumers. “Punishment” and loss of income to the banks.

    And how about that Bailout being funded not by taxpayers and inflation, but from the Financial Industry!   If it puts them out of business, great!

    Do we really still defend the horrendous Too Big To Fail mantra that rewarded the perpetrators and prevented markets from properly punishing lack of risk management?

  • carrie

    In response to the caller wanting tax breaks for small businesses: been there, done that.  There was no “trickle down,” but a marked increase in the divide between rich and poor, increased unemployment, and a worsening fiscal picture. 

  • Ellen Dibble

    Can your guest (Varal Lacharia at NYU — sp?) with today’s OpEd about putting less national assets into housing, what does he say about the “affordable housing” which is rentals, which requires people to pay a third of income for rent — which is a far cry from paying a third of income for buying your own home.  It takes your money you should be saving and puts it into rent — for souped-up rental units, which makes the community look thriving, whilst they are being squeezed out of having any wealth whatsoever.   And the developers are putting up these “affordable” units, because they have low loans and have property tax remissions.  So for about 40 years, “regular” rentals have not been built.  I couldn’t get local support for building or buying rental buildings at all.  I was told in the future there will be no rental units, just condos (owned; you can’t just move; you have to take all the responsiblity), and “affordable” 30 percent lease-controlled units.  So the economical units are gone.  Somehow we have luxury units going up anyway.  But part of the milk-the-system for housing dreams is in that too.  The government tries to make the people live in plusher circumstances than make sense.  Who gains?  New innovative industries?  People who want to invest in them?  No.

  • brian parizek

     why not end the mortgage interest deduction for households earning over $250,000 and allow those households making less be able to also deduct simple interest…eg auto loans, personal loans, credit cards.

    certainly that would help the struggling households who have turned to personal credit to off set job loss or ballooning mortgage interest rates.

    • Anonymous

      I don’t think consumer debt should be subsidized but usury laws should be brought back. 

      • brian parizek

        the idea was to have economic impact w/ the largest amount of the population.  smaller tax burden equates increased daily spending.

      • Xo

        No kidding.  The interest rates the banks levy are insane and should be illegal.  But the banks write their own rules and get their money for free… we’ll look back on this era with utter disgust at the sheer level of greed that permeated throughout our govt and our culture. 

  • Julia R Canas

    My husband and I recently sold our home in Seattle after trying to sell it for over two years. We were current, though we had been through two lay-offs and had borrowed from our 401-K to do so. Our realtor suggested we ask our mortgage company to consider converting our second mortgage to a personal loan, so we cold price the home at a range where we could get the appraisal we needed and more realistically sell. It worked!!! We sold the home in less than 30 days!! Although we still have a personal note just under $50,000, we feel that in sharing the responsibility with the mortgage company it was a more than reasonable way to work the deal. I think if more people who need to sell and are current on their home with a decent credit rating were offered this option it could significantly help get rid of some of the homes for people desperate to sell. We are thrilled and very appreciative our mortgage company was willing to work this deal with us!

  • Anonymous

    My husband and I stayed current on our mortgage, even as the value dropped more than 30%.  My husband lost his job, he picked up extra hours at his second job, but alas we were not able to stay current.  Now we’re 3-4 months behind on our second and two months behind on the first.  Every time the government announced a package to “Help” homeowners we got excited only to learn that we didn’t qualify because we weren’t delinquent, not delinquent enough and the value of our townhouse hadn’t dropped enough.  All this while people who took out crazy interest only mortgages or bought too much house were bailed out.  Now you tell me that since I am delinquent now , I’m not worthy of assistance.  This whole mess makes me want to give up and walk away, except now I can’t rent anything because rents are skyrocketing. 

    • limbodog

      Any chance you can rent your townhouse for enough to cover the mortgages plus a little more?  And live, frankly, uncomfortably for 3-4 months until it is back on track and then rent somewhere you can kind-of afford?  Since the rent rates are so high up, maybe you can take advantage.  (grasping at straws, I know)  My condo just would not sell, even when marked down to 75% of what I paid for it.  But within 24 hours of putting it up for rent I had 5 people applying.  I coulda charged more.

      • Anonymous

        Thank you for your constructive advice.  We have tried this.  The rent wouldn’t cover the mortgage and it would be too much to rent in a decent neighborhood and cover the difference in the mortgage plus condo.  It’s better to stay put and work to get caught up.

    • Xo

      What makes you think you are entitled to own?  What makes you entitled to make a profit on your home?  What makes you think you are entitled to be bailed out for making a poor investment?  

      Its harsh but you bought the house that you could not afford.  You took out a second mortgage and spent the money.   You should not have purchased a home if you didnt have enough cash to survive a few months without income.  That’s the sad harsh truth.  Do renters get to stay in their homes when they dont make the rent?  No.    

      Move out of your home and rent a cheaper place.

      • Anonymous

        Who are you to tell people how to live?

        • TFRX

          I’m sure when 80% of the folks in their town are foreclosed on it won’t do anything to HIS property values.

          Nope. These Galtians have the magic power to singularly keep their own house from decreasing in value like that.

      • Anonymous

        Xo, You are so RIGHT!

        It isn’t the easiest thing to say or hear, but it is the truth.

      • Anonymous

        For your information, we could afford it when we bought it.  We bought outside Boston and both commuted an hour to be able to afford a home.  Even when we refinanced to pay for upgrades, we specifically refused to max out the value, trying to be responsible.  Unfortunately, we could not predict that the economy would tank and my husband would get laid off from a very good paying job.  You don’t know anything about my truth so get off your high horse.  I don’t expect anything except that I will continue to work to pay off my debts, including my mortgage, as I have always done. 

        If I’m lucky enough to qualify for assistance, I will take it with both hands, because I know that my tax dollars go to help many others. I just want to be able to partake too.  You should be careful about your judgments, you never know when you may need a helping hand.  I certainly never thought I would.

  • Dave in CT

    The economy doesn’t need to catch back up to housing prices, prices need to fall back to the economy.

    Wishing for the resurrection of our Ponzi-scheme level economy seems wishful, and debt-stimulating to get there seems crazy.

    We need to figure out a way of getting the capital out of the hands of those who corruptly took it, put it back in the distributed people’s hands and then let an organic supply and demand free market economy operate, within a rule of law that prevents ponzi schemes and usury going forward.

    Asking for a one-time redistribution after a criminal event is not socialism, it’s basic justice.

    Only by preventing and punishing such crimes, will we ever be able to enjoy the real fruits of liberty and organic free markets.

  • WBC

    I heard the ON POINT discussion.  However, I don’t understand how implementing this plan would “pay for itself”?  If Fanny Mae and Freddy Mac are constantly coming to the the US government with their hands out for more money, how does reducing the interest rate of the loans that are currently still paying reduce the amount that they have get baild out by the government? 

    Also, what is this going to do to the bond holders?  Yes, there are a lot of bond holders in Wall Street that deserve to go broke, but what about the little guys, like me, that have part of their portfolios in bond funds?  Are we going to take another hit?

    • Dave in CT

      For the sake of simplicity, and practical enactment, perhaps we “little guy” bondholder/investors are going to have to take a hit too.  A punishment for our lack of vigilance in investing in our current financial system, looking for “sure things”, albeit on a smaller scale.  As long as the big boys get hit very hard it could be worth it.

      Otherwise the intertwined nature of it all just protects the malefactors, as I’m sure they have counted on.

      We are hostages, so we must ask how much will we sacrifice to get the hostage takers…..

    • Modavations

      The ending total for Freddie”s and Fannie’s bailout will far exceed that given to the banks The banks paid us back,Fannie will not.Unfortuneatle,as usual,the money was not used to pay down the debt,but was “frittered”away 

  • Hennorama

    I think this is a fantastic idea!  This is an idea that would reward responsible behavior, stabilize the real estate market, reduce risks to taxpayers, and stimulate the overall economy.  What’s not to like?  Let’s do it already!

    Most homeowners who are current and who haven’t already re-fi’d are unable to take advantage of these low mortgage rates due to the reduction in their income, their home value, or both.  Reducing their interest rate would help these individuals who have suffered all along, and have been responsible enough to stay current on their payments. This rewards them for their good responsible behavior, which is what we should encourage.

    In addition, it would reduce the risk to Fannie Mae and Freddie Mac (which means reducing the risk to taxpayers) since these homes would be much less likely to slip into foreclosure.  This supports the rest of the housing market by keeping more low-priced inventory off the market.

    This also potentially puts more money into the economy, as homeowners will be likely to spend the mortage payment savings.  Again, a plus.

    Yes, bondholders would take a hit, but these bonds are callable anyway, meaning they always have the risk of being paid off before the end of the term.

  • Modavations

    Get out of the way.Close down Fannie and Freddie.Take the hit and the markets will adjust.When prices get low enough people will buy.They still expect more downside!!!!!!!

  • Xo

    Once again we’re rewarding people who over spent, over estimated growth and caused their own demise with either greed or stupidity.  

    The price of housing needs to fall to affordable levels – we should not artificially prop up the market nor people who made poor decisions.  We are punishing those who were responsible and bailing out people who were not.   Life is not fair – you are not entitled to own your home or make a profit on its existence.  Millions of people who didnt fall prey to the hype are being punished by the actions of those who felt they were entitled to the bigger house or a continued appreciation.   
       

  • twenty-niner

    The crisis was in the last decade when housing prices in some areas doubled and more than doubled over the course of a few years, rising significantly faster than wages and inflation, creating a bubble that was sure to leave wide path of destruction.

    The period we’re in now is more akin to chemotherapy, which is painful but in the end will leave us a much healthier patient.

  • Modavations

    Last year we paid 413Billion in interest on the debt.This year we pay 457bill.and it escalates.We are about to be eaten by debt.

  • Modavations

    Gold just hit $1780.00 and Hugo C. has declared the nationalization of the Venezuelan gold mines.I think he too,is voting against the dollar

  • Noraal48

    Why, oh why, do we/You continue to ask “economists” questions and treat them, any of them, as if they know what they are talking about now when they, as a profession, did not see any of this economic fiasco coming!!  It seems to me this is like asking the shepherd whose flock has been decimated by wolves: 
    “how should I protect My flock from being decimated by wolves?”

    • Modavations

      P.Krugman’s only job in the private sector was as a “spin meister”during the Enron Embroglio.I’m sure this professor has never worked in the real world either.

      • Anonymous

        So being a professor is not a real job. The subtext here is pretty obvious. You are one of those who think people with intellect are to be viewed with suspicion. In short you’re anti-intellectual.
        Pretty typical.
        .

        • Modavations

          Professors should spend twenty years in their field and teach upon retirement.Who would you rather have do your Heart Transplant:Christian Barnhart(?the S.African)),or someone who read about it in a manual.Who would you rather teach you to paint:Matisse,or a manual reading professor?

          • TFRX

            I’m sorry, but after swillilng all the output of wingnut welfare, all those people in lobbyist think-tanks, you go off about lefties who don’t work in the “real world”?

            It is to laugh.

    • Roy Mac

      Agree.  As a profession, economists are certain about the future and befuddled by the past.  We pay attention to them at our own peril.

  • Ngarfield

    The only thing radical about the “fix” is that we would not be doing what the banks want. The rest is the law as it has been for hundreds of years. The housing crisis is a false crisis made real because the banks said so, that’s why. The mortgages (most of them) were not perfected or valid. The foreclosures are therefore only accomplished through forgery, fabrication and misrepresentation to the courts.

    Thus the fix is to give the house back to whoever lost it in a faulty foreclosure in which the wrong creditor got a house for free. The stimulus effect on both housing and the economy in general is obvious and it would not cost a cent, which of course means that none of the big boys on Wall Street and Washington would make any money.

    The banks don’t want it because their balance sheet depends upon a  false view of the mortgage assets. They are ficitious is large degree which would cause a devaluation of the tier 1-3 assets and thus result in the need for resolution of each of the megabanks. The tragedy that is projected is a theoretical construct. There are 7,000 other banks and credit union tied into the same common electronic payment and processing backbone who could easily pick up the pieces.

    • Modavations

      My good man,the Fannie and Freddie bailouts,dwarf Wall Street.I think we’ve blown over 200Billion and they want more!!!!

  • Modavations

    I am astounded that people pay $50,000.oo a year to be taught by these guys.He leans on P.Krugman ,for goodness sake.P.Krugman was on Fahreed this weekend,saying we should fake an Alien Invasion,because wars are the only way we get out of slumps.Does this not negate FDR?

    • Anonymous

      So you don’t understand the use of a metaphor in context to what Paul Krugman was pointing out and yet you have the audacity to criticize him without understanding a word of what he was saying.

      The light bulb crack says it all.

      • Modavations

        No,no,he was talking war as the panacea.Metaphor,schmetaphor.Read the NYTime’s first ombudsmens opinion of Mr.Krugman!!!!As for my light bulbs,let me decide please.This is a question of freedom

      • twenty-niner

        Here’s my problem with Krugman:

        “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

        - Paul Krugman, August 2002

        All this clown knows is bubble-nomics: replace the tech bubble with a housing bubble, replace the housing bubble with a government spending bubble, replace the government-spending bubble with a currency-printing bubble. How about knuckling down and trying to develop real technologies that can propel sustainable economic growth, creating real wealth versus a string of short-sighted ephemeral bubbles, each being more destructive than the last?

        • Dave in CT

          Do the beltway parrots even see the horrible irony of that statement by Krugman? Maybe not even ironic. He got what he wanted.

          The irony is the status quo liberals wanting more of the same I guess.

        • nj

          On the off-chance anyone is checking back on this thread, it has to be pointed out that the context in which the above Krugman quote appears clearly shows that he was not advocating for another bubble, only pointing out that that was the only mechanism available to the Fed at the time.

          http://krugman.blogs.nytimes.com/2010/04/05/me-and-the-bubble/

    • CS

      I watched Krugman on Fahreed and that’s not exactly what he said. Its not good to take people out of context like that to make them look silly. It happens too often in our public discourse and does nothing more than lead people further astray. 

      • Modavations

        Please google the first ,NYTimes Ombudsmens description of P.Krugman.P.KrugmanHe said war is the only way to get out of the slump.FDR’s prescriptions were boogus,it took a war.I heard the interview

    • TomK in Boston

      Krugman said that if an alien invasion scare got the gvt to do the massive spending that is the only solution to our current economic mess, it would be a good thing. Sorta like WW2. I agree. Keynes said, in the first Great Depression, that it would be a good step to pay some workers to dg holes and some others to fill them in. I agree. If you can’t hear the point, that spending is needed and austerity is poison right now, and are looking for a chance to take an ideological shot at Krugman, enjoy.

  • Modavations

    Guess what the prescription of Sarkozy and Angela was:Balanced Budget Amendment

  • Modavations

    By the way,the DOD has now rescinded the farm vehicles edicts.They lasted one day!!!!!!And give me back my light bulbs,while we’re at it

    • TFRX

      You’re overreaching, even for you.

      These were laws that were always on the books but never enforced. Some right-wing hack got all hepped up in the black helicopter way, and you followed him over the cliff.

      Comprehend harder.

  • Anonymous

    OUTRAGE OF THE DAY: Do You Realize That The Government Is Still Paying Banks Not To Lend…?

    One of the most outrageous “open secrets” of U.S. government policy these days is that the Federal Reserve is still paying big banks not to lend money.
    And it’s doing that while screwing average Americans who have been responsible and lived within their means.
    Huh?
    Seriously:
    The Federal Reserve is quietly continuing with one of the many outrageous bank-bailout programs it initiated during the financial crisis–the one in which it pays big banks interest on their “excess reserves.”
    What are “excess reserves”?
    Money that the banks have but aren’t lending out–money that banks are just keeping on deposit at the Fed.
    The Fed is paying banks 0.25% interest on this money.
    Read more: http://www.businessinsider.com/government-paying-banks-not-to-lend-2011-8#ixzz1VJa239mv

    And it’s doing that while screwing average Americans who have been responsible and lived within their means.
    Huh?
    Seriously:
    The Federal Reserve is quietly continuing with one of the many outrageous bank-bailout programs it initiated during the financial crisis–the one in which it pays big banks interest on their “excess reserves.”
    What are “excess reserves”?
    Money that the banks have but aren’t lending out–money that banks are just keeping on deposit at the Fed.
    The Fed is paying banks 0.25% interest on this money.
    Read more: http://www.businessinsider.com/government-paying-banks-not-to-lend-2011-8#ixzz1VJa239mv

  • Josh

    If mortgages are lowered won’t the bubble return? House prices are currently still too high in many places. If we make mortgages easier the cycle returns.

    • Modavations

      Bingo!!!!!!!!!!

  • Modavations

    Economists were shocked,economists have adjusted down,economist were expecting……..It’s a fake science.You’d do better listening to a Druid throwing the Rune Bones.

    • Dave in CT

      Its rigged, and the media, like NPR reporting the daily stock moves, and ascribing reasons for them, day after day, play right along.

  • JC
  • GTM88

    I don’t understand why the rates can’t go to 4% without the overhead of re-fi cost.  It would be a software switch and no lawyers involved.  Since FanM & FredM own the loans, they could just step the rate to 4% and just execute. Foreclosures slow down.

  • Vince D

    Obama won’t do diddly squat. Wall St and the banks control him. He does not represent “We The People”, he represents them. Anything that deprives Wall St, Goldman Sachs etc. a dime will nto be considered.

  • Ed

    The housing problem was predictable and is clearer elsewhere: not enough children and young people, so no one to buy the houses.

    • Dave in CT

      Precisely why Wall St. knew it would make a great bubble/shorting extravaganza (Goldman Sachs).  Friends in high places and revolving doors made it all the more possible.

  • Tony

    Glenn Hubbard, who co-authored this plan with Chris Mayer, got filleted by Charles Ferguson in Inside Job. The guy has no credibility to speak of. Why anyone would listen to him — and why Onpoint would take anything with his name on it seriously — are beyond me. I’m sorry I wasn’t listening today because I would have loved to call in.

  • Tony

    This is really infuriating. NPR shouldn’t be earnestly discussion Hubbard’s ideas. The guy belongs in jail!

  • JimMLINY

    Simplest thing to do is term the mortgage out to 50 years at a 5% interest rate.  Banks will get their principal paid in full instead of writing it off 10-20 years from now when folk sell them.

  • http://www.exportworks.com ExportWorks

    Mayer’s plan could anchor a Marshall Plan for the Middle Class – one we need desperately before it goes extinct.

  • ronnie

    If a bank already holds a mortgage at a higher rate and the borrower is making payments but only because they are using savings (lost job) why wouldn’t the bank allow them to refinance – if the borrower can pay (at least at the moment) at the higher rate they would have a better chance of staying in the home at a lower rate.  My bank solicited me for no cost refinance under the “mortgage relief” umbrella – I told them I don’t need mortgage relief and asked if they were refinancing everyone at their bank and of course they said no.  I refinanced (why not?) with 11 years of equity back to a 30 year mortgage so if I was going to be in my home for the life of this refinance I’d have paid 41 years – I’m not going to be here more than five more years.  The banks took our money for bailout and now they won’t budge now – shameful.  I prefer my credit union. 

  • TomK in Boston

    It’s criminal to not allow refi at current interest rates, but since Obama’s loyalty is to the banksters I don’t see much hope there. 

    I would like to see the gvt bail out those with “underwater” mtgs, in exchange for an equity share. Then it’s not a freebie, and if the RE mkt ever recovers the taxpayer gets paid back. Meanwhile, the economy gets a big boost. What’s not to like?

  • Ctwood2

    The most radical fix would be for renters to stop subsidizing the housing and banking industry and do away with writing off mortgage interest on taxes.

    Obviously the twin devils of mortgage brokers and realtors have created a monster financial catastrophe that now all tax payers have to shoulder.

    Before I get attacked…I am a home owner, a mortgage holder but kept my head about me and when told I could “afford” a $450,000 mortgage, I opted for a $275,000 house.

    I could still afford my payments without the tax break! And millionaires might have to think twice about knocking down 800k houses to build 2.5 million dollar replacements.

    The answer is to let the ridiculous overpriced real estate market come back to earth and have consumers pay for the actual house is worth sans the tax subsidy.

    More over such a policy choice would force free marketeers to put their ‘aye’ votes where their rhetoric is on Obama destroying the free market system…Bachmann obviously knows little or no history and the other Repubs have degrees from Limbaugh University on Free Market Capitalism (when regulations favopr the wealthy).

    Let’s face it the American middle class pretend to be astute consumers, but unfortunately, they’re simple-minded schmucks.

  • Frank TheUnderemployedProfessi

    Unfortunately, there isn’t any solution other than to allow housing
    prices to drop so that they are commensurate with Americans’ incomes and
    purchasing power.  Because our nation is suffering from rampant
    inflation and decreasing incomes, market forces dictate that housing
    prices must continue to decrease.

    Basically, our nation is
    transforming into a third world country as a result of an economic force
    called Global Labor Arbitrage.  The U.S. economy and labor force is
    merging with the billions of impoverished people in the third world via
    foreign outsourcing, H-1B and L-1 visas, and mass immigration.  This
    means that the American standard of living MUST decrease towards third
    world levels as it averages out with the poverty of the third world.

    It
    also means that housing prices will have to decrease to the point that
    people (Americans) with third world poverty-wage incomes can afford
    them.  However, it’s possible that landowners might just choose to hang
    on to their houses and keep them in the family. 

  • Delcilev

    If the goal is to keep as many people in their homes extend mortgages by ten years automatically reducing monthly expenses by 25-33 percent. Banks/financial institutions will not make money on refinancing and those who should not have been granted mortgages to begin with will not benefit.  Revenues not being spent on monthly mortgages will be saved, used to pay off debt or spent in the general economy.

  • UnemployedinMiami

    Great show today. 

    I am totally amazed that some people just don’t get it. The only thing that is going to help this economy and straighten out the housing market is JOBS, JOBS and more JOBS. 

    There are only two kinds of people in the US today…those who have a job and those who do not have a job. The people with a job are living in a different world then those without a job. No matter how long the people with jobs keep their eyes closed…the people without jobs are not going away. 

    People without jobs do not want their unemployment benefits extended…they want a job! Don’t try to fix a hemorrhage with a band-aid. Fix it right or let the patient die…that simple.

    Reducing government mortgage rates for people that are current on their mortgages is a total and complete waste of money. Let those people refinance their loans and get a lower rate on their own. If they don’t qualify (too low income or negative equity) then they already have the lowest rate they qualify for. Keep paying your mortgage or default…its their choice. They made it this far on their own. My hats off to them!

    Lets stop finding ways to squander what little we have and find ways to make the money multiply and flourish. Employed people buy goods and services. Unemployed people become a burden. The unintended consequences are just too high. 

    As a disclaimer. I lost my small business of 25 years and my $20000 per month income when the banks called my lines of credits in 2007. I have been unemployed since then. I lost my 1.85 Million dollar house due to an insurance scam by my lender in 2008. Deutsche Bank sold it for $500k in 2008. They never lost a dime and collected all their outrageous fees. The widows and orphans who bought the bonds got 10 cents on the dollar. But hey, I am happy as a clam…I live in a 3900 sq ft condo on Biscayne Bay and pay $2500 per month in rent. My wealthy landlord paid over a million dollars for the place at the end of 2006. He has it on the market and gets offers in the low to mid 300′s. He has a mortgage of $800k, guess I will be here for a while!

    Cheers

    JOBS JOBS JOBS JOBS JOBS JOBS…its the only solution.

    PS I could use one!

    • Dave in CT

      Ok, lets pull some jobs out of the jobs genie bottle!

      Through neglect and lack of vigilance as citizens to what our government and corporate colluders have been doing for decades, and probably a good dose of turning our heads with futile hoping that we would get a slice of the easy money, we have let our economy and society morph into a largely unproductive ponzi scheme.  Of course the elite were happy to nurture this, as the more sheep-like we are, the easier to pick our pockets and get paid for mirages.

      To think that this sad, corrupt, bankrupt state of affairs can be turned around in the blink of an eye to supply millions of honest, productive jobs seems naive.

      We have alot of work to do, and alot of choices to make. Either we do the hard work of vigilance so we can reap the rewards of liberty, or, if we are too dumb and lazy for that, we can have more of a Soviet-style or China style, with a fairly mediocre, go-nowhere existence with little individual autonomy or mobility.

      Choice is ours. Maybe, if we haven’t already blown our chance, and sold ourselves out.

  • Rx Man

    Recently called a well known online lender for refi and at first excited about going from a 5.875% mortgage to a 4.99% with no PMI IF the home appraises at 95% LTV since according to this lender, our loan was NOT backed by Fannie or Freddie. We have excellent credit but the best rate they could give us was 4.997% because of high LTV and no PMI. There was a pressure of quickly starting the refi process and also the anxiety of not getting the home appraised at 95% LTV. After doing my own research, our loan is backed by Freddie and we have an option to refi with 105% LTV with no PMI…Lots of evil out there! Do you homework!

  • Plantiful

    The housing bubble popped in 2008, and anyone left holding a fresh mortgage or a mortgage-based investment got left holding the bad:  anyone who is still capable of paying for this inflated mortgage is still paying for this bubble, which sucks all of the money out of the general economy and sweeps it to the banks and their associated investors.

    A lower mortgage rate will only help the economy outside of the housing mess.  Lowering principles, by some algorithm whereby if you bought your first property during this bubble, you would get a market-corrected principle adjustment and the banks would take the direct loss (they and Congress created the bubble, they can take their loss– people still needed to buy housing).  On the other hand, if someone bought and sold up the chain during the bubble, they made money, and their current principle would be adjusted by a lesser amount.  Corrections would be based on estimates of bubble prices vs. actual prices for each reason and housing market.

    What will this do?  It would allow people to sell their homes if they want to move.  Many are “underwater” and cannot sell without a loss.  Housing prices may stop their slow decline, and as a result people would not be so afraid to buy them.  People with mortgages would be able to spend more money in the economy instead of giving it all to the banks.  This would stimulate the economy and the housing market in a very significant and permanent manner without costing the government anything. Companies would see an increased demand for goods, and they may even start hiring again instead of buying out other companies and laying people off.

    Sounds like this would be the best alternative.  Now if only the banks could figure out how to make a buck doing that, this would happen.  But instead, this will be a loss for them, and since they own the Congress, this will not even be an option to consider.  So, the economy will stay as as hostage to the banks for the next 10-15 years, housing prices will continue their slide, and unemployment will remain high, all so that a few banks can keep their investments profitable.

    • Dave in CT

      Exactamundo!

  • Jay Blanchard

    What is the name of the goverment emergency fund for mortgages that Diana Olick mentioned that is designed to help people who are unemployed or under employed and struggling with payments?

    Jay Blanchard – jaypam14@aol.com

  • Dave in CT

    If Obama proposes a principal adjustment, to consumers, from the banks, as Plantiful proposes below, I will vote for him.

    One tangible move to hurt/punish the banking/financial class and help those swindled by the premeditated bubble.

    Anyone think we will see that?

    • Yingz

      I can’t post anew, but reply only. Weird. But I want to say this:

      As far as radical remedy for housing goes, one can just look around and emulate successful examples around the world. Case in point: China, world’s hated totalitarian and repressive regime, could stumble on some good econ. policies, such as printing money and giving away housing.

      As someone growing up in China and still having parents living there, I can tell you most city residents own two apartments, the first of which was given away to them by the state for token amount of money in early 2000s. That freed up people’s money to buy their second home. Now both of these properties approach or even exceeded that in US price wise per sqft. The state has tried numerous times to restrict housing price increase to no avail.

      The US government does not own people’s housing in the first place, thus can not give them away. One way they can do like Chinese is to print say $150000, and give it to each household, homeowners or not, while phasing out with people who have gain on sales of housing from say 2000 to 2007 and those who chose to strategically default. This money should pay off an average mortgage balance, or can be saved or spended to stimulate economy, depending if you have mortgage or not.

      I know people will scream about printing money, or inflation. Hey, look at China again, their banks were loaded with bad loans as toxic as US banks loaded with bad mortgages, or even worse. Yet, people outside did not hear a blip about any banking crisis from China. That is because Chinese government continously print massive amount of money to purge their balance sheet. Also they print massive money directly to citizens to pay for their bonus, a huge addition to their wages. Moreover, whenever the US buys something from China, the chinese government receives the US dollars, put them in vault and print RMB to pay the workers — doubling the revenue. Was there inflation? You bet. Were people worse off because of inflation? To the contrary. People are enjoying that they are ahead, and laugh about the memory that how little money things costed in the past.

      Printing money is much misaligned, when people believe in some old dogma, and only look at examples of policy gone awry, like pre-war Germany, south america in 90s. Yes, money supply causes inflation. But why does one care if a loaf of bread costs twice as much, if your wealth is increased by two fold or even more? If your house can increase in value because of inflation, isn’t it the good thing you want in this economy?

      Pass on to this prof. of real estate, Bernanke, your congress men, Geitner, Obama. It is not hard to solve the housing problem at all. Just needs a radical idea.

  • Unclezart6

    I recently came across an article I read in the Las Angeles Times that discusses a new program being implemented by a Financial Institution that might hold the key to addressing the Underwater Mortgage Crisis. So far it looks like the program might actually work and hopefully spread across the United States. I hope you will take the time to read it and pass to a Government official that might see value in implementing all or part of the ideas discussed.
    (Here is the article)
    “Ocwen Financial expanding program for underwater borrowers”The Ocwen Financial program restores some equity in the borrowers’ property, which helps motivate them to stay current on their modified loan payments and avoid foreclosure.
    August 07, 2011|By Kenneth R. Harney If you give millions of seriously underwater homeowners a new equity position in their properties by reducing their principal mortgage debt, will they keep paying on their loans and avoid foreclosure?Call it a pipe dream or a significant model for other lenders and investors, but one company says it has found an important combination: Modify underwater borrowers’ loans so that their payments are reduced to a manageable amount and cut their principal debt over time, but make the deal dependent on their scrupulous on-time monthly payments of the new amount plus sharing of a portion of any future profit they make on the house sale.In practice, the plan works like this: Say you’ve been underwater on your loan. You can’t handle the payments and you’re heading down the conveyor belt to near-inevitable default and foreclosure. Now the company servicing your mortgage makes you this multipart offer: First we will reduce your loan balance to a level where you will have 5% positive equity in the house. That is, rather than the original amount that has you drowning, we will set your debt at 5% below the appraised value of the house.Next we’ll modify the mortgage so your monthly payments reflect the reduced underlying principal balance. Then, in annual increments over the next three years, we will write off the amounts of the original debt balance that we reduced. In exchange, we will expect that you do two things: Stay current on your loan payments, and agree to let us share 25% of any future gain you make on the house at resale.That’s the deal Ocwen Financial Corp., one of the largest servicers of distressed home mortgages in the country, began offering more than 3,000 underwater borrowers in a test that began a year ago. The results to date: 79% of the customers offered the program in the test signed up, and the re-default rate has been just 2.6% — far below the 40% to 50% rates within similar time periods seen in some federally sponsored loan modification efforts.Ocwen, which services 460,000 loans and is acquiring a portfolio of 250,000 more next month from Goldman Sachs’ Litton Loan Servicing unit, said the test was so promising that it’s now taking the program national. It already has regulatory green lights in 33 states, including California, and expects more to give approval in the months ahead.Ocwen Chief Executive Ron Faris says the key to the program is that the shared appreciation approach allows for a restoration of equity for borrowers, which is “psychologically important” and greatly affects their motivation to keep current on the modified payment terms. It gives them a stake again and gives them some hope.”Our analytics tell us that an underwater loan is one and a half to two times more likely to re-default than one with at least some positive equity,” he said.The shared appreciation and principal reduction concept also works for the bond investors who actually own the mortgages, Faris said. The loans keep performing — unlike many other modification plans — and there’s the possibility of a little sweetener at the end in the form of a portion of any appreciation that occurs beyond the revised appraised value on the house.Paul Koches, Ocwen executive vice president and general counsel, says there is no set cutoff level of negative equity beyond which the program cannot go. So even if your current loan-to-value ratio is 150% — which puts you deeply underwater — the program may include you.There’s a key limitation, of course: Only Ocwen-serviced borrowers who are both underwater and unable to handle current loan payments are eligible. Since roughly 11 million owners are underwater on their loans, according to industry data, and 2 million of them are in financial distress and projected to go to foreclosure, Ocwen’s program can only touch a modest fraction at best.Some large lenders and servicers such as Bank of America and Wells Fargo have initiated principal reduction efforts for some underwater customers, but none to date has announced a shared appreciation feature.Ocwen’s program is drawing praise from consumer advocates active in foreclosure prevention. John Taylor, president and chief executive of the National Community Reinvestment Coalition, said in a statement that “we hope this innovative effort inspires other mortgage servicers to follow suit.”Is this the long-awaited solution to the housing crisis? Not likely. But if major banks and servicers come out with their own versions — and better yet, the Obama administration tells servicers to include the idea in their tool kits — then the effect could be much more powerful.kenharney@earthlink.netAugust 07, 2011|By Kenneth R. Harney If you give millions of seriously underwater homeowners a new equity position in their properties by reducing their principal mortgage debt, will they keep paying on their loans and avoid foreclosure?
    Call it a pipe dream or a significant model for other lenders and investors, but one company says it has found an important combination: Modify underwater borrowers’ loans so that their payments are reduced to a manageable amount and cut their principal debt over time, but make the deal dependent on their scrupulous on-time monthly payments of the new amount plus sharing of a portion of any future profit they make on the house sale.
    In practice, the plan works like this: Say you’ve been underwater on your loan. You can’t handle the payments and you’re heading down the conveyor belt to near-inevitable default and foreclosure. Now the company servicing your mortgage makes you this multipart offer: First we will reduce your loan balance to a level where you will have 5% positive equity in the house. That is, rather than the original amount that has you drowning, we will set your debt at 5% below the appraised value of the house.
    Next we’ll modify the mortgage so your monthly payments reflect the reduced underlying principal balance. Then, in annual increments over the next three years, we will write off the amounts of the original debt balance that we reduced. In exchange, we will expect that you do two things: Stay current on your loan payments, and agree to let us share 25% of any future gain you make on the house at resale.
    That’s the deal Ocwen Financial Corp., one of the largest servicers of distressed home mortgages in the country, began offering more than 3,000 underwater borrowers in a test that began a year ago. The results to date: 79% of the customers offered the program in the test signed up, and the re-default rate has been just 2.6% — far below the 40% to 50% rates within similar time periods seen in some federally sponsored loan modification efforts.
    Ocwen, which services 460,000 loans and is acquiring a portfolio of 250,000 more next month from Goldman Sachs’ Litton Loan Servicing unit, said the test was so promising that it’s now taking the program national. It already has regulatory green lights in 33 states, including California, and expects more to give approval in the months ahead.
    Ocwen Chief Executive Ron Faris says the key to the program is that the shared appreciation approach allows for a restoration of equity for borrowers, which is “psychologically important” and greatly affects their motivation to keep current on the modified payment terms. It gives them a stake again and gives them some hope.
    “Our analytics tell us that an underwater loan is one and a half to two times more likely to re-default than one with at least some positive equity,” he said.
    The shared appreciation and principal reduction concept also works for the bond investors who actually own the mortgages, Faris said. The loans keep performing — unlike many other modification plans — and there’s the possibility of a little sweetener at the end in the form of a portion of any appreciation that occurs beyond the revised appraised value on the house.
    Paul Koches, Ocwen executive vice president and general counsel, says there is no set cutoff level of negative equity beyond which the program cannot go. So even if your current loan-to-value ratio is 150% — which puts you deeply underwater — the program may include you.
    There’s a key limitation, of course: Only Ocwen-serviced borrowers who are both underwater and unable to handle current loan payments are eligible. Since roughly 11 million owners are underwater on their loans, according to industry data, and 2 million of them are in financial distress and projected to go to foreclosure, Ocwen’s program can only touch a modest fraction at best.
    Some large lenders and servicers such as Bank of America and Wells Fargo have initiated principal reduction efforts for some underwater customers, but none to date has announced a shared appreciation feature.
    Ocwen’s program is drawing praise from consumer advocates active in foreclosure prevention. John Taylor, president and chief executive of the National Community Reinvestment Coalition, said in a statement that “we hope this innovative effort inspires other mortgage servicers to follow suit.”
    Is this the long-awaited solution to the housing crisis? Not likely. But if major banks and servicers come out with their own versions — and better yet, the Obama administration tells servicers to include the idea in their tool kits — then the effect could be much more powerful.
    kenharney@earthlink.netkenharney@earthlink.net Addendum: I would add the following provisions to the Ocwen Financial program to motivate and entice Lenders to participate. Any lender that promotes a similar program would assign a financial planner that would work with the homeowner and analyze their unique financial situation. The Financial Planner works for the lender and gets paid from a small portion from what the Home owner saves in their newly reduced mortgage payment. The financial planners function is to :Coming up with a workable plan based on Homeowners monthly income and expenses and create a blue print for the Homeowner to work from. This means educating and implementing a retirement savings program, rainy day fund, college fund and vacation fund. The financial planner also makes sure a plan is put into place to pay off credit cards and possibly have their employer the (Lender/bank) ce credit cards and facilitate the means to pay them offThe whole point here is the Financial Planner is not only helping the Home Owner develop a working plan to stay on tract, pay their mortgage, pay off credit card bills, help Home owner save for retirement and free up disposable income that the Home owner can buy goods and services that will stimulate the economy. This means job creation and new Home owners. Think about this, how many unemployed financial planners could be hired across this country, become part of the solution to improving the economy and best of all stop the stampede of foreclosures.The financial planner is also keeping the interest of the Lender in mind, almost guaranteeing that the Home owner does not default on the mortgage.The Home owner wins, the Lender/Banks wins and the economy wins.Addendum: I would add the following provisions to the Ocwen Financial program to motivate and entice Lenders to participate.
    Any lender that promotes a similar program would assign a financial planner that would work with the homeowner and analyze their unique financial situation. The Financial Planner works for the lender and gets paid from a small portion from what the Home owner saves in their newly reduced mortgage payment. The financial planners function is to :Coming up with a workable plan based on Homeowners monthly income and expenses and create a blue print for the Homeowner to work from. This means educating and implementing a retirement savings program, rainy day fund, college fund and vacation fund. The financial planner also makes sure a plan is put into place to pay off credit cards and possibly have their employer the (Lender/bank) ce credit cards and facilitate the means to pay them off
    The whole point here is the Financial Planner is not only helping the Home Owner develop a working plan to stay on tract, pay their mortgage, pay off credit card bills, help Home owner save for retirement and free up disposable income that the Home owner can buy goods and services that will stimulate the economy. This means job creation and new Home owners. Think about this, how many unemployed financial planners could be hired across this country, become part of the solution to improving the economy and best of all stop the stampede of foreclosures.
    The financial planner is also keeping the interest of the Lender in mind, almost guaranteeing that the Home owner does not default on the mortgage.
    The Home owner wins, the Lender/Banks wins and the economy wins.

  • Frank TheUnderemployedProfessi

    Here’s an idea I have been contemplating for some time.  What if a law were passed that required banks to sell foreclosed homes within a certain amount of time after foreclosure, perhaps 8 months or one year.  The penalty for failing to sell a house after one year would be to pay a weekly fine, perhaps $2000/week.

    This would force the banks to lower home prices so that working people could afford them.  Of course, this could result in a drop in housing prices, but housing prices need to decrease until their prices are commensurate with the new American labor market.  If huge swaths of the population are working poor or underemployed, then housing prices will just have to decrease until those people can afford them.  It has to be better for society than letting the houses sit empty, mold, and rot.

  • Eric Penman

    First step in solving the housing problem… just Kill yourself,
    ha ha ha, then have your body shipped to china where
    they can grind it up and make dog food for Paris Hilton’s cute
    little god err dog. Sounds absurd right not as far fetched
    as the banksters ever giving the little guy a break….
    Ha ha ha, you fools, go vote if you think it will make a difference
    it only encourages them. ha ha ha

  • Slipstream

    http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/

    A picture is worth a lot of words.  My question is why was this allowed to happen, and what can we do to make sure it doesn’t happen again?  Obviously the average person has not really profited from the bubble.

  • Sm

    What is the name of the song at ~11:30?  I love it.

  • Aleli71

    There is no way this country can suffer the rampant ignorance and blatant greed that citizens and residents alike exhibit. Blaming banks, loan officers, etc, etc is unsubstantiated and , actually, more than just a little irritating at this point. Accountability seems to have been dropped from the English language, which I suppose is not surprising. We are, in fact, in a downward spiral, and there is no one to blame bit the irresponsible individuals who sought much more than they could actually afford. 

    A blight on those who do not pay their bills but use their earnings to indulge themselves and family in overindulgence.

    • Dan

      um why are lenders not held to this moral code of yours?  They were the sophisticated party and took the risk.

  • Rickrpm

    Quick Fix – Get the national association of realtors, the banks, appraisers, local govt property tax dept ro all agree to inflate all house prices by 25% across the board. This opens up many opportinities. As long as there was a strict condition that the new found equity could not be used as a credit card like in the past. It would not solve all situations but would allow those trapped being underwater to possibly start selling and buying again!

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Israel-Gaza conflict heats up. The House votes to sue Obama. Ebola spreads in Africa. Our weekly news roundtable goes behind the headlines.

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They see you when you’re sleeping. They know when you’re awake. Employers move to digital assessment in hiring, firing and promotion. We’ll check in.

 
Aug 1, 2014
A close up of newspaper front pages focusing on the Ebola outbreak, including a newspaper, left, reading 'Burn all bodies' in the city of Monrovia, Liberia, Thursday, July 31, 2014. The worst recorded Ebola outbreak in history surpassed 700 deaths in West Africa. (AP)

Israel-Gaza conflict heats up. The House votes to sue Obama. Ebola spreads in Africa. Our weekly news roundtable goes behind the headlines.

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Our Week In The Web: August 1, 2014
Friday, Aug 1, 2014

On the different levels of Internet, knee-jerk anger and the wisdom of Samuel Beckett meshed with the cuteness of a kitten.

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What Happened To Rodrigo Y Gabriela?
Friday, Aug 1, 2014

In which yet another studio connectivity issue beyond anyone’s immediate control foils a lively music interview with a great band. Good news: they’ll be back.

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Criticism, Conservatism And Dinesh D’Souza
Thursday, Jul 31, 2014

Best-selling conservative author and filmmaker Dinesh D’Souza and On Point host Tom Ashbrook disagree about what makes America great…or do they?

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