Paper Economy - A US Real Estate Bubble Blog

Friday, February 20, 2009

The Almost Daily 2¢ - A Petition for Accountability and True Responsibility

“The plan I’m announcing focuses on rescuing families that played by the rules and acted responsibly…” – From President Obama’s February 18th announcement of the proposed “homeowner” rescue plan.

I’d like to strongly disagree with the premise of the rescue plan as stated by president Obama.

The overwhelming majority of “homeowners” who are now experiencing financial stress did NOT act responsibly.

Although many current financially strapped “homeowners” acted illegally in securing the financing with which to purchase their dream homes, just having stayed within legal bounds does NOT mean you acted responsibly.

Stated simply… if you cannot now afford your home and are falling behind on your payments, you made some sort of irresponsible mistake.

Further, many millions of Americans who may not be guilty of any specific instance of legally defined financial fraud are still at fault for defrauding our nation by living above their means when times were booming and becoming a serious liability when things went bust.

In this way they damaged our society at both ends and deserve neither rescue nor respect.

But, this is an overly forgiving nation that seems to need to discern the difference between fraud and foolishness and like it or not (I certainly don’t) appears bent on attempting a rescue.

So, with a true spirit of community and the ethic of transparency, I’d like to suggest two simple stipulations be added to president Obama’s plan.

First, I’d like to propose that every person that receives a federal mortgage bailout be clearly and publicly identified through a searchable database hosted at the Obama administrations Recovery.gov website.

Details listed should include the person’s full name, state and town of residence and the cost to the taxpayers of their individual rescue.

Second, all bailed-out persons should be required to perform community service proportionate to the cost of their rescue.

In order for our country to truly recover from this sorry delusional era we need real accountability and to strongly uphold the democratic ideal of equality.

No individual should be allowed to benefit from acts that are tantamount to fraud and so injurious to our society and although the truly responsible among us will more than likely graciously interpret most of these individuals as only fools, we need reciprocal gestures from them in order to reaffirm their worthiness to be rescued.

If you agree with the proposal outlined in this post please consider signing my online petition and please pass it around to others who may be sympathetic.

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26 Comments:

  • "Details listed should include the person’s full name, state and town of residence and the cost to the taxpayers of their individual rescue."

    This is likely to inspire some very unpleasant confrontations.

    By Anonymous Anonymous, at 11:25 PM  

  • If your going to take my money because of your irresponsible actions, then tell me why I shouldn't stare you down.

    By Anonymous Anonymous, at 12:11 AM  

  • We could also ask for the name and address of the mortgage broker and loan officer involved in the loan. If you want to stare down everybody who took your money you can't let them off the hook. Mine made it sound like a crime not to invest in my own home and they and the banks are the only people making money.

    By Anonymous Anonymous, at 12:52 AM  

  • "SATT said...

    Stated simply… if you cannot now afford your home and are falling behind on your payments, you made some sort of irresponsible mistake."

    Lets see, I bought in 2006 and put 20% down on a 30 year fixed mortgage. Payment was equal to rent - this is metro detroit - we had no bubble here. Payment was 2,000 a month, and our (wife & I) income was 8,000 a month.

    Wife & I both work for the auto industry (consultants), both got laid of in early 2008 - we both got part time jobs while looking for full time work. We now make 3K a month combined.

    I had a 40K "rainy day" fund set aside to carry us for 1 year in case we lost our jobs. That fund will run out in Apr.

    We have cut everything we can from the budget - yet we are still falling behind on the mortgage. Please tell me, exactly where I made the irresponsible mistake.

    By Anonymous Jason K, at 12:10 PM  

  • Jason,
    I feel for you my man.
    Was you mortgage a 30 year fixed?
    assuming it was, and assuming a 5.75% interest rate, with a $2000 monthly nut, then you must have borrowed $342K, with that and your 20% down, I figure the house cost $425K..... with $96K yearly income, I hate to say it, but I see that as a stretch.
    If it were me in that critera I would not have taken it on.

    Since you did not give all the details of your mortgage though I am speculating a little.
    But truly I wish you the best.

    Static

    By Blogger static, at 12:29 PM  

  • SATT,
    I think that they will find that if they truly use a criteria of affordability, such as you use in your MBA application survey... then there will not be many re-do's.
    But we'll have to wait and see.
    static

    By Blogger static, at 12:32 PM  

  • Jason,

    I too sympathize with what you are going through and I do wish you the best.

    BUT... I have to also point out that you and your wife appear to have used your "combined" income as an assumed basis for your purchase.

    I believe you fell into a trap very typical of today's dual income households.

    Neither of your individual incomes could have safely carried that mortgage... that was a very fragile situation...

    What was the purchase price of your home?

    By Blogger SoldAtTheTop, at 12:48 PM  

  • Static - your figures are pretty close - except I should have said the 8K was my net income. Gross is a bit closer to say 9,500.

    SATT - dual income trap? Maybe so. All I can say is we had a good sized safety net, plus we anticipated that if one of us lost our job, we could make it on 1 full salary & 1 part time. It was the loss of all salary that was the killer.

    Further, what If I was only one individual making 8K a month. What if I had a mortgage of only 1K a month versus 2K now. Sorry but no matter what when you lose your job, any payment is unaffordable - even rent.

    Bottom line is - I guess you can always find someone more fiscally prudent than you. Im sure that for those who purchase homes in cash - the would deem that any purchase with a mortgage would be an irresponsible mistake.

    Still I doubt I am out of line with main stream USA. I eschewed "affordability products", waited til I had enough saved for a down payment, bought ONLY because it was as cheap as renting, set aside a large chunk of cash for a rainy day fund, maxed out my 401K, have no debt other than the house, drastically cut back once we lost our jobs, took lesser employment while still looking for full time work, etc, etc. etc. yet I am still unable to swing payments and therefore deemed having made an "irresponsible mistake".

    I appreciate the best wishes sentiment, but I think you can understand why I take issue with your statement "Stated simply… if you cannot now afford your home and are falling behind on your payments, you made some sort of irresponsible mistake". As I see it, you painted a bit too broadly with that brush.

    By Anonymous Jason K, at 1:56 PM  

  • There is always the possibility, albeit undesirable possibility, of taking on a boarder if you have the room. A lot of people are losing their homes and you might find a single or nice couple that are in need of a temporary room. This could help to carry you temporarily until you either find work or sell your house. It's not ideal but desperate times take creative measures. I also speak from experience as I have been in the situation where I needed to take on boarders....and I live in Baltimore with an equally high crime rate as Detroit (where interviewing potential boarder can be sketchy).
    I will also say that my husband and I have a higher income and live in a $260k closet of a house because we knew what we could afford. I sometimes get bitter when I see all of the people who live in great houses who have the same income that we do. The bailout would not be fair to those of us who made the right decisions.
    May I also recommend networking (online...LinkedIn)for help with finding work. When I lost my job a few months ago, it was how I set up 8 interviews in the first week I was unemployed.
    Best Wishes

    By Anonymous Anonymous, at 2:13 PM  

  • Jason,

    It seems to me that you did everything right according to generally accepted models of "good" decision making. I don't truly wish to make this an issue about you and your wife. But I think we can look at your situation and draw some conclusions about Americans as a group -- without committing serious fallacy.

    Clearly, you & wife made some risky decisions (ie, to work in the same industry, both as consultants) that the conventional American risk-model doesn't account for. America's decision-modeling was wrong. wrong wrong wrong. Who let that model into your house? You did.

    I commend you for being responsible in your home purchase, and I think it freaking sucks that factors beyond your *present* control are ruining your plans. You need help -- an exit strategy that lets you walk away from this situation with dignity and a reasonable sense of hope for the future. I don't know what policy gets you there, but I think the very least you can offer American taxpayers is the truth about how you came to be where you are and what you might have done differently to avoid it.

    I'll admit that as a professional reliability engineer, I am VERY critical of the unrealistic sense of safety that dual-income families perceive. The dual income "trap" is real, and to a certain extent you were aware of that -- but your sense of security was based on normative standards that didn't account for your ACTUAL situation. Frankly, I'm a young guy and my wife stays at home with the kid and we live (essentially) paycheck to paycheck. (we do rent - but that's not my point).

    But I do have documented contingency plan on Google Sites for my wife to follow should I end up disabled, unemployed, or dead.

    Surely you can admit, with the benefit of hindsight, that it was a risk for both you and the wife to work in the same industry -- especially both as consultants!

    Sincerely yours,

    - Andrew

    By Blogger andrew, at 2:53 PM  

  • Anon - am looking into taking on a boarder. Still this has nothing to do with my "irresponsible mistake"

    Andrew - point taken with the dual income trap. You could also say I was being irresponsible for buying in detroit, a dying city with little future. Again though, what about those with one income who lose their job?

    I do appreciate sentiment and well wishes. I remain cautiously optimistic that things will work out for us. Still, the point I was trying to make was SATT made a very broad and IMHO overreaching statement:

    "Stated simply… if you cannot now afford your home and are falling behind on your payments, you made some sort of irresponsible mistake."

    I think there are plenty of people who cannot pay because they lost their job - and I fail to see how that was an "irresponsible mistake".

    In any event, you all should take heart, the bailout will not help people like me the underemployed. I wont be taking any of your tax dollars from this plan.

    By Anonymous Jason K, at 3:58 PM  

  • Jason,

    Again… sorry for your predicament.

    My statement was broad but I’m sticking to it.

    Keep in mind… we intentionally sold our house in 2006… partly for random circumstances and partly to both capitalize on and avoid the housing bust.

    Everything went into a POD and since then I, along with my family (wife, kids, dogs and all) have been renting here and there… not the best of circumstances but better than being stuck in a debtors prison of sorts.

    I also sold all our long stock positions (all our retirement) between 2006 - 2007 and moved into cash in order to avoid any loss (to date… though the Fed is working hard to foil my plans).

    I’m not mentioning these details in order to gloat but to make a simple point.

    I’m a self employed software developer and single income head of the household that survived the dot-com bust and have been working every day (especially for the last three years) to survive this one as well.

    None of our recent decisions have been easy…. These were especially hard choices when times were still booming… but we have always been aware of the economic environment, its current and potential impact on the business and have, in a sense, taken the downturn on our own terms.

    Proper planning isn’t simply having a cash cushion and borrowing only the accepted “rule of thumb” ratio per your current income.

    This is what is wrong with so many Americans… delusional mindset of screwey ideas, expectations and standards… many seem to have forgotten that bouts of unemployment are a very real part of life, becoming indebted is easy but not a good thing, the stock market doesn’t just always go up, appreciation of the value of residential real estate has NEVER been a “sure thing”…

    We are all responsible for our own choices… it’s that simple.

    By Blogger SoldAtTheTop, at 5:38 PM  

  • Bank Nationalizations - http://www.capitalismgonewild.com/2009/02/bank-nationalization-for-citigroup-and_20.html

    By Anonymous Anonymous, at 7:44 PM  

  • Noone seems to talk about the millions of home sellers that go a tax free windfall as a result of all the overprice home sales. Bad enough they had a windfall profit but tax free too?!?

    By Anonymous Anonymous, at 8:42 PM  

  • Jason,

    I want to add that I don't think that your were being screwy or delusional at all... in fact you sound like a poster child for the collateral damage inflicted by this whole mess.

    My point was only that people seem to have lost the sense to be cautious... but I suppose that that is just what happens at the end of a long credit cycle.

    In 2006 I was doing just about all a blogger could do to combat the idiotic messages spun from the NAR precisely for this reason... it was nothing short of financial disaster to buy residential real estate in 2006 (and 2007 and 2008 etc.).

    The honest truth is I feel very bad for people in your situation.

    Hang in there...

    By Blogger SoldAtTheTop, at 9:36 PM  

  • REGARDLESS of anyones situation, how is that anyone facing a foreclosure now and qualifying for this taxpayer funded buydown of their mortgage, more entitled than someone else in a similar circumstance at any time in the last several decades. How?

    People lose jobs all the time, people lose their homes all the time. Guess what, foreclosures will happen in the future - yeah, and to good people too. The risk was and always will be present. Its part of the deal.

    So, why is it suddenly fair to say that we will do this for folks NOW?

    Moral hazard.

    stupid, stupid government.

    yeah, and lets trust essentially the same group of people in Washington DC who did such a wonderful job over the last 10-15 years preventing, or shall I say creating the opportunity for this mess to occur in the first place and couldn't see it when it was farting in their faces the last 2-3 years when they actually could have possibly preempted the damage unfolding before us now.

    So, now people are actually thinking our buddies in DC have the wits to do something in the 9th inning of this problem to pull us out? Huh? - oh, yeah good plan guys - friggen bravo.

    The analogy I've heard is that its like letting youself get on a plane that will be flown by an incompetent pilot who just severely crashed a plane, killing many.

    By Anonymous Anonymous, at 11:16 AM  

  • Jason,
    The latest Anon basically wrote my thoughts.

    Stuff happens, it's part of the system. Similar to the quote regarding Democracy credited to Churchill: "It has been said that democracy is the worst form of government except all the others that have been tried."

    Our system, or capitalism in general is not perfect. There will always be some who come out on the short side.

    I remember the RE bust in Texas in the 80's (?) when the oil industry took a hit.

    I think Detroit is a very similar situation. Who knows, the auto industry might come back better than ever.

    But we have to believe in the system and accept the pain as time, technology, society etc. evolve even when that pain is our own.

    I'm sure, looking back in hindsight you are questioning your decision to buy in a 'one industry' area like Detroit especially during a time when foreign manufacturers were kicking the American Auto Industry's butt.

    It happens to all of us one way or another and life will go on and no matter what happens to you and your family you can make sure that the time ahead is better for having experienced this difficult time.

    Almost any outcome, no matter how painful each individual story is to hear, is better than the Federal Government stomping in and taking over any more of our collective lives.

    I think it's probably like the difference between living in purgatory or living in hell.

    One is temporary and one may actually come out better then when they entered. The other is permanent and indescribable to anyone who hasn't been there yet.

    Just ask anyone who made it to this country, even with all the hard work and self reliance and trials and tribulations required to survive and often flourish, from someplace like Cuba or one of the old USSR satellite states.

    Many, many of us wish you well Jason and knowing that you had a rainy day fund and didn't grab one of those 'too good to be true' mortgages, I have absolute faith that you and your wife will come out of this better than you can imagine now.

    !

    SATT, I love your idea of using old fashioned community shame. I've heard stories from my parents about the Depression era and shame did much to inspire people, through family pride etc., to get back on their feet and off of the Government dole as fast as possible.

    It is a great motivator!
    !

    By Anonymous Anonymous, at 12:10 PM  

  • SATT - hate to say it I agree with Jason.

    I know a guy he lost his job and his wife has some lifethreatening Lukemia (insurance wont cover the latest treatment because its experimental).

    He puts everything he has into treatments -- after 18 years of dutifully paying his mortgage -- he will lose it to foreclosure.

    He wasnt being irresponsible.

    By Anonymous Anonymous, at 5:48 PM  

  • Anon,

    I said the overwhelming majority..

    I'm not talking about people suffering through a life threatening tragedy...

    Look... the statement was intentionally broad... for every one family going through some serious trouble there are probably a thousand (or more) that are simply whining because they are losing money or status or both.

    I'm as empathetic for individuals as anyone else but behavior in aggravate is a different thing altogether.

    We had an immense credit bubble... people lost their marbles and WAY over did it... the party is now over and all the losers are looking for a (nonexistent) easy way out.

    So the speculative behavior was damaging on the way up as it needlessly pushed up prices for an essential service (shelter) into the stratosphere and now that the game is over the very same twits want some break that will, again, seriously damage our nation for generations to come.

    This is a complete joke.

    I feel empathy for Jason but someone tell me how it was responsible to buy over $400K of residential real estate in 2006... the game was ALREADY way over... if one stopped for like two seconds to contemplate the matter it was perfectly obvious.

    But Americans were too busy to stop... watching HGTV... flipping... competing with each other in "keeping up with the joneses" mentality that went way beyond anything the 50s generation ever dreamed up...

    Even if you did your homework and still decided to dive in on obviously over-inflated prices you were throwing caution to the wind.

    At the end of the day this is simply a life lesson...

    By Blogger SoldAtTheTop, at 7:56 PM  

  • SATT,
    Now I hate to say it too, but I agree with anon who agrees with Jason.

    A system like ours, where you are responsible for your own life, good or bad, errors or misfortune, good times for many while others may be suffering, is just too unfair.

    A system like that is just too awful.

    Actually, I can't believe that the Founders thought this whole thing up and that so many decades have passed with so many thinking they were on to something. Think of all those who paid, many with their lives, so that we and our children and their children would live in freedom, I wonder what all those Americans before us were thinking?

    Socialism / Communism is much, much better.

    It's much better if almost everyone, except the very top of the ladder of course, lives the same mediocre way of life.

    All this free to pursue (a verb, btw) stuff is just such a bunch of mean spirited stuff.

    If one person is suffering in this Nation, or any Nation actually, then no one should be able to be happy or comfortable!

    USSA, here we come! True equality at last!

    !

    Hey, maybe if we're very, VERY nice to one of those bureaucrats, like Nancy Pelosi for example, they'll arrange it so our kid or grandkid could have a bike or a meal in a really nice restaurant? That really will be swell.

    !

    By Anonymous Anonymous, at 8:34 PM  

  • OK let's say that I was making good money when I bought a brand new car, now I have no money to pay it. Bail me out too.

    Well, life is tough. You always have to plan accordingly. My income is over 100K now, but if I lose my job I know that in a country where average income is $45K/yr it is going to be tough for me to get the same amount of money again, so I know that only if I buy a house for up to $200K I can pay for it no matter what. Unless you are professional your income will always fluctuate no matter what, so if you always hope and plan for the best you will need to be bailed out all through your life.

    By Anonymous Anonymous, at 11:39 AM  

  • Actually SATT, I just saw you said

    "overwhelming majority"

    Earlier I didnt see that, suggesting to me that you were saying EVERYONE who is having trouble paying made some sort of irresponsible mistake. (i.e. there were no exceptions for Jason, my neighbor, etc).

    Now that I see that, I can understand where you are coming from.

    By Anonymous Anonymous, at 5:18 PM  

  • 1) I'm not sure about the rest of the county but my parents taught me to always live bellow your means. In my family we can afford our lifestyle on just my husbands income alone, so anything else I make is gravy and that gets halved and put into the bank for long term and short term goals. We also have only one $2500 credit card for emergencies.

    2) It's not always the mortgages reps's fault. I used to do mortgages for a living. I would have the couples come in and it would be there sole purpose to get the most money. I hate ARMS and would spent so much time trying to explain all the reason's they stink. I would tell them the gods truth and that when the rate adjusts it could adjust up or down that your taking a gamble.

    3)It really makes me angry that there is this keeping up with the Jones's in America. And I'm glad that most American's are falling on their butts. My parents worked hard all their lives, never baught a new car, shopped on sale and saved, saved, saved. When it came time to replace my mother's car after 30 plus years of driving used my parents wanted to get a new car. They went in, did the loan and were approved for $90,000. What did they do? Buy a Mercedes? Or some other type of expensive car? Nope they got a Grand Marquee. My mother later said, why would she want to burden herself with that extra monthly payment? She could have had the status but she took the economic route.

    And lastly before my husband and I got married he got his first credit card at the ripe old age of 32. He wanted to get a card to use to pay for the hotel for our honeymoon and for our car rental. Knowing that they would hold a chunk of the money if we used debit. He went in and did the loan and was approved for $12k. He called me laughing to tell me that he was approved for that amount. We laughed, and then moved the limit to 2500.

    With my two cases both my parents and my husband could have got big and fancy things. They could have been living up with the Jones's but instead choose to live simply and in this economic time we haven't notice a thing. We're living like we've always been, below our means.

    By Blogger Crystal G, at 8:34 AM  

  • This is a bad idea. Judging by some of the comments, even just on this page, this could even be a potentially dangerous idea.

    I'm all for personal responsibility, and I agree that a number (not all, clearly) of the homeowners getting bailed out probably made poor choices. However, giving up their personal details can only lead to somewhere very bad. A person (you, me, some of the other commenters, for example) might be reasonable, but people - a group of people - are pretty stupid, and easily riled up. Giving a lot of angry people who haven't thought things through directions to a singular casualty of their anger, would lead to - well, casualties.

    This costs even more tax dollars; police will have to be involved, court fees paid for people who probably can't afford that either, when they're either arrested or have to go appear at court for something that happened because someone decided to track down someone on such a list.

    I'm not saying that will happen everywhere, but it will happen, and as much as we like to say that our society and civilization is above all this, it isn't. If people were never like this, Jerry Springer wouldn't have a show, and nor would the rest of the people putting trash on TV.

    Again, I'm not against the model entirely, but maybe there could be another way to hold these people accountable without sharing their personal details.

    By Anonymous MIyna, at 1:32 PM  

  • Yes, thank you for hyping up irresponsible people, and not, say, people screwed over by the American Medical Industry or some other means by which so many people fall into rapid, increasing debt. Thank you for hyping up irresponsibility, and not people who are normally able to pay their bills, but fell behind for work travel costs and the increased price of foods due to rising gas prices. Thank you for having your little rant and mentioning community service for -all- recipients, including those who may have 50-hour work weeks for shitty pay, because it's your anger as tax-payer for all these stupid lazy people (they should be working 80 hours, then! Nevermind how hard it is to get a job or keep it when companies are going under) that is making such a crucial point here.

    By far and overwhelming? Show me your statistics, in full, from a reliable source, by an objective standard, which, oh, oops, is at the government's leisure to define, not yours. If that seems counterintuitive, it shouldn't be.

    If you're going to have a rant like this, perhaps you should acknowledge and mention for more than two seconds the many exceptions to your rules, rather than trying to stir up a bunch of angry 'I was able to keep my home because I was frugal' people. Maybe someone was careful and responsible. And maybe they were lucky to not be laid off. But before you go crying "I'MMA FIND THESE PEOPLE ON THE FOR TAKING MY MONEY", you should find a better means of accessing the current American condition.

    Just what we need, people getting fired up over things they don't even have a grasp on. Why don't you get out the shotgun while you're at it?

    By Anonymous Anonymous, at 12:30 PM  

  • Let's see, I've based my mortage on what my wife makes (1/2 my pay). Responsible huh?

    We work in two completely unrelated industries. Responsible huh?

    I get laid off, job goes to China.
    She gets fired cause she is making too much (actually for selling drugs at work but you cant fire people for making too much). I get hit by an under insured college slut. My health insurance provider is suing me for 250,000 in medical bills (they want their money back). I have over 100,000 in debt I haven't been able to pay yet (not counting what I HAVE been paying in office visits and medication). In November I will loose my house which costs less than rent in this area.

    Irresponsible when?

    By Anonymous Anonymous, at 12:50 AM  

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