Sunday Dinner
January 27th, 2008 by 
reality
A couple of good pieces for Sunday evening reading or viewing. CBS’ 60 Minutes show offers a segment on the mortgage mess, featuring Jim Grant. It also includes the “just walk away” thought process that appears to be taking hold like a California wildfire.
They say they can afford the higher payments, but see no point in making them.”The house keeps going down, payments keep going up. Where’s the logic in that? And how can we fix it? I mean, that’s what this whole thing’s about for us is how can we fix this? And if we can’t fix it, then what do we do?” Matt Valdez asks.
“Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense,” Stephanie Valdez adds.
“That’s what you agreed to do when you bought the house,” Kroft points out.
“Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,” Stephanie Valdez replies.
“You’re saying, essentially, that you’re going to stop making payments on it? You’re just gonna let it go into foreclosure?” Kroft asks.
“You know, that’s the only advice we’ve gotten so far is walk away from the home. We don’t want to do that to our credit. Why can’t our mortgage company work with us?” she says.
In other words, we only bought this puppy because we thought we could resell it for a profit. We now want to have our cake and eat it, essentially void the contract we signed and reprice the house at market without damaging our credit, or we’ll walk away. Sharp practice, indeed. They must be corporate employees, used to getting their stock options repriced down every time the corporation’s stock declined, to come up with this feeling of entitlement.
And another of John Hussman’s exceptionally thoughtful pieces. Certainly one of his top ten. It covers markets, the stimulus package, politicians and Keynesian economics with so much good stuff that I won’t excerpt from it.
Posted in Fixed Income, James Grant, John Hussman, Real Estate, Rogues and Rascals | 
January 27th, 2008 at 7:29 pm
All I ever needed to know, I learned from Forrest Gump:
“stupid is as stupid does”
unfortunately, they might take all of us down with their stupidity (home buyers, lenders, Wall St geniuses, guvment, Greenspan, the list is endless)
January 27th, 2008 at 10:20 pm
OTOH,
There was so much fraud and manipulation by big mortgage, real estate and IB/finance that every one that bought a house is getting hurt by this. Why shouldn’t people expect those people in big finance, mortgage, IB, RE and the govt. who failed to regulate and enforce and allowed all of this to take a hit for the consumer they were screwing for $$$? People are finidng a loophole and the financial bastards deserve extra pain after the way they got congress to rewrite the bankruptcy laws to create debt slaves.
I can cover my home loan and I am not asking for a handout but I am pissed as hell at all of the unscrupulous persons that profited off this and perpetuated it to the misfortune of all. Everyone is going to suffer because of this ultimately and I think dumb consumers should take the least blame of all. Banks have no business lending money to people that may not pay back if they lose 10-20% of value. All risk management went out the window and you cannot blame the consumers for that.
January 27th, 2008 at 10:28 pm
Well, I am angry too (what was your first clue?). But it takes two to tango and this pair of charmers were obviously dancing up a storm. They weren’t dumb, they knew exactly what they were doing then and they know now. Having said that, the systemic problem in real estate finance is that you have all these folks getting their fees and commissions out at the front end without risk, leaving the borrower and the ultimate holder of the debt more or less equally f*cked.
January 27th, 2008 at 11:12 pm
It doesn’t take a genius to realize that people making money on something like this need to be regulated and enforced so that they face jail time for financial fraud and/or they need to have some financial skin in the game themselves. We have been supremely failed by both the financial system and the govt. Gee… where have i heard that story before? (and how many times now?) Welcome to the best democracy that money can buy!