Thursday, October 16, 2008

Election Issues - The Economy (Part 2, Housing)

The housing market in the United States has been in a downward spiral for quite awhile now. Many Americans are very concerned about this topic and want to know what the the next president will do about it.

John McCain wants to institute a "HOME Plan", enabling those with mortgages in default to trade them in for kinder, simpler mortgages. Basically, all you've got to do is stop paying your mortgage for a few months and go fill out a form at the post office. The old mortgage goes away, and you get a new one based on the current market value of your home. I can't even imagine the ways in which this will be abused.

First, be a deadbeat. This plan is only open to those that don't pay their bills, so it obviously encourages people to default on their loans. Quit your job, stop paying the bills. Don't worry, your socialist republicans will take care of you. After you get your mortgage bills lowered you can try to get a job as a flagman on unneeded road construction sites.

Second, depress housing values. If you want to get the most out of this deal you've got to make your "current market value" as low as possible. Stop cutting the grass. Park an old car in the yard, put it up on blocks, and just for good measure, burn it. You'll have your cheap mortgage in no time flat. It's even better if you have good neighbors, you can encourage them to trash their houses too. If you turn the neighborhood into a slum that's got to get you a better mortgage. In real estate, it's always location, location, location.

Barack Obama's plan to adjust your mortgage payments isn't quite as blatant. What he wants to do is allow the bankruptcy courts to adjust your mortgage payments. It's not quite as simple as going to the post office, but if you're willing to give an unscrupulous lawyer a cut of your windfall you can have a cheaper mortgage in your Obama presidency.

Don't worry about all the money you're taking away from the banks with these plans. We've already given them over 700 billion dollars, and I'm sure we'll come up with some more when they need another $1,000,000 hotel suite or $500,000 hunting trip.

Both candidates have plans to regulate the mortgage industry and to place protections against mortgage fraud. I may be wrong, but thought we already had laws about fair lending practices and protections against fraud. I seem to remember signing a dozen or so papers to that effect the last time I bought a house. There was one sheet in particular, called the lending disclosure statement, that summed up my entire mortgage including monthly payment amounts, interest rates, loan term (or length), early payoff penalties, and the total cost over the life of the loan. Unless I'm very much mistaken, this is a pretty good protection against fraud. Either the disclosure is right, in which case it isn't fraudulent; or the disclosure is wrong, in which case you can take them to court. Why do we need another law there?

The simple fact is that people signed mortgages that they couldn't afford, and banks loaned money that they couldn't afford to lose. The government will only make this worse with further legislative bailouts. These measures teach both banks and individuals that it's o.k. to do stupid things because the government will swoop in with $700 billion and new mortgages for everybody! When being wrong has no consequences there's no incentive to be right.

No comments: