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Fairly controversial article here arguing that we need MORE foreclosures. From the article:
"I have been dismayed about the latest actions out of Washington and Wall Street. The banks are now pushing all manner of mortgage mods and foreclosure abatements. These are little more than 'extend & pretend' measures, designed to put off the day of reckoning. They are not only ineffective, they are counter-productive. They reward the reckless and punish the responsible, and create a moral hazard. Worse yet, they penalize middle America for the sake of giant Wall Street banks."
He continues by arguing that prices still aren't at 'normal' levels and that as long as we are keeping people in homes they cannot afford to pay-off, we are simply rewarding reckless borrowers and the banks that lent them the money.
What do you think about all the foreclosure prevention measures? Does the author have a point?
What does most for the 'public good'? Should we worry more about keeping families in their homes, or should we seek to 'fix' the real estate market?
http://www.ritholtz.com/blog/2010/03/more-foreclosures-please/
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I think that the author does have a point. The credit industry has lost some of the risk management that it needs. Therefore, too many people are living beyond their means and this puts the economy and individuals at greater risk for future failures.
ReplyDeleteIn the article, the author states, "By working so feverishly to artificially reduce foreclosures and prop up home prices, we punish the first time home buyer, the newlyweds, the savers who want to buy a house they can actually afford". This is especially worrisome because we will be entering the point in our lives when we get married, buy first homes, etc. within the next few years.
Mortgages adjustments are good for families, banks, industry, and investors. Homeowners don't have to be uprooted, banks don't need to lose money, industry doesn't have to fight with a flooded housing market, and investors don't lose their money. It does "prop up" housing prices but housing inventory, last I knew, was still in a state of enormous surplus. There are houses to be had on the market.
ReplyDeleteI also believe that author has a point. We need to fix the credit market so that reckless loans are not allowed and return to the 30 year fixed rate method as a poster-board for conducting business. People who made the mistake of buying a house they couldn't afford got what they had coming. However, people who lost their jobs and subsequently their homes as a result of this crisis got the short end of the stick in my opinion. Prices will soon return to normal and the housing market will recover as soon as the economy begins to turn around.
ReplyDeleteThe housing market and Fannie Mae in the past sucked many people into owning a home, especially one they couldn't really afford. I think people were really misled, but it's also up to the individual to realize what is best for them and to do their research. It's your responsibility to know what you're signing and what's you're getting into...but in saying this, it's also very unfair that the market and government tried to create an artificial demand...didn't they foresee the problems that could arise? A good government shouldn't work to trick its citizens.
ReplyDeleteI agree with Dana in that ultimately the responsibility is left to the individual. Regardless of the artificial perception the government tried to portray, I think the American public should understand at this point that they should not get in over their heads. It is no secret the job market is very unsteady and the housing market is still in shambles; it is imperative people don't have short memories and remember what the last few years have been like.
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