Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

121 responses to “Foreclosure Rescue Plan Open Thread”

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  1. 98115_Renter

    RE: The Tim @ 100

    I know those discussions exist, I’m just injecting perspective that this is worth about 5% (or less) of TARP, and an even smaller % (maybe 2-3%) if you include the Stimulus.
    Considering housing is really the root of the entire problem, this is a very small % to throw at tthe problem. Maybe we should all be glad that they are not directing $3 Trillion at housing. $75 Billion is a relative pebble on the beach.

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  2. Ira Sacharoff

    I still maintain that a fair number of the underwater homeowners were duped. Maybe they should have been more aware of what was going on, but to some extent some of them were victims, and maybe there’s some rationale to help them out a little bit, by perhaps allowing bankruptcy judges to allow modification of their monthly payment, but how were the banks “victimized”?

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  3. Ouch!

    98115_Renter has a point, but I think outrage over the foreclosure package is still warranted. Statistically homeowners tend to only stay in their homes for 7-9 years before moving on. Why is it so important to keep them in their homes now? Is it bad if they move into something more affordable now rather than later? If you follow the money, the foreclosure plan, like TARP, is just another way to prop up the banks.

    But the foreclosure plans sends the wrong message to taxpayers. If you make a poor investment in housing, the government will do everything in it’s power to rescue you. Why isn’t the government helping me (or you) with losses to retirement stock investments? Why are they focusing on 9 million over-extended homeowners?

    If you invest in stocks, bonds, mutual funds – no money for you! Chin up and take your losses. If you gambled by over-purchasing personal real estate – you made the right choice. The people who complain about it are sore losers.

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  4. EconE

    RE: Ira Sacharoff @ 91

    From what I understand, judges do have the legal authority to modify loans.

    However, that would take down a HUGE chunk of the derivatives market.

    Investors can also legally sue that judge.

    And how were the banks victimized? Simple, people lied about their incomes…but then again…the banks allowed them to.

    Stupid Stupid Banks.

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  5. Herman

    What this country needs is for private individuals with cash to start investing or spending it. These are the people who made smart decisions in the past and can make the smartest decisions about where the invest the money now.

    These people don’t need a “bailout” or a “package” or any other gimmick. What they need is…. low prices! And that’s as easy and cheap as doing nothing.

    The markets need to crash down for 1-2 years to create great valuations. Then the government can intervene to create stability. The combination of great value and stability will bring in the private money.

    The impatience is killing us. Spending tax dollars to try to sustain inflated asset values is counterproductive.

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  6. Lake Hills Renter

    I’m no fan of CNBC, but I saw something there today (forgive me, home sick) that I haven’t seen on any other network so far, not that I’ve been looking — the host asked several panelists, when talking about the housing bailout, why homeowners who didn’t get in over their heads, and people who don’t even own homes, should have pay for those that did get in trouble. First time I’ve heard that question raised on air.

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  7. 98115_Renter

    RE: Lake Hills Renter @ 106

    Well the answer for those who own homes is simple: prevent foreclosures on their block and therefore prevent their home value from falling further.

    It’s a bit less clear for those of us who rent.

    One note: Nobody is paying for any of this anyway. We are all getting tax cuts year after year, remember? It’s all deficit spending. Eventually someone will pay, but it is not clear who or when.

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  8. Kary L. Krismer

    By Lake Hills Renter @ 106:

    I’m no fan of CNBC, but I saw something there today (forgive me, home sick) that I haven’t seen on any other network so far, not that I’ve been looking — the host asked several panelists, when talking about the housing bailout, why homeowners who didn’t get in over their heads, and people who don’t even own homes, should have pay for those that did get in trouble. First time I’ve heard that question raised on air.

    It’s not terribly surprising. How often do you hear on the news the real reason for the compensation for 9/11 victim’s families?

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  9. Ira Sacharoff

    “How often do you hear on the news the real reason for the compensation for 9/11 victim’s families? ”

    Fill me in, Kary. I have heard absolutely nothing from the media or anyone else. What is the real reason for compensation for 9/11 families compensation?

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  10. Kary L. Krismer

    Well the fact that it was passed by Congress within about 10 days of 9/11, and the fact that to receive the compensation they had to give up any rights to sue, tells you it wasn’t compassion or to compensate the families for their losses. It was to protect the insurance and airline industries, mainly the former.

    So like foreclosure relief, everyone gave up something for the greater good, not to protect or compensate those in trouble.

    BTW, I’m not entirely positive, but I think the name of the act that created the fund was the Air Transportation Safety and System Stabilization Act .

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  11. Kary L. Krismer

    Now I am sure: http://www.ustreas.gov/offices/domestic-finance/atsb/hr2926.pdf

    (See Title IV)

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  12. Ira Sacharoff

    Thanks, Kary. It’s like so many things. We pay for them, but it’s to protect industries with a whole lot more resources than we have.

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  13. David Losh

    Thank you Kary for bringing 9/11 into the discussion. I personally think all of the economic expansion was a response to having the World Trade Center attacked by foriegn interests. The exuberence of the American way of life lead us to the fulfillment of the American Dream for so many people.

    I also look at the foreclosure assistence as a way to divert people from legal action against lenders. In my honest opinion I think lenders were allowed to use some very deception business models to get money out of consumers.

    I also think patriotism was used in many respects to promote the idea that consumer spending was good for America. When the President of the United States encourages home ownership, and Congress enacts legislation to give the scheme easy credit options, it does give the impression of being a good thing for America.

    I think our government did the most to create this mess.

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  14. Kary L. Krismer

    Think of the 9/11 legislation as being similar to the bailout of AIG. I’m not sure which companies would have been most on the hook, but this legislation was designed to keep them in business.

    What the Fed was doing immediately after 9/11 is interesting too. If I recall correctly, they started acting almost immediately.

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  15. Mark

    What people seem to forget is that for every house sold at an inflated price, a bunch of people made a bunch of profit. With the exception of institutions now holding the paper mortgage, it is a zero sum game. Why is there no effort to recover ill-gotten gains over time?

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  16. David Losh

    That is true that the profits have been made and are now “out there” to be used for other ventures. If that money now gets taken away to some place else, like to the government, there is a good chance it will end up in another misdirected effort to fix things.

    The key in all of this is government intervention. If after 9/11 the government would have persued the evil doers and stayed focused on justice things would be different. They instead interferred with the rebuilding of the site, handed out money like candy, and ran interference for the insurance industry.

    Good intentions that we now see were a misdirection.

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  17. Kary L. Krismer

    By Mark @ 115:

    What people seem to forget is that for every house sold at an inflated price, a bunch of people made a bunch of profit. With the exception of institutions now holding the paper mortgage, it is a zero sum game. Why is there no effort to recover ill-gotten gains over time?

    What ill gotten gains? Are you going to sue someone because they sold their house here in August, 2007? They either had great timing or were lucky, but neither is grounds for a lawsuit.

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  18. 98115_Renter

    Anybody who watched Santelli’s “outrage” on CNBC yesterday, and who felt a little disgusted by his faux “traders’ populism” might be interested in the NYT piece up today:

    http://opinionator.blogs.nytimes.com/2009/02/20/rick-santelli-tea-party-time/

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  19. JimN

    There seem to be two camps emerging: Both believe the banks/financial system needs to be fixed.

    1. Big banks/finance. These blame falling home prices as the root cause of our current situation. Supporting home prices will support the banks/finance system. Let’s loosen credit, subsidize housing some more, and try to keep going for a little more. This is a huge and influential industry and has the ears of lots of politicians. Of course, it is not only the fortunes of the companies they run, but also likely their personal fortunes at stake. Although they’ve already lost a huge percentage of their net worth, the hope is that things will rebound/stabilize at least a bit.

    2. Economists and those who believe the credit bubble is the root cause, ie. ridiculous credit/fraud. This resulted in the real estate boom and fed on itself. Home prices need to correct (and are still overall too high), and the banks are insolvent. Rather than throw good money after bad, take over the banks, wipe out shareholders and sell back to private industry. At that point, regulate and maintain rational lending standards and don’t allow for a repeat. (Yes, bank will be boring slow growth entities again.) This will result in L shaped markets for both the finacial sector and housing.

    #1 seems to be similar to the Japanese experience of the “zombie banks.” #2 seems to be the route to “reset” the system and getting back to a diversified, sound economy. I think if it weren’t for the huge power and influence wielded by the financial industry, we wouldn’t even be talking about #1 as the way to fix the banks. The tech bubble collapsed, and then began resumed more rational growth thereafter.

    This week, it looks like #2 has a leg up for now. Yes, unfortunately #2 may result in lots of people’s houses and retirement accounts not rebounding for many years, but at some point we need to choose what’s best for our country.

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  20. Kary L. Krismer

    By 98115_Renter @ 118:

    Anybody who watched Santelli’s “outrage” on CNBC yesterday, and who felt a little disgusted by his faux “traders’ populism” might be interested in the NYT piece up today:

    http://opinionator.blogs.nytimes.com/2009/02/20/rick-santelli-tea-party-time/

    I finally saw this on the news today. It actually lowered my impression of CNBC, which I didn’t think was possible. Loved the White House response, calling it ignorant. But IMHO that goes without saying when you’re dealing with CNBC.

    I’ll agree there is a morality hazard to part of the plan, but the concern is saving the entities that CNBC worships.

    If I’m sick of anything, it’s that morons on CNBC make so much money spouting so much nonsense.

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  21. Lake Hills Renter

    Put me in the #2 camp. If I hear one more person say the government should keep housing prices from falling, I’m going to f-ing LOSE it!

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