The Lunatics Have Taken Over the Asylum

I understand that the country voted for change in November, but is this really what we had in mind? It's seems like we now have a government that has completely lost it's mind and is running amok, spending hundreds billions, probably trillions, of dollars with no real idea of whether any of this spending will make a dime's worth of difference to solve our current economic woes.

We get corporate bailouts followed by "stimulus" plans that nobody read, followed by mortgage bailouts, and every time one is announced the stock market plummets, 401Ks get smaller and the public confidence goes down.

As this because we feel the government needs to "do something" even if that something makes the situation worse not better. Has anyone ever considered that sometimes there are events in our lives that are just too big for the government to stop?

If a hurricane were heading toward us, would we start clamoring for the government to "do something" to stop the hurricane? Of course not. Why? The hurricane is something too large for the government to do anything about. If it were to try all the resources used to try and stop it would be wasted. The government can warn us it is coming, tell us to get out of the way, help clean up the mess after it has passed and even help us rebuild. But stop it? Impossible.

Has anyone ever considered that we may be in the midst of an economic and financial hurricane that is simply too big and too powerful for the government to stop? Has anyone considered that all the money (debt) being used to try to stop it is simply being wasted and we will have nothing to show for it but the debt payments?

As a real estate broker, times are tough and we all hope things improve soon. But it's hard to see that doubling down on the irresponsible policies of the previous administration is the way out. I am personally tired of listening to all the chatter about what the economists say. In my opinion, economists are nothing more that a modern version of the court astrologist.

What would seem to work is common sense. If too much risk, too much debt an too much spending got us into this mess, then less risk, less debt and less spending would get us out. Since the lunatics in the government are doing the exact opposite, it's hard to be confident. God help us all.

Mortgage Bailout Plan Is The Government Version of Predatory Lending

The mortgage bailout plan unveiled yesterday, designed to "help" homeowners in financial difficulty stay in their homes, is a perfect example why we should board up the windows and barricade the doors whenever the government attempts to come to our rescue.

What has been proposed is little more than a government version of predatory lending. Here are the basics as I understand them. Homeowners who are delinquent on the mortgages and have no equity in their homes can get a loan modification whereby the rate would be adjusted to 3% and the total housing payment for the homeowner would not be more than 38% of the monthly income. All this is based on a 40 year amortization schedule. So good so far.

Now here is the bad (predatory) part. Nothing is being done to change the mortgage balance. Let's say you bought the house for $300,000 and the mortgage was $280,000 and now the house is worth $200,000. That means your have negative equity in the home of $80,000. Let's also assume that the rate adjustment with the payment limit would equate to a $180,000 mortgage. If you stayed in the home for forty years, which is unlikely but possible, you would still owe the lender $100,000 at the end of the mortgage.

If you sold the house, which is more likely, you would have to pay off the full mortgage amount of $280,000. Since the average family moves every 7 years, what are the chances that the prices will stop falling and then appreciate enough to get the value back to around $300,000 before you move? Not likely.

The government thinks this workable based on the notion that housing prices inevitably go up. Isn't this the same assumption that got us into this mess in the first place? This program will do little more than postpone the day of reckoning that troubled homeowners are currently facing. It is very unlikely to solve their problems. Isn't it ironic that we listen to our elected officials to rail against the predatory mortgage companies, yet feel it is OK to offer the same kind of garbage in the name of "assistance"?

As a real estate broker, I want to see the market improve ASAP. I wish this sounded like a solution, but it doesn't. It sounds like another reason why government intrusion into the private sector is likely to make a bad situation even worse.