It is ironic that with the market doing a crackerjack job of
punishing the excesses of the mortgage markets, cries for bailouts, handouts,
and major new regulations. A recent USA
Today article did a great job pointing out many of the ironies that abound.
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In Vermont lender tend to be more cautious and
mortgage delinquency rates are below 3%, in contrast to Nevada, where 30% of
Las Vegas homebuyers used subprime loans, and now the state has a mortgage
delinquency rate above 7%.
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Home prices have only fallen in 77 of 150 cities
tracked by the National Association of Realtors, but prices were up in 73
markets.
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California and Florida alone accounted for 30%
of recent U.S. foreclosure starts, according to the Mortgage Bankers
Association.
Think about what those stats mean. First, Nevada’s 7% delinquency rate is the
poster child for the problem, but that means 93% of mortgages are OK. A 7% problem is not the crisis that is
portrayed. Moreover, even a small
percentage of sub-prime borrowers are in trouble. This is a fairly small scale, geographically concentrated
phenomenon, not a sweeping nationwide problem.
Does it makes sense for the people in Vermont, who avoided trouble, to
bail out all the housing gamblers in Las Vegas?
Yet, there seems little chance of calm at the national
policy level. Election year politics
will pander—hell they don’t really need an election as an excuse. My favorite quote from the USA Today article—a
woman who bought a house a few years ago with no money down and an adjustable-rate
mortgage that started at 5.9% and now faces an 11% interest rate she can't
afford says “I think (a bailout) is a good thing for working Americans who are
trying to pay their bills and do the right thing. I'm not asking for a handout.” Excuse me?
I think you just did as for a handout.
I know some people are in pain, but it hurts us all if we
don’t allow people to bear the consequences of the choices they make. You buy a
too expensive home with a high-risk mortgage in order to squeeze down the payments,
and things go wrong, it really is your fault, not America’s.