Mortage crises leads to tent cities

[Broomstick]

Well, one reason is that for a net $500 a month, you're buying a house worth $700K, and in Aus, at least, the amount of tax deductions you can claim on a place you're renting out is amazing. Mortgage interest, land rates, repairs, utilities...

...And as pointed out in the US tax deductions only apply to owner-occupied housing, not to rental properties. In fact, in some locations rental properties are taxed at a higher rate than owner-occupied.

[Ariphaos]

What kind of imbecile would get such a thing? This is exactly why it would be absolutely wrong to bail out these threatened homeowners; if you don't make people pay for their reckless financial irresponsibility, they'll never change their ways.

Because they see 2.5 or 3% and think it is automatically a better deal. The tricks that pull them into this ridiculous arrangement aren't spelled out in black and white in the offer.

A friend of mine works on selling loans, and some people will call up -DEMANDING- certain interest rates. "I WANT MY 3%!"

"It's going to end up costing-"
"I DON'T CARE I WANT MY 3%!"

...so he gets his 3% and pays umpteen thousand dollars in points for the refinancing.

[The Grim Squeaker]

I suppose it should be pointed out that while personal idiocy is the root cause of this problem, better government regulation of the mortgage market could have prevented it.

BETTER being the key word, sorry, this is a pet peeve of mine.

Yet another example of the "smaller government = better" axiom in action.

That;s one way of looking at it. Another way would be that

the tax breaks in the US only apply to owner-occupied housing

, especially distorted consumer behaviour.
It's not the size of the government, (this is not a sweeping statement!), it's what it does.
Here there's a case o0f being large enough to interfere for corporatist cronies, and to distort what is rational consumerists without educating the populace, or looking towards consequences, or endorsing rational cunsumer choice ot it's alternatives (You want suburbs? Fine, but electric cars/rail transport/buses only, etc').

I can't believe libertarians still keep saying that the people don't need paternalistic government.

People need a good, competent government ("It's not how big it is, it's hwhat it does" to paraphrase the Economist ). There are many examples of small governments in the world that perform stellarly, and large ones that choke the nation.

I could agree with that if there were not such ample evidence of the people being generally imbeciles.

Which is why economic policy is a guiding tool to manipulate the wretches, and why misguided/half baked ones can be far more damaging as half measures than doing nothing. (It turns waves into irregular tsunamis, such as the 5 year mortgage housing delay proposal, etc').

Foreign banks have been grabbing up some of these properties, though most are probably waiting for the market to hit rock bottom before they start buying. Why buy cheap when you can wait a few months and buy cheaper?

Same banks/investors that didn't want to buy in the US at all while the boom was going on, it's been patently obvious that the US has had a housing "bubble" for quite a few years now (If not the full scale being apparent). Do I detect a note of critique in waiting for the market to finish crashing before investing?

[Darth Wong]

People need a good, competent government ("It's not how big it is, it's hwhat it does" to paraphrase the Economist ). There are many examples of small governments in the world that perform stellarly, and large ones that choke the nation.

So? The point is that the "smaller = better" axiom with its attendant "less regulation = better" dogma is bullshit. I wasn't trying to peddle the opposite dogma, so please dispense with the fucking strawman.

[Darth Wong]

By the way, are there any penalties for the people at banks who approve these shitty loans? If you've given out millions of dollars in loans that were obviously bound to go sour, shouldn't you get fired?

[The Grim Squeaker]

People need a good, competent government ("It's not how big it is, it's hwhat it does" to paraphrase the Economist ). There are many examples of small governments in the world that perform stellarly, and large ones that choke the nation.

So? The point is that the "smaller = better" axiom with its attendant "less regulation = better" dogma is bullshit. I wasn't trying to peddle the opposite dogma, so please dispense with the fucking strawman.

Sorry for assuming that you were, apologies for leaping to conclusions.

[Broomstick]

By the way, are there any penalties for the people at banks who approve these shitty loans? If you've given out millions of dollars in loans that were obviously bound to go sour, shouldn't you get fired?

If they have not broken the law and they have not violated the lending entity's policies... no, not automatic mechanism for firing exists. However, such entities are rapidly going out of business, which means many of these people are losing their jobs, with the subsequent fallout of losing their own homes, assets, and going into bankruptcies.

The exception to the above are morally questionable lenders who saw the crash coming and bailed a year or two ago (which phenomena was noted in places like the Wall Street Journal, where I recall reading an article about real estate tychoons changing careers and selling off their properties to invest money elsewhere) Those folks will have made their money and skipped town with no consequences.

[Darth Wong]

What kind of imbecile would get such a thing? This is exactly why it would be absolutely wrong to bail out these threatened homeowners; if you don't make people pay for their reckless financial irresponsibility, they'll never change their ways.

I agree with you that people need to learn from their mistakes and they should be punished for their complete lack of financial foresight and planning. The problem is all the secondary effects of those foreclosures, foreclosures drive housing prices down due to causing a glut of cheap homes on the market,. These deserted, usually trashed, homes also provide a convenient area for criminals and junkies to hang out increasing crime. There is also the fact that these foreclosures are bad for the banks as well, foreclosure can take years and by the time they're done a bank will only recover roughly half of what they're owed.

It's not as if this pain wouldn't still be coming down the line if these people get a bailout. All it would do is spread the pain around and delay the reckoning ... until after the next election. It seems like it would be better to get it over with.