Thanks to L for forwarding a copy of a mailing by Rep. Brad Miller from North Carolina, which sadly was "prepared, published and mailed at taxpayer expense." The mailing is entitled "The fight is on to protect homeownership." The fight is also on to make sense of Congressman Miller’s remarks.
Miller takes exception to predatory lending. It’s hard to fault him for that–there’s been a lot of it. going on–to the detriment of many borrowers. Predatory lending is not responsible for the entire housing debacle, however, but you wouldn’t know it from comments like this:
We have an epidemic of homeowners in serious financial trouble, and whose houses are worth less than what they owe on their loans, largely because of irresponsible lending practices.
While borrowers might be in loans they can’t afford to repay because of irresponsible lending practices, falling home values have caused homeowners with minimal equity to become upside down on their loans, regardless of the type of loan used. Lenders cannot, and should not, be blamed for every underwater borrower.
Miller doesn’t seem to understand cause and effect when it comes to homeownership and economic status either. Further down he states:
Protecting your ticket into the middle class
In a world of stagnant to falling home values, how is a home a "ticket into the middle class"? Wouldn’t that ticket be hard work, a good education and a savings plan, rather than a depreciating asset?
Miller also states:
One out of every five subprime mortgages made in 2005 and 2006 will end in foreclosure. It should be said that most of the subprime problems are tied to refinances and not first mortgages. These are folks that because of family illness, loss of jobs or other crises have had to draw on their equity to stay afloat.
If, in fact, these borrowers are only in trouble now because they borrowed for emergencies, how is that the fault of lenders? Even if they borrowed for toys and vacations, again, how is that the fault of lenders? Perhaps if they had stayed in a more affordable rental and saved more- they might have had more money available to them to weather economic adversity.
Here’s where Miller gets his most bizarre:
2.2 million American families could lose their homes to foreclosure in the next two years. Hardworking American families stand to lose more than $160 billion in wealth. And every foreclosure means a family is falling out of the middle class into poverty.
A large percentage of foreclosures involve investment properties, often purchased with little money down. It is unlikely that any of those foreclosures will result in anyone "falling into poverty." Virtually all owner occupied foreclosures will result in homeowners moving to more affordable housing from less affordable housing. As foreclosures should not affect employment, it is unclear how any foreclosure would thrust a borrower into poverty.
Then there’s Miller’s conclusion:
As bad as foreclosures are already, the worst will come in 2008 and 2009. It will be the worst foreclosure crisis since the Great Depression, and Congress should act as forcefully now as Congress acted seventy years ago to respond to a nation in crisis.
Before Congress acts "forcefully", shouldn’t its members have a grasp of what the real problems are?
Northern Virginia Housing Bubble Fallout
Bubble Meter
UK House Bubble
Mish's Global Economic Analysis
Ohio Fraudclosure
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
I really, really hate to quote a fascist Treasury secretary, but
“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people”
- Treasury Secretary Andrew Mellon, 1933
Or, if you like, we need a recession for purposes of ‘creative destruction’per Schumpeter.
The old stuff we thought the economy was going to be built on… homebuilding, dog washing, retail anything, designing web pages.. has to largely be purged, so we can start the system over again.
Perhaps back to the future… farming is getting profitable again, building homes isn’t. Say, weren’t those homes built on farmland in the first place?
Irony of ironies.
We need ‘creative destruction’ so we can find out what happens next.
Me, I can’t wait… I’m an optimist.
Okay, so homeownership=middleclass? Does that mean during the last 8 years when we saw homeownership go from 66.2% in 2000 to nearly 70% in 2005 that we had more people enter the middleclass?
http://www.census.gov/hhes/www/housing/census/historic/owner.html
BTW West Virginia has the highest homeownership in the country yet has a large population in poverty.
And every foreclosure means a family is falling out of the middle class into poverty.
I guess the good Congressidiot thinks that all renters are poor. If only he would change the tax structure to reflect his odd views!
If Miller wanted to protect the middle class he’s coming to the table a little late. Even WHEDA (state government) http://www.wheda.com/ sells your loan off to some dorky lender. I do agree with Miller that many lenders are just plain unethical and con artists, but.. My girlfriend went with a WHEDA loan and the other day she handed me this mailing she got from the lender. For an upfront fee of $300 and $5 a month, they will let you pay twice a month on your loan, they stated what the savings was in interest, etc. They don’t compound biweekly, the savings is because you’ll make an extra yearly payment by paying biweekly. What a complete rip-off. I could hardly believe it.
Took out their equity for emergencies? Is a Corvette, boat or motor home an emergency? If he gets the bankruptcy laws changed, lending will become even more restrictive. I wonder if these guys in Washington ever get out of the office. Oh, and don’t forget to play the race card!!
re: house -> middle class
Classic post hoc, ergo propter hoc.
The truth: “Many middle class people buy a house.”
The fallacy: “Buying a house is a way to gain entry into the middle class.”
This is the kind of dishonest and deceptive claim that led Mark Twain to coin the phrase: “Lies, damned lies and statistics.”
Checking my calendar, I see that this year ends in an even number. I suspect the mentality in the Rayburn/Longworth/Cannon buildings is that the foreclosed-upon might actually vote this year, so let’s head ‘em off at the pass by blaming the lenders. Welcome to Washington.
Hard to believe the “liquidate labor” line from FDR’s right hand, eh? I’m sure it was a real “Catch-22″ for the White House in 1933…
The house on the ticket graphic he’s using.. that looks like, what, 2 bedroom, 1 bath? Maybe a finished attic? I find it ironic that the graphic sort of sums up the entire issue – you need a ticket just to get into a tiny crap shack even as a middle class family (unless, of course, you lie on your loan)..
truly fascinating that a bloke with a masters degree from the london school of economics would embarrass himself by spouting such populist bunkum nonsense.
one time in my life, just once before i am worm food would i like to see a politician with a D after his name blame the quote little guy for the absolute deplorable mess he has made for himself. not big bad corporations. not lack of government intervention. himself. you know what guys, the little guy just blew it. his bad. he’ll learn and be all the wiser next time. no need to pull out the government/regulatory teet this time. he’s going to pull this one out on his own, thank you very much.
right.
I just called Congressman Miller’s office in D.C. and asked if it would be possible to interview him as I wanted to know how someone who was born without a brain could get elected to Congress. The person who answered the phone then hung up on me3, but I called right back saying that we “must have been disconnected”. I then asked if I could speak with the Congressman even though this is normally the time he rapes sheep. She hung up again.
I can only imagine that this dude thinks that more than 50% of his district is going to lose their home. Let’s hope so and that they all move away so they can’t vote for this moron.
Wait, does this mean that because I rent, I’m officially “poor”?
Can I stop paying 40% of my gross in income taxes now?
Jim-
I’ve officially been renting for three years now, so I’m broke AND stupid – and therefore a much better person than you. ;P
Scrolling through the lowlights of Obama’s economic “plan”, I think we may long for the days when we only paid 40% before we were Baracked. I’m just waiting for the 15% excise tax on retirement accounts to keep those “poor victims” in their homes: The New Prosperity Act of 2010.
Jim-
I had the same thought. If renters live in “poverty”, shouldn’t we be the ones with the tax break?