Read this article which seems to blame the eeeevill mortgage companies for the current round of foreclosures. Of course, without these experimental loans, these people wouldn’t have been able to buy a house at all. And a significant percentage are weathering the storm and becoming home-owners. By my math, that’s good. But we must have a sob-story about the 20% who are being fore-closed on not the 80% who got a home they’d never have been able to purchase just five years ago.
Notice also the irresponsibility of the home-owner they talk to:
He cannot afford his mortgage payment, which jumped to $1,300 a month from about $1,000 after his loan reset to a higher interest rate last summer. A divorce and the loss of his county government clerical job, which paid $14.80 an hour, have also hurt.
In 2004, Mr. Shields took out a popular hybrid mortgage that carried a fixed interest rate for two years before becoming an adjustable-rate loan for the remaining 28 years. In August, his loan’s interest rate rose from 6.6 percent to 8.1 percent, and to 9.6 percent now. “I love the house,” said Mr. Shields, 47, who now works in a custodial job with the Chicago school district that pays $10.40 an hour. “I put a lot of money in the house — a deck and a new garage — and they are just going to take the house.”
Bought a house too big for his income; got a divorce; invested money he didn’t have in improving the house; lost his job. How is this the fault of an “over-extended loan market”?
And I would point out that these two-year adjustable rate mortgages are designed to allow someone with bad credit to get their, um, financial house in order and refinance. Most people who buy the 1 or 2 year ARM’s do precisely this. But we have to hear about the ones who don’t.
But what got me was the NYT just can’t, just can’t write this article without getting into some good old liberal wealth hatred:
The mortgage interest deduction, the biggest single subsidy to homeowners, will cost the federal budget about $80 billion this year, according to the administration’s projections. Deductions for state and local property taxes will cost $15.5 billion. Allowing homeowners to pocket tax-free much of the profit from selling their homes is expected to cost $37 billion more. Altogether, this amounts to almost 5 percent of the federal government’s total tax revenue, and almost three times HUD’s entire $42 billion budget. Now even some in Washington are questioning the soundness of pushing homeownership so broadly.
I can’t even begin with the stupidity here. Deductions do not cost the government shit — they return money to the owner. It’s only right to deduct property taxes (which are smaller than pork spending) as we shouldn’t be taxed twice — we deduct income taxes, don’t we? And deducting the profit from selling a home (only after two years of residency, BTW)? Well, how else do you expect people in a mobile society to not get jobbed when they sell? If I have to sell my home in the near future because Sue and I change jobs, a full tax plus agent commission would wipe out any profits. I might even lose money on the deal.
But the NYT apparently believes only irresponsible people should get tax breaks.
And the government’s efforts to promote homeownership are far from an unqualified success. From 2000 to 2005, homeownership rates increased significantly only among households in the top two-fifths of the income distribution, those earning more than $46,883, according to the Census Bureau’s American Community Survey.
Gee, it’s almost like the responsible choices that give you wealth also make you buy a house.
Homeownership declined for families in the bottom two-fifths of the income scale. In the lowest fifth — where families make less than $20,180 — homeownership was only 42.4 percent in 2005, which was 3 percentage points less than it was 25 years earlier and 26 percentage points below the national average.
Whoa! Irresponsible choices can both make you poor and prevent you from owning a home? Say it ain’t so! And, of course, this has nothing to do with excessive property taxes, the disaster or urban renewal, property forfeiture, imminent domain abuses or Chapter 8 subsidies.
No, nothing at all.
I actually do agree with one point here. It’s not the government’s business to encourage people to buy homes. And we are seeing the Law of Unintended Consequences rear its ugly head once more. George Bush has been a big driver behind this ownership society business because he is, at heart, a leftist who believes government can make people better.
And I would glady trade in my home mortgage interest and tax deductions for a Fair Tax. But I don’t think that’s what the NYT intends.