REAL ESTATE: SoCal bloggers fight housing 'bailout'
Local bloggers attract thousands of supporters against legislation.
By ZACH FOX - Staff Writer | ∞
Not everyone wants to stem the wave of foreclosures about to wash over North County.
While the Senate has fast-tracked legislation that would offer assistance to thousands of families in danger of foreclosure, local bloggers and self-proclaimed housing nerds are putting up a fight.
Garnering thousands of supporters across the nation, some bloggers have launched a campaign based on a moral argument that irresponsible borrowers should not receive taxpayer-funded aid.
"A major issue is the equitability of it all. Someone can get a cash-out (refinance), buy a boat with the money and then get his principal written down," said Rich Toscano, a financial adviser with Pacific Capital Associates in San Diego and founder of the housing analysis blog piggington.com.
And Toscano is far from alone. His blog links to another site that aggregates like-minded dissidents under the tell-all name; stopthehousingbailout.com.
So far, it links to 35 blogs against legislation aimed at helping families facing foreclosure.
For now, it looks like the bloggers are losing the fight.
Several senators have vowed to get the legislation to the president's desk by July 4. Still, President Bush has threatened to veto the bill.
The legislation allows for a government agency to insure up to $300 billion in loans that would reduce the amount cash-strapped borrowers would have to pay, as well as broadening counseling programs and allocating $4 billion to communities to buy up foreclosed properties.
Along with the bloggers, some North County politicians have not been keen on other versions of foreclosure assistance legislation. Reps. Duncan Hunter, R-El Cajon, Darrell Issa, R-Vista, and Brian Bilbray, R-Solana Beach, all voted against a predecessor to the Senate bill.
"It's not just bailing out irresponsible borrowers, it's also bailing out irresponsible lenders," Bilbray said. "That's a big one. You don't want to put the burden on those of us who have been responsible and didn't bite off more than we can chew."
Seeking to save families
On the other side of the argument are local housing advocates. They argue that lenders would need to take significant losses, so the bill would not count as a bailout. Further, they say, something needs to be done to save thousands of families from entering foreclosure and further deteriorating the local housing market.
"We're seeing a lot of people who are a good case for a fixed-rate mortgage and are willing to take a renewed responsibility," said Sue Reynolds, executive director of Community HousingWorks, a San Diego nonprofit that counsels families facing foreclosure. "They're good risks, and if they stay in their homes, we'll put a tourniquet around the hemorrhaging in the market right now."
Let the bleeding continue, bloggers say. For some, recent massive home-price declines have been a boon, making homes more affordable. Allowing home prices to fall is key to reviving a healthy market, they argue.
San Diego County homes are down 28 percent from a peak in November 2005, according to a recent report by Standard & Poor's Case-Shiller Home Price Index.
"It (the housing legislation) directly harms us in a big way," said Patrick Killelea, the San Francisco founder of housing blog patrick.net. "We've been waiting for years for affordable prices, and they're saying, 'If you made a really bad financial choice, not only are we going to pay for it, but we're also going to keep prices high.' "
He said his site regularly gets 15,000 hits a day. He said he is used to policy makers not listening. Killelea, as well as Toscano, predicted home prices would tumble more than a year before they started to dip.
Killelea, and others, argue that portions of the bill would prop up artificially high home prices.
Beyond keeping families in homes, the $4 billion fund could allow state and local governments to purchase foreclosed homes. Therefore, the bill would theoretically increase demand for housing.
Bad behavior
In addition to preventing a correction, bloggers argue that the legislation might encourage poor financial behavior.
"I've got no problem with profiting. People who take smart risks deserve to prosper, and people who take bad risks deserve to fail," Toscano said. "If you short-circuit that feedback system, it really threatens a smart capitalist system that encourages a smart allocation of resources."
Further incensing visitors of stopthehousingbailout.com is the sentiment that bank lobbyists have crafted the legislation ---- an opinion fueled in part by revelations of favorable loans for the Senators who authored the bill.
And at least one economist agrees that the legislation is favorable for the banking industry though lenders will have to eat losses on the mortgages.
"It's kind of a joke to say they're taking a haircut. They're acknowledging a loss they would have had to take anyway," said Dean Baker, co-director of the Center for Economic and Policy Research, a Washington D.C. think tank.
Though the Senate appears poised to push through the foreclosure prevention legislation, the opposition says all has not been lost.
Baker will continue to push for his "own-to-rent" proposal that would allow a homeowner to remain in the house as a long-term tenant. And the Los Angeles founder of stopthehousingbailout.com, Morgan Ward Doran, expects many more bailouts coming soon that will require his fervent opposition.
Further, Ward Doran feels he has played a role in toning down the legislation's language.
"There's a spectrum of win-lose. It's not like the Celtics winning Game 6," he said. "It's an ongoing battle, and this is somewhere in the middle. It's probably closer to the lose, but we've had an effect."
Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.
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mommawomma wrote on Jun 30, 2008 9:04 AM:"tourniquet" is right. Usually with a tourniquet, part of the limb has to be amputated, and that part will be the responsible people who rented through these over-INFLATED house prices that are not based in reality or FUNDAMENTALS. Meaning, housing should be based on wages. Mortgages based on the down payment and ability to repay. Housing prices based on what people really can afford.
The government's new legislation, completely written by Bank of America (there is proof of this online) ONLY benefits to keep the house prices inflated, and the politicians pushing this through. This is NOT representational government, nor is it responsible governing.
The mere fact that we have to have "bubbles" to keep the rich rich and the middle class headed towards disasterous slavery and poverty is another fine example that this government is no longer working. It is a failure, for "republicans" and "democrats".
Another fine example of this housing mess would be to say that we have an "Oligarchy". yes? Well, I rented and now I pay more taxes and more for food and gas. This bubble filled with flippers and rotten politicians isn't just the problem of the bloggers. It is -everyones- problem.
Skate wrote on Jun 30, 2008 11:08 AM:A very well spoken and truthful article about this housing market! How many people pulled out equity or speculated that the market would continue to go up in value! The banks knew what they were doing and getting rich quickly, now are asking for the bailout! This legislation was produced by the banking industry, will only leave them off the hook, and put the rest of America, in debt forever!
Nicholas wrote on Jun 30, 2008 11:49 AM:"Further, they say, something needs to be done to save thousands of families from entering foreclosure and further deteriorating the local housing market.
" WHY? Why would we want to "save" a family from foreclosing on a property they have no equity in, a property most likely financed at 100%? Who are we "saving"? That same family can move literally across the street and pay rent for same property and cut their monthly expenses in HALF! Now THAT'S what I call "saving" the family.
One Buyer wrote on Jun 30, 2008 11:59 AM:When I bought my house in 2005, house prices were going through the roof. I thought, "well I'd better buy now so I am not totally priced out later." I signed a 5 year interest only (fixed for 5 years). When I inquired about what will happen to my payment when the 5 years is up, the lender told me, "Don't worry, you can just slide into a new loan at that time." So I feel I was deceived. They don't care and will take you money even if they don't think it's a good idea. The gov't better bail me out, or else my family is on the street. Is that what you people want? Just so you can say, "HA, that's what you get."
SuzyK wrote on Jun 30, 2008 1:16 PM:"Own to rent"?? Does this mean that the former "homeowner" will now be a renter but still incur all the costs associated with owing such as taxes, maintenance and insurance? This is "helping out"????
toma wrote on Jun 30, 2008 1:36 PM:Housing cost is killing not helping this nation. The average American pays like 50% plus for housing due to bloated house prices and the mantra that "buy at all cost". This kills demand for other goods and services. House prices outstrip incomes by some 5x. This not good for anybody. House prices need to fall and fall some more for us to have a sustainable market. Not a market that depends of gimmicks of ARMs.
Hard working wrote on Jun 30, 2008 2:04 PM:I think it is wonderful for people to now be able to afford a house but I worked hard to buy my house in 04 and I have a 10 year interest only loan. I do not have a second and I did not buy any toys. My job depends on a growing housing market and now since the crash, which I did not cause, it is getting more difficult to make my mortgage payment. I tried to refinance but they say I am better off with the loan I have now. Most of my neighbors have walked away and are now renting bigger newer homes. Their old homes are listed for 200k less than what they bought them for. I keep making my house payment while sacrifing things for my family. I want to continue doing the right thing but it seems like this market is now geared towards helpig those who have never owned a home or those that agreed to a fantasy loan. When will there be a bailout for the person who works hard and has and is doing the right thing??????
Suzy wrote on Jun 30, 2008 2:30 PM:Buy in haste, regret at leisure. If one did not have a guarantee of a re-fi in writing, a verbal promise is worth nothing in a court of law. This is not news. Verbal agreements are very seldom enforceable. Nobody owes anyone a house or a guarantee of a gain on an 'investment'. Sometimes you win and sometimes you lose.
barry wrote on Jun 30, 2008 5:00 PM:onebuyer-- I wish your family the best-- but you are an adult and i should not be forced to pay for your poor decisions.. do you want to live in a socialist economy? And I am pretty sure you can walk away from your mortgage and rent at a lower rate.
The problem with the US is entitlement
YourContractNOTMINE wrote on Jun 30, 2008 5:52 PM:The rest of the American public DOES NOT LIVE IN YOUR HOUSE, NOR DO WE BENEFIT FROM TAX WRITE-OFFS, ETC. so why should we help you with your bad decision? Many of us have waited to buy because we could see that we could not afford, that prices were outrageous, that corruption was flowing (how else could it get this far... common sense here please), and we have been honest with ourselves and others regarding our income and obligations. You have signed a contract. If you were suspicious or could not afford, why sign? All contracts are binding. How about contracts I've signed? Are they void because I wasn't wise, honest, or whatever? Do you want to pay for my contracts? WHAT PART OF YOUR HOME IS MINE? AND IF YOU ARE BAILED OUT, WHAT PART OF YOUR HOME CAN I CLAIM ON MY TAX WRITE-OFFS? Nothing? Point is made. This is your issue, not mine. Those not involved in this greed bubble that's popping did NOT SIGN ANY CONTRACT! You signed on the dotted line, you get the bill. Why did you do this if you were not certain it would be a good thing? You do not need to be on the street, you will be in apt's, or whatever, JUST LIKE THE REST OF US!!!
Bravo wrote on Jun 30, 2008 7:09 PM:yourContractNOTMINE, well said!
mahabone wrote on Jun 30, 2008 7:17 PM:The gov't better bail me out, or else my family is on the street. Is that what you people want? Just so you can say, "HA, that's what you get."
you have to propagate that up the pain chain buddy. Spreading filth around just makes everyone dirty.
Mike S wrote on Jun 30, 2008 8:16 PM:How many of you wrote your Congressman and Senators???
Blog all day long doesn't do a thing about legislation. Demanding your elected representatives represent you does.
jon wrote on Jul 1, 2008 7:14 PM:I have been renting now for 6 years since selling my home in Ca in 2002. After reading several blogs like patrick.net and the sorts for over a year now, I have prepared myself for the housing bailout for the past year. With a credit score of 760 I have been able to accumulate 28 credit cards totaling $480,000 of possible credit debt. If this bill goes thru to bail out all the greedy "my house isn't making moola for me so I'm walking away unless uncle sam bails me" slimeballs...I am poised to turn this 480,000 into cash and do the same. (I have it all figured out, thanks to pay pal). I encourage all other renters with decent credit to do the same. That way it would be only a matter of time until the Feds bail out credit card junkies as well....and if they don't, I will claim BK, grovel for a few
years and then immigrate to a predetermined country where my 480K has been for 2 years already in their currency (not deflating to garbage currency of the world like the American
dollar will have by then)
Bill wrote on Jul 3, 2008 5:54 PM:One Buyer - rent an apartment ya big baby, whaaaa, I want a house, bail me out taxpayers, whaaa...
Hard working - a ten year interest only loan is not "the right thing", it's a unintelligent RISKY thing...
the problem is that everyone is TOO GREEDY, stop being so damn GREEDY!
Roberto wrote on Jul 4, 2008 5:38 PM:Fortunatly I don't need any help or bailout...but!, what about all the lenders who fed this mess, why are they not accountable? They knew even more that the homebuyers that these loans couln't be sustained yet put our economy in jeopardy to make money for themselves in the now...Its call white collar crime and an acceptable business practice in America.
volvosteel wrote on Jul 5, 2008 7:07 PM:if they bail out all the people im just gonna walk away from my house, whats the point, i did everything right and and still doing such, ill become another statistic if thats all it will take for the goverment to pay my loan, who care's im self employed i can hide all my money right, it seems in America you only get rewarded if you do it the wrong way anymore,, im tired of sitting around being the perfect american citizen because thats what i was tought to do and sit by watching ignorant/stupid/non working and just plain dumb people get free money/food/electric etc etc at my hard working expense!
Jen wrote on Jul 23, 2008 2:45 PM:I just wrote my congressman, senators and senate Banking committee consultants that worked on the H/R. 3221 bill. It's the first time I've ever done such a thing. And trust me, if everyone who is outraged does this, SOMETHING will happen. I'm just hoping for once that the taxpayers won't get stuck with this giant mess!
Eric wrote on Sep 28, 2008 10:23 AM:Congress has no right to give the White House and its Secretary of the Treasury the power to transfer the people's money to the richest bankers in the country. Vote No to the Bailout legislation. The Bailout legislation is being rammed through Congress in a matter of days. This is an illegal power grab by the White House and their richest friends on Wall Street. The Legislation allows the Treasury Department to appoint the same bankers who created the crisis to administer and dictate the use of trillions of our tax dollars. It is also one of the biggest transfers of wealth from working families to the ultra-rich in the history of the United States.
Congress should help families stay in their homes. Wealthy executives should be forced to disgorge their obscene profits, fees and bonuses that made them ultra-rich while they ran the economy into the ground.
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