The Fight Club: Are "Dignity Mortgages" Essential or Insane?

I'm about as conservative as you can get but garrett's right about the crony capitalism being more responsible for 08 than the unqualified who signed. I would like just one change to the proposed program, the banks who write the loans have to hold the paper with no government insurance on the loan. what no takers?

Frank has a strong argument, and Garrett has good points about no one owning up to the losses created by those insane CDOs which everyone knows was the leading cause of the crash. So let's put Frank and Garrett in a room and not let them out until they arrive at a solution!

Mr. Garret is right dignity loans would be a great help to middle class in my case our
property in BC Canada, we were forced into selling lender was paid out in full but credit
rating agency will not remove it from my credit file this property sold in April 2011. It is
still affecting my ability to borrow. Three lawers told me Equa Facts is the worst of the
Credit Rating Agencies in Canada Thank You Robert Butt

Frank takes points for steamy outrage, Garrett scores TKO with intelligent points. When people finally realize it is the banksters that are the real cause of our macro economic problems, maybe it won't be too late to reign in their unbridled greed, if not their callousness.

There are enough abandoned homes that are being vandalized and misused that don't belong to anyone now that could be given, with some reasonable requirements, to displaced families. There is no need to give away money or build any more homes. Just place families in them, give them some community service work and the healing can begin.

Both gentlemen make good points, but generating a solution ahead of the market is asking for those usual unintended consequences that result from government intervention. I say let the market repair itself. As for someone "paying" for the collapse of the housing bubble, ain't gonna happen in my lifetime, too many vested interests.

You know some of us that lost are homes weren't deadbeats. I owned a home decor store that did amazingly well till the housing crash! I paid my bills on time and was living the american dream. Unfortunately I lost my business. My now ex husband was payed salary and commission and couldnt handle the financial and emotional stress so we lost it all. He finally walked out on our family leaving a mom and kids to defend for ourselves after a four year legal battle I finally get child support and now alimony. I have been working as hard as humanly possible doing any work I can find just to pay the legal bills and our living costs. Now that I'm getting back on my feet do I not deserve a second chance because of the circumstances? I have NEVER received food stamps or public assistance even when I had to pawn every piece of jewelry I owned, and I may add have gotten back. Do my kids and I have to rent for the rest of our lives? What about when I'm to old to work? My savings is gone and my state retirement will be very small. Yes in my 30s I already worked long and hard enough to have state retirement which not even enough to pay the bills. Do I become the burden of the state or my family then or would it be better I get a dignity mortgage now? Home ownership promotes self esteem and the neighborhoods owned verses rented, help the economy, as people tend to work harder to maintain their own homes and communities. This argument is a no brainer. YES people deserve second chances.

Wait a minute. If one borrows money for a car/home/whatever, doesn't he have a personal responsibility to be reasonably sure he can make the payments? To claim that Barney Frank's social welfare program to coerce banks into lending to unqualified borrowers, and the banks' reluctant willingness to do as the federal government ordered them, is responsible for borrowers being too stupid or irresponsible to avoid signing loan agreements they couldn't honor is not just naive, but dishonest, maybe even malevolent.

Garrett is absolutely correct! Why is it that the "authors" of such "idiocracy" that figured out how to STEAL from us TWICE (once directly and secondly in bailouts) continue to pile on the profits with NO ONE going to jail? Where are these profits going? To workers? (NO) to managers (NO) but to CEO's and owners.

And nothing has changed. The august House of Representatives wants to weaken already wimpy Dodd-Frank so the whole mess can continue. Reinstate Glass-Steagall, and support state banking modeled by the Bank of North Dakota. For good measure let's actually prosecute some of those responsible for gambling with the world's financial resources, eliminate risky financial products created just to provide something more to gamble on, restore some sanity to the wage disparity (Can anyone truly justify paying someone thousands of dollars an hour or more, while paying someone who serves their meals at a restaurant $2.10 an hour? It is easy to criticize when people are forced to overextend just to feed, clothe and house their family if you can, without noticing, spend hundreds of dollars on lunch, a week's pay for for many you then refer to as "deadbeats," all the while supporting cutting safety net programs. Garrett has it right, but it is only the first step in restoring the middle class to some level of dignity for the work they perform each and every day under often stressful working conditions. They are the true means of production in this country. I'd like to see a month when the only work done in this country was done by those "earning" over $500,000/year. Then we'd see who does the real work in this country.

It was Mitt Romney that called 47% of Americans deadbeats, you need to keep the politics out of your articles. Turns people off. Romney lost the election. All liberals do not think like you think they think, many are hard working individuals that pay their bills, keep up their properties, and are not on any type of subsistence.

They say the devil is in the details and unfortunately, the details of the program are lacking. First, Garret's discussion of the banks being greedy and guilty is irrelevant here. While I agree that they have some guilt, it really is not important to this discussion. Two wrongs don't make a right.

The question really boils down to this; will this program be another boondoggle or will it help those who are able to afford a home but due to present circumstances, not be able to get a home, and thus, truly help the economy? Let's ask some questions. First, what happens to the interest rate after it reaches "ordinary lending practices" as Garret says. Will it be a fixed rate or an ARM? Second, why is the taxpayer going on the hook for this? (for that matter, why is the taxpayer on the hook for any loan?) Third, having worked on mortgage modifications, I can assure you that the individuals are as guilty as the banks, brokers, government, etc. What will be different this time?

No one seems to answer how this is different now. Given the state of the economy and the direction the jobs market is heading, why would we think this won't be another taxpayer funded bailout?

While agreeing with most of your comentary about Dignity mortgages, I take issue with one statement in particular. "The new mortgage holder should learn: how to become and stay employed;". How can you expect the general hard-working person to do that rediculas statement when they are for the most part, fighting the greedy corporate owners that dump them on the street after working faithfully for almost enough years to retire. The key word here is "Almost". I have seen over and over how businesses have filed bankruptcy then after the employees are put in a position to lose everything, the same people buy the company back at the bankruptcy sale and it's business as usual. Only with new employees and no retirement to pay out, nor suppliers to pay who have had to lay off thier people because the first business did not pay them. So re-think your statement there Slick. When you experience it first hand, you are then qualified to comment. Sometimes there is more to the story than just figures on a chart.

When you give a person a second chance, they should not be rewarded for the previous failure. Just let them line up with the rest and judge the application based on its merits.

Garrett Baldwin Has It Right!!!

I am a 75 year old General Contractor and have been building and selling homes to the average middle class American for 55 years and have experinced all of the ups and downs during those years. It has been a constant battle with banks and mortgage companies and interest rate swings, etc, trying to find ways that people could afford to buy a home, it is a very difficult business, most of the difficulty is with the banks. The banks are the major problem with our housing, economy and the belittling of our American middle class, which are made to feel unworthy everytime they go into a bank and ask for a loan, these people are the people that built America, they are deserving of the right to own their Home with fair rate of interest.

Garrett Baldwin has it dead RIGHT, best description I have ever read on the Housing need of America!!!

One thing keeps puzzling me; if someone in line for a dignity loan has problems with paying bills, making payments and has a limited income etc. why are they supposed to pay a higher interest rate? Does a risky borrower suddenly become less risky when charged with a higher interest rate?
Really? Doesn't this makes it even more difficult for them?
I am convinced that the housing crisis could have been a lot mitigated, if not prevented, if right at the beginning when teaser interest rates expired all mortgages would have been frozen at the lowest market level. I know a lot of "middle class" people who would have stayed in their homes if their mortgage interest rate modification would have been successful. Nobody wanted a premium reduction just a reasonable interest rate.

And why were banks lending to people they knew couldn't afford a mortgage, and then packaging and selling these loans as a collatoralized investment? Does anyone remember the "Community Reinvestment Act"? They were mandated to give these loans by Congress under threat of "penalties" Don't lay all the blame on the banks as once again the politicians are the source of the problem. I blame a meddling Congress who is always mucking things up, and sticking their collective noses where they don't belong.

It frightens me that results are 50/50. Do half the people in this country forget that making loans to people who did not qualify for a loan is what caused the economic situation we are now trying to recover from ?

What Garrett neglects to take into account is the pressure Bill Clinton's AG put on banks to lower their lending standards allowing poorly qualified people home mortgages. Reno threatened lenders with federal lawsuits if the banks didn't comply. A do-good law, the Community Reinvestment Act, signed by Carter in '77, enabled Clinton to create this mischief and it was all based on the socialist idea of wealth redistribution.

Bob Colby (comments) and Frank got it right; Garrett got at least part of it wrong. To buy more votes and get re-elected, our Princes and Princesses in DC pushed the CRA on the banks and others. Read the official transcripts. Old Barney pointed the finger at everyone but the true culprit in the mirror. Google "Barney Frank roll the dice" for just one of the smoking guns.

And Garrett, the last thing banks want to do is lower their lending standards; that drastically increases risk… unless, of course, the legislators set-up conditions to mitigate that risk. Which they did. And in the process, our P & Ps set-up conditions to unleash greed on everyone's part (not just bankers).

The 2000-2008 real estate market conditions roughly paralleled the 1920s when stocks could be bought on "margin"– pennies on the dollar and you borrow the rest. Any decent student of history could have predicted with certainty the logical outcome in the 1920s and 2000s. It seems that we re-learn the same lessons that our grandparents and g-grandparents learned. Google "Kondratieff Cycle".

History DOES repeat itself, and paraphrasing Mark Twain– it doesn't repeat exactly, but it rhymes.

I like the idea of the interest rate going DOWN in a year or so. One of the problems was the balloon payments and interest going UP after 5 years in the old loans. People were always hopeful their situation would improve in five years, and when it didn't, they were in over their heads. I read somewhere that REAL wealth has only gone up 4% in the last 36 years for the bottom 50%. Not 4% a year, but 4% total!

The more those in charge make people look at piecemeal aspects of something, the easier they distract us [like magician's do] from what is really going on – the bigger picture > ACCESS TO CREDIT. They know and control that simple principal – because they have the sheer power to keep access.
Up front, I am an independent, responsible person, but against the current banking system; it is prejudicially set up to insure the banking elite, linked with the political elite however you want to describe it, always have access to credit and all others [except large corporations] so intermittently and so much less so as to perpetuate the serfdom kingdom.
Comedian Shelley Berman said anyone can lie with statistics [the left side of the audience has 30 % less cavities … but the right side has 50% more teeth]. What is an interest rate except what someone with enough power [the Fed] says it is – for loans, savings, and increasing spreads? Has anyone linked need for money printing to where it goes? How can a society function on 15% to 24% interest credit cards? Another example of two sets of rules. We probably could give everyone a house [not to sell of profit from – but to live in mortgage free] – for far less than the current money printing / bailouts AND with remarkable reduced societal stress.
The US as a nation has over decades since WW II changed more toward two earner families – with little or no effective family financial gain in a fiat money system – more work and less peace. The financial industry has little clue of the psychological toil & stress on families of the reduced child raising time; sure that is OK if you want to raise robots. Maybe the constant manufactured strain of the endless [if we stay distracted] "war on terror" will provide a clue.
Hold this thought, reflective of policies. Back in the 1970s, as a US Navy officer, I had a Philippine chief steward [food and personal service on ships]. He said he was better off working in the US Navy and shipping money home than seeking work back home where he was a licensed C.P.A. and reserve fighter pilot in the Philippine Air force. In his home country, only 2 of 5 educated people could find work. Where is the US headed under our lame, financially controlled leadership?
Our leadership needs to look to policies that truly would foster self reliance, not government dependance [now approaching 50%]; but that means also providing a financial-political framework where there really is work available [yes created by entrepreneurs – but other than just those at large corporations, which patent law favors more now than ever]. Finance, and scrutiny of Madison Ave marketing, have by design never been significantly taught in schools.
A long ago friend, Senator James Webb, obviously had had enough seeking change through Congress after one term. We need a whole Congress of James Webbs at the same time to alter the status quo of access to credit – to do the right thing, including a focus on full education, not producing robot followers. The financial segment of society needs to be a true society facilitator, of the real economy – taking 3% of GDP profits, not 25% to 30%.

Capitalism fails when ethics are thrown out the window. Our society as a whole has been degrading ethically for at least 40 years if not more. It's so obvious at so many levels it's simply self-evident. The sheer number of laws and regulations in existence is proof of the erosion of common ethical decency, requiring more rules to fuel more lawyers and create a society perpetually thrashing in the courts.

Systemic ethical failures are exemplified by corrupt institutions such as the government, banks, and wall street. The proof of systemic ethical failure is simple … people who should be fired (at minimum) are not, people who should go to jail, don't. Then there are all those who live in a state of never ending delusion and denial, leading to systemic dysfunction, derangement, and disconnect. These people are neurotic to the point they should be on disability, and have almost zero ability to see or understand reality … Nancy Pelosi comes to mind, she's clearly mentally ill, yet has been leader of the House … in a sane world, Pelosi could not be … and yet, there she is.

Individuals then pick up on the corruption they see from the elites and privileged and start to emulate it. In the 90's it became clear that perpetual daily lies told by holders of high office literally became the norm. I argued with people I knew at the time that when a society starts pretending that lies are truth, society is in deep deep trouble. Of course, nobody cared, too busy rooting for another 1000 points on the dow. Today, many if not most voters wouldn't know the truth if it was standing in front of 'em with a baseball bat. Ignorance is now worn with a badge of honor.

Today, the lack of anything remotely approaching ethics is like a cultural cancer. We listen daily to liars lying, and frauds spinning, and con-artists throwing crap against the wall to see what sticks. It's all about what you can get away with … people are not even embarrassed by their own egregious mis-deeds … if called on it they act like it was someone else who did it … if you tell the truth, you get crucified, so you're actually incented to lie. The '08 meltdown was systemic cultural failure all the way from Washington D.C. to Main Street, U.S.A. … you can't really just blame one thing although you can certainly identify causes and effects for sure. '08 was the perfect storm exposing a greedy, thoughtless, secular, materialistic society whose concept of ethics has simply turned to dust.

I'll know that ethics is making a comeback when actual justice prevails. That would mean Solyndra executives going to jail, crooked pols impeached or in jail, etc. … I figure it's going to be a long wait.

Garret makes a good point about the banks not having been punished for their role in the financial crisis. However, this program would not solve that problem. The solution to that problem is to go after the banks and investment firms responsible for this mess. Give them more than just a hand slap fine. Put those responsible in jail. However, that issue should not be used as justification for this program. I'm inclined to agree with Frank that this program just takes us down the same path all over again.

A simple equation:

Too big to fail = Too small to survive.

OK, the mortgage industry was working fine until we stopped underwriting the loans. FHA was the means of getting younger people qualified to buy a house. They paid 1+% up front mortgage insurance, and 1+% per year in that same insurance. Oh yea they had to have a job, decent credit and a decent debt t income ratio. OK FHA, Fannie and Freddie were doing fine. Then in the late 90s well Wall Street got into the act. Well we really don't need proof that you have an income, ah what the hell, forget the down payment. These programs backed by the idiots on the hill poured new money into housing. WOW, I can buy 5 houses. If I buy one today for $150K it'll be worth $200 next year, I'll take 5. Mr and Mrs. Jones that make combined $60,000 well yea you can afford that $500K house and why not we'll lend you the money for a new car and furniture too, yea get the upgrades what the hell make it $600K.

FHA's percent of the mortgage business went from the 40s to below 5 in 2005. Why because they insisted you had a job that could support the payments. It was Wall Street and the fancy financial instruments they sold that put us into that mess. I know as I have been involved in the housing industry since the early 90s.

Just like now with the stock market. These idiots in our central bank are printing money, which is inflating stocks and bonds. When the pin goes in it will be ugly. When the shoe shine guy is telling you about hot stocks time to go find another party. You see Buffet and Soros those fake Dems getting out of the market, they know.

As long as you underwrite loans and give them to people that can afford to pay them, then the price of housing will rise with wages. Owning a home is incredibly important for America. Now if homebuyers are educated properly, then they will know, pay the interest and mortgage insurance and in a few years you'll have equity. Wow then you can refinance and get rid of the MI. OK and if your career advances (isn't that what America is about) and you have some equity, and the price of your house rose over those 7 to 8 years, well you might be able to move up. This was how it worked until these idiots on Wall Street with our idiot government yea Dodd and Frank, the SEC who were watching porn instead of doing their job, got into the act.

As usual the few ruin it for the many Now these underwriters are afraid to approve a loan. They want to see people's underwear before they write the check, and it doesn't matter if you make $400K per year, putting down 40%. It is incredible.

I am a Republican, who believes we need to build a strong America and one of the things that will get us there is home ownership, we just need to be sensible, people need to prove they can make the payment. Think about what payment do you skip rent, car, credit cards. Rent comes first or you're in the street. So the mortgage payment is the rent. I love how everybody runs their mouths here but very few of you know what they are talking about. And it so simple!