“All of us must learn to live within our means again.” – President Barack Obama
Taken at face value, who can argue with a statement like that? As a sound bite, President Obama’s statement is an encouraging affirmation of good common fiscal policy — policy that is good for both the government and the private citizen.
But according to this Associated Press article, President Obama actually made that remark while unveiling his rescue plan to address the current housing implosion that currently threatens up to nine million homeowners with eviction because they can’t make their mortgage payments.
The plan will spend $75 billion to reduce the house payments of homeowners threatened with foreclosure to no more than 31% of their income. This is on top of $400 billion being spent to encourage Freddie Mac and Fannie Mae to refinance loans of “upside down” homes whose market value is less than the amount the owners still owe.
Up until about ten years ago, generally accepted lender practice was that a homeowner’s housing-expenses-to-income ratio should not exceed 28%. But during the insanity of the aught decade, this number reached values of 40% for good credit lenders, and upwards of 50% for lenders to those with below-average credit scores.
President Obama clearly speaks with a forked tongue, for it makes no sense to endorse such a rescue plan and then preach about “…learning to live within our means again.”
The press has shown little predilection for challenging the President. If I could, I would. But I don’t have press credentials, so I have little choice but to ponder these questions here for anybody that will listen:
1. Can somebody please, please, tell me how this rescue plan is going to somehow teach those who couldn’t figure out that they might have trouble making a mortgage payment that ate up as much as half of their income to live within their means? Anybody? Bueller?
2. If I were one of the beneficiaries of this “rescue package”, the lesson I would take away from the United States’ new-found sense of Socialism is this: As long as Uncle Sam is around to bail me out, why bother worrying about whether I have the financial means to repay my obligations?
3. Why should responsible folk like you and me have to subsidize these people? Somebody please help me out here. Foreclosure is not the end of the world. It is the end result of a borrower’s inability to meet his or her contractual loan obligations. The foreclosure process takes months to complete and, as a result, the homeowner has plenty of time to find a place to rent. It is not as if the individual losing their home is automatically banished to a 4-person pup tent on skid row.
4. Does the majority of this country really believe that it is everybody’s right to own a home, whether they can afford it or not? If not, they better start writing their Congressman because that is the only logical reason I can see for our politicians approving such a rescue plan.
5. Where were these politicians when housing prices plunged during the early 1990s? I bought my first home in Southern California at the top of that market in 1990. Then the bottom fell out and, for seven long years, I owed more on that mortgage than my house was worth. Despite being “upside down” I never asked for, nor expected, any kind of bail out from the United States taxpayer. I could have sold the house at a loss, and shell out a significant chunk of change in the process, but I chose to continue to make my payments and ride out the storm.
6. So what, exactly, has changed since the last housing downturn in 1990 to warrant the drastic and hysterical action now being taken? Well?
I’m just askin’.
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