Obama’s Housing Rescue Plan and the Responsible Homeowner

There is an uproar in the air.

Rants like the ones by the (in)famous Rick Santelli, has people up in arms, about not wanting to pay for their neighbor’s mortgage.  Rick’s rant reminds me of the Sudanese people who protested the International Criminal Court’s arrest warrant for their President, who has been accused of committing war crimes and genocide against the people of Darfur. The depths of ignorance that encourages such great manipulation is stunning. That the very same people whose friends, neighbors and relatives have been the target of genocide, now protest the arrest warrant of the person who is responsible for the genocide, is at best very sad and at worst, another crime of exploitation against the ignorant.

Like the Sudanese, some of our people are being misled, once again, by the likes of Rick Santelli. I know the example of manipulation and exploitation I gave above is hard-hitting, but the point is this: we shouldn’t miss the forest for the trees. Let us not cut off our noses to spite our face.

Obama’s plan to rescue homeowners who are stuck in high interest, fancy mortgages that they are unable to pay has gotten a lot of people’s (especially Republicans!) knickers in a bunch. Many have said that they do not want to rescue irresponsible people who have taken out a larger mortgage than they can afford or bought a larger house than they can afford.

For one second, lets set aside the fact that the taxpayer is rescuing irresponsible banks and financial companies to the tune of many billions, even though many have knowingly sold bad mortgages to people by misleading, mis-stating or misinforming them. That is a debate for another blog post.

Even if the American taxpayer was not rescuing the banks and financial industries, I would still recommend we stand by Obama’s plan to rescue the distressed homeowner.

Why do I say this? It is not because I stand to gain personally. No, I will not benefit from Obama’s plan, so there is no vested interest here. The reason I support Obama’s plan, even though it is not perfect, is this: If there is ever a chance that the housing market recovers and by virtue of its tight interconnection, the financial markets recover, the only hope is to stem the foreclosures.

The banks which are opposing or dampening the extent of Obama’s homeowner rescue package are continuing to exhibit the very same behavior that caused this collapse: that of greed, selfishness and short term mercenary avarice. What they do not understand is this: foreclosure benefits no one. NO ONE!. Not even the neighbor who has been very meticulous is paying his mortgage, very responsible in buying the home he can afford and who now resents having to rescue someone he considers irresponsible.

When a home in a neighborhood goes into foreclosure, all the bank is interested in, is to retrieve the principal they put into it. The homeowner might have had about 10% or 20% invested in the home. But the bank will very easily price the home down to get it off its books. What does that do to a neighbor’s home, the one who has been responsibly paying his mortgage? It automatically brings the value of his house down to match that of the foreclosure. In the end, as more foreclosures hit a neighborhood, the value of all the properties go down – it no longer matters if they are foreclosed or not.

So it is in the best interest of ALL of us, even those who have been religious about paying our mortgages, to stem foreclosures. The money spent will eventually benefit EVERYONE, not just the ones who are being rescued.

And Obama’s plan, tries to achieve some of it (provided the banks don’t lobby the House and Senate to add their riders to mangle the plan.)

Home to none

It was a cute little suburban home. The gables in the roof shone in the sun, the grass was green, the walkway was lined with cute little purple and white flowers. The windows sparkled, and the siding was clean and well kept. Two small children rode their bikes in the sidewalk that snaked through their yard. A couple walking their little yappy dog, waved at the children. A jogger smiled and waved hello to the couple. Another couple stopped to pet the dog and exchange small talk with the neighbors.

Everything was perfect in suburbia.

And then came the storm clouds. It grew dark and ominous. Thunder was in the air. The children rushed inside to their mother. The mother gathered them in her arms and soothed their fears. She took them into the warm kitchen filled with the smell of baking bread and gave them their dinner. She then capped it with a cup of hot cocoa and shooed them up to their rooms to complete their home work before going to bed. Once the kids were safely tucked into bed, she finished chilling the wine, as she waited for her husband to come home from a long day’s work. They would relax, unwind together and enjoy the quiet evening. Tomorrow is yet another day.

Six months later: same neighborhood, same house. The grass is dry and wretched. The flowers are dead. There is no one strolling on the sidewalk that winds through the yard of the house. People hurry past with eyes averted. The windows are shuttered and there is no sound of happy laughter emanating from within.

Inside the house, a couple is walking through with a black suited realtor, who is trying to convince them that this house is a steal. The house smells musty from being shut up for the past six months. There are some cobwebs around and the dust has settled thickly on the kitchen counters. The kitchen tap is leaking with a drip, drip, drip leaving a dull, rusty mark in the stainless steel sink. The hardwood floor has numerous footprints of the multitude who have come to see the house in the past months.

The realtor doesn’t stop talking. She is expounding the value of the “steal”. She says that the house is much cheaper than other comparable houses, because the bank only wants its investment in the house. The family who lived there have had to forgo their equity and leave because they missed a few mortgage payments due to a job loss. So the house is on the market, for a much lower price.

But the couple walking through sense the damp, the dust, the dreariness and the lost soul of the house. They are looking for a home to live in, not a dead shell. They move on to the next home on their list.

FORECLOSURE – HOME TO NONE.