Solving America's Mortgage Crisis
As a native born American of the baby boomer generation who has watched both our leadership and economy now disintegrate progressively from the 50's Eisenhower era (there were a few high points, but very few), perhaps when Mr. Obama is searching for some solutions for the mortgage crisis now occurring in this country, he might turn to the older generation of Americans for a little advice and the history books for some lessons.
The used car salesman tactics are not going to work with the baby boomer generation, nor for many of their offspring. We were, after all, the generation that coined the phrase "don't trust anyone over 35." That legacy remains for many of us. Also, distrust of authority figures also comes naturally. Some may have assimilated and morphed into politicians and corporate executives, but in reality although the clothing may have changed, concrete beliefs have not.
Most of us were opposed to the war in Vietnam, after all. Many protested, but many more simply kept silent to refrain from upsetting that World War II generation who had fought the "Great War," and connected war with glory and conquest. The circumstances surrounding Vietnam were much different, though, and their war was a war between nations and military - without civilian involvement after a full blown attack on this country's military on one of it's territories.
The country could not do enough for those vets upon their return, and your local banker was the veteran's and the citizen's friend. A man you knew by name, and who knew you and your family by name. In speaking with some former World War II vets, the events which lead up to the attacks on Pearl Harbor were more complicated than the history books have lead many to believe. It was as much about Germany and Hitler but also about a broken trade agreement with Japan over the rubber industry that infuriated the Japanese government at the time.
But this was a war, after all, between armies. The civilian casualties overall were few in number, even after the bombings which eventually occurred and for which there was at least some warning to the civilian population prior to that horrific event. Unlike today America then was a major exporter and the trade deficit was in the black on our side. Now we are upside down and trade agreements are even taking precedence over national security, as with the situation now occurring at the Mexican border although Mexico imports into this country far more automobiles and other products now than we export from Detroit (even their citizens now printing handouts on how and where to cross the Southwestern borders, their largest export by far).
Vietnam never was a war the American people were totally behind or comfortable with, and even more so because it followed on the heels of Korea, also another war in which we were not directly attacked. And the draft was reinstated to fight this foreign enemy which hated our freedoms. The "spins" placed on the legacy of Camelot are just that - spins. For the boomers, "duck and cover" exercises were held during homeroom. I don't think they had those in Camelot. Sugar cubes distributed to children in schools who were told it was a simulated exercise in case a radioactive bomb was dropped in order to combat radiation sickness. The fallacy of that lie never has been admitted by Washington to this day.
The returning vets from World War II had the GI Bill, VA home loans, ticker tape parades and medals. Those from Vietnam had PTSD, Agent Orange disabilities, and an ungrateful nation. It was the first time our soldiers ever faced women and children in the field of battle.
The World War II generation who had served at home but not in the battlefield had low interest, fixed rate home loans and assumable FHA and VA loans in order to finance their American dream.
The baby boomers for the most part faced a different and changing market. Interest rates skyrocketed, and then the Keating fiasco struck (the first bank bailout at the American people's expense) and the banks began the practice of offering flexible ARMs and interest only loans, with rates and terms renegotiable every two to five years.
Every payment for the first twenty years went toward interest on the ever escalating debt. There were still some fixed rate loans, if you passed the credit check and at a much higher rate. But by and large most average Americans, the ones who could least afford it, had to settle for the "creative" loans.
The "fix" of throwing money at the problem ala Keating which re-established the credit flow after the savings and loan bust has been tried before. Actually, that is what primarily lead to these "creative" loans which were then resold to duped investors to begin with and created this problem in the first place. The problems were not addressed which lead to the saving and loan disaster. Lack of adequate regulation, and bankers and banking executives of major regional banks who skirted the rules and used every loophole in those that existed at the time for their personal benefit at the federal level, and for which there were absolutely no controls at the state or local level.
The flowery speeches and salesman tactics are not going to work in attempting to convince a new home buying generation now also to settle for these "foreclosure loans," since the problems that actually lead to this bust - high interest, flexible loans and terms with contracts now consisting of over 65 pages of legalese - have not changed. No "choice" or "free market" dictates the American home buying experience, but boilerplace adhesive "loan shark" foreclosure contracts marketed as "loans." Merely "use rights" in most instances until the banks decide to exercise their options.
The thousands who have already lost their homes now have credit that precludes them from purchasing another one for many, many years. Foreclosures do stay on your record for 10 years, as do bankruptcies.
Thousands are out of the market - with a young generation now that has seen the devastation of this tsunami occur to their parents and friends. Used car sales gimmicks are not going to work, and neither are temporary fixes and throwing taxpayer monies at the problem once again without addressing the cause.
You cannot budget for an "unknown." Until fixed rate and assumable loans with adequate buyer protections are again instituted, Mr. Obama, I believe you are whistling in the wind, and will find more and more Americans preferring to live in tents out in the desert, then take a chance on buying a piece of the American dream, only to have it again stolen from them.
Many were not young buyers or ones who over-extended themselves but had to refinance due to increases in taxes and insurance and other costs of ownership during the boom.
The media spins and speeches are not going to satisfy a generation and their offspring who live now in an era where the only contact they have with their banker is through the internet, or revolving bank managers that must now speak with "corporate."
Your friendly neighborhood banker is gone. Instead, you have bankers lining up for their bonuses to go on vacations and retreats on the American taxpayer's dime.
And "contracts" which are provided at time of closing or refinance that must be signed within 24 hours in order to "lock in" those loan shark rates and terms. Without any recourse since many states do not afford jury trials prior to the "takings" of these homes - every state now has either non-judicial or judicial foreclosures.
In other words, while mortgages and the mortgage document itself is deemed a "contract" matter, there is no recourse for one of the parties to that "contract" prior to the lender's execution of the foreclosure provisions. There are no "buyer protections" whatsoever for this "state" action which is leaving more and more homeless by the day due to the one-up, one-down these "contracts" represent. Throughout the industry they are "boilerplate" and essentially non-negotiable with Freddie Mac and Fannie Mae packed riders.
And these banks due to the flexible terms can "disclose" all they want, (which has resulted in those 65 page contracts of legalese, rider after rider, and disclosure after disclosure) but it doesn't solve the inequities of the contractual terms or state statutes throughout the nation in the case of breech, especially on the part of the lender who now may even resell those contracts without the buyer's consent - whose new lender then attempts to institute even further nonconsensual terms upon those buyers.
These contracts can now change monumentally over the course of those loans into something the lender had no forewarning, nor has any recourse whatsoever other than filing expensive, equity and financially depleting legal actions, and in that event again is the one down due to his own hard earned dollars being used against him by the lending institution.
Those loan terms that made the American dream possible have fundamentally changed. For the majority of Americans it is just that - a dream. For those still in possession, it is now becoming a fight for survival. There are few real buyers (other than the vulture investors) willing to risk their financial futures again on the unknown. Owning a home now is becoming more of a liability than an asset with all the predators and wolves just outside the door.
There are so many "caveats" now you might as well hand over the keys at closing and save yourself and your wallet the grief.
Tags: Mortgages , Loans , Foreclosures , Banks , Lending , Credit , Economy , Debt
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