Comments on: More Than Housing

By: Nashvilian

Nashvilian — Thu, 22 Jan 2009 16:47:37 +0000

How to break the cycle? Change the purpose of Social Security to include home ownership in the definition of security. I’m not suggesting that everyone buy a home, but for people who choose to, the cost of buying a home can be brought way down by simply borrowing less money. And that can happen if SS and 401k contributions were allowed to go instead towards paying off the mortgage.

Currently, folks spend the equivalent of half their income on the mortgage and retirement contributions. Instead, they should put that half of their income into paying off the mortgage ONLY and then put it into retirement savings ONLY to catch back up.

The median home is priced around $200k. With 10% down, that’s a $180K loan, which at 6% will cost $208k in interest over 30 years. But if one could accelerate payments and have the home paid off in ten years, the interest paid would only be $64K. Most everyone could buy in ten what they currently buy in thirty if their retirement contributions bought the home first. Thus, the median home costs $144,000 LESS simply by changing how we contribute to SS and changing what we invest our 401k into.

By: Swordsman

Swordsman — Fri, 16 Jan 2009 04:12:13 +0000

Agree with Michael. The idea of giving ANY of these people a blank check is just ludicrous. Anyone see the interview with Bob Lutz, the Chairman of GM on NPR.org? The man is completely out of it. Likewise, now we have BofA wanting 25 billion MORE since they don’t have enough money to buy Merrill Lynch after all.

Sorry, but here’s the world’s smallest violin.

By: Michael Wells

Michael Wells — Thu, 15 Jan 2009 19:45:17 +0000

One small solution would be to tie the bailout and the incentives together. Require the banks to use bailout funds to buy tax-credits for low income housing or other projects and readjust the system so they can take the credits later when they’re profitable. Require the banks to make equipment loans to contractors who get federal infrastructure contracts, guaranteed by those contracts. These can tie to “shovel-ready” projects, loosen up credit and get some cash in the economy. They would also go directly into the real economy, not buyouts of other companies or speculation.

There’s already $700 billion sitting out there unused, with no strings attached and banks are afraid to use it. These loans and tax credits would be safe and go on their balance sheets to replace the cash that’s just sitting there.

By: Buzzcut

Buzzcut — Thu, 15 Jan 2009 17:53:18 +0000

Securitization surely turned what might have been a housefire into something that burned down the entire city, and then some.

Certainly there are lots of different factors (a huge increase in subprime lending, a global search for investment returns, mark to market, failure of ratings agencies, etc.), but securitization is what makes this recession different than all the others. It is why we’re in a credit crisis.

By: Wendy

Wendy — Thu, 15 Jan 2009 16:42:46 +0000

Shouldn’t we really be thinking of the housing value decline as a symptom or an effect of the poorly regulated and/or managed financial and lending system?

Many of the people defaulting should not have been able to borrow in the first place because they were poor credit risks. Others should not have been able to have as large of a mortgage as they did because their income and/or debt service ratio didn’t justify it. But the system allowed them to borrow too much, and at scary terms when considered long-term (low interest & payments now, higher later).

Too much liquidity didn’t help either.