Category: Lending (page 41 of 56)

by Sean Purcell

Real Estate Renaissance Man

Author website

If you are a mortgage holder who is either struggling with crushing payments, bitter for having overpaid for your home during the bubble, or who has extravagantly refinanced when prices were rising, the government’s landmark $700 billion bailout package has an important message for you: stop making your mortgage payments.

So says Peter Schiff, president of Euro Pacific Captital and author of “The Little Book of Bull Moves in Bear Markets” in his op/ed piece entitled, Just Stop Paying Your Mortgage.  You may or may not read it with tongue in cheek, but read it you should.

When a financial institution holds a mortgage, homeowners must live with the fear of foreclosure. Private institutions only have obligations to shareholders. In the case of a defaulting borrower, they will look to recover as much of their principal as possible. If foreclosure is their best option, they will take it in a heartbeat.

The government has no such obligations. Its only goal is to keep voters happy. After supposedly bailing out the fat cats on Wall Street, no politician wants to be accused of evicting struggling families. Once you understand this, all of your anxiety should melt away.

The law of unintended consequences is never so manifest, or insidious, as when politicians correct the free market with legislation.  (Except, perhaps, when they do so because they are …from the government and … here to help.)

by Sean Purcell

Real Estate Renaissance Man

Author website

Last week, while watching the House contort itself in a self-serving round of navel-gazing over the bailout package, I pondered two connotations of their disconnect with the populace.  Taken together they are a question really, that looks at the motivation behind politicians’ decisions; the metaphysical understanding of a Representative if you will.  This question in particular asks why our elected officials vote for legislation they know their constituents are against.  At the time, many of our representatives had chosen not to support the bailout package; not because they were against it – quite the contrary, they wanted to vote for it – no, their problem was their constituents didn’t want it and the election was to close for a nice spin cycle.  So I wondered if they ignored the people who elected them because:

• …constituents are too stupid to understand

or

• …constituents are not the ones who pay their bills

Over the weekend I am sad to report the answer became clear.  The majority of America (at least the majority of America who contact their representatives) were against the bailout the first time around.  I had hoped it was due to the fact that middle America was smarter than the politicians and pundits surmised.  But then Wall Street had its little temper tantrum and middle America couldn’t wait for the bailout package to pass.  They told their representatives so with an onslaught of voice mails, emails and snail mails.

Walls Street’s melt down affected every-one’s retirement funds and investment funds and saving funds… if they elected to sell them that day.  Otherwise it made not a wit of difference to the average person on the street who does not expect to need those funds for years yet.  But people panicked anyway.

I learned from this episode a lesson most politicians must learn early in their career.  I learned that middle America did not read up on or have at least a passing understanding of what the bailout meant, nor did they look into and try to understand how Wall Street’s shoe stomping episode actually affected them.  Instead, middle America did what they always do: they Read more