$8.2 Trillion dollars in Mortgage debt (a/o 2004)

MSNBC Special Report: The Mortgage Mess
http://www.nbc11.com/msnbcnews/11605431/detail.html

"Some have compared the current wave of mortgage fraud to the savings and
loan debacle of the late 1980s and early 1990s, when deregulation of the thrift
industry opened the door to widespread abusive lending practices among
commercial developers and lenders. After years of trying to roll over bad loans
- only to see losses continue to mount – the government finally stepped in
with the creation the Resolution Trust Corp. to buy up bad loans. The bill to
taxpayers eventually came to $124 billion, according to a 2000 review by the Federal Deposit Insurance Corp."

Home mortgage debt owed, as of 2004, is $8.2 Trillion dollars, per MBA Rept.
75% of outstanding subprime loans originated since 2003, per MBA Rept.

In 2006, our GDP was $13.21 trillion at the official exchange rate, per the CIA World Factbook

MBA Rept. Mortgage Bankers' Association's "Characteristics of Outstanding Residential Mortgage Debt: 2006"
http://www.mortgagebankers.org/files/Bulletin/InternalResource/47210_DataNoteCharacteristicsofOuttandingResidentialMortgageDebtfor2006.pdf
Interesting notes from this content:
34% of all homeowner households own their homes free and clear
Roughly 70% of outstanding mortgages originated between 2000-2004
For all mortgage loans in the report, the average age is three years.
Top 4 states with ARMs: Nevada, California, Washington D.C., and Colorado

And, just for fun, here's a feature from the Orange County register, ground zero for two of the struggling subprime lenders, and, reportedly, the birthplace of subprime lending.
Take a test on mortgage mess

Where was all the finger-pointing when subprime borrowers were making money?

With all the articles, all the testimony to Congress, all the regulatory scrutiny that mortgage lending is receiving today, I have to wonder why no one was complaining during the real estate boom. When subprime borrowers, little old ladies, people on fixed income, minorities, et. al., were able to secure financing for homes they could ill afford, but COULD sell at a profit, there was no hue and cry, no accusations of predatory lending, no senate investigations. No, when subprime borrowers made money on housing appreciation, no one complained.

Well, the "bitter renters" - as anyone who questioned the economic fundamentals of the bubbly market was called - certainly complained. Many folks who wanted to buy a house, who had secure jobs and sizable downpayments, were "priced out." Perhaps they could not afford prices that were 3x the prices of just 5 years earlier. For many, they could afford the price, but could not justify the risk. For whatever reason, many well-qualified borrowers were outbid and outpriced by poorly-qualified buyers. Those buyers who would have happily bought a home, and paid every mortgage payment on time, were pushed out of the market by buyers who had no need for sensible pricing.

The government is now talking about bailing out buyers who bought over their heads, taxing everyone to keep foolish buyers in their McMansions, their luxury condos, their sparkling kitchens with Viking ranges and sub-zero freezers - as well as keeping foolish buyers in their modest bungalows, inner-city flats, and major fixers. The very people who outbid responsible, qualified buyers are now the "victims", needing government help to stay in homes they cannot afford. The sad reality is, a bailout will merely postpone the inevitable for most such borrowers.

The type of people who run up high credit scores are typically the type of people who continue paying their mortgage, even if they become "upside down" with a mortgage balance that is greater than their current home value. The type of people who let their credit ratings drop down to subprime levels are typically the type of people who just walk away, letting the bank hold the bag on price declines.

Why is it okay for prime borrowers to share in the gains AND the losses on real estate, but subprime borrowers should only share in the gains? Why should prime borrowers, renters, and every other taxpayer shoulder the cost of bailing subprime borrowers out of their mortgages? Let's face reality here - subprime borrowers are subprime for a reason. For some, they were incredibly careful and responsible, but hit hard times. For far, far more of them, they became subprime because they over-extended, lived above their means, were slow to pay debts or failed to pay them at all, declared bankruptcy, etc.

ABSOLUTELY, some subprime borrowers got that way through no fault of their own. Others got there by making mostly good financial choices, but they took some risks that didn't pan out. While others just never cared about paying bills. Look at C. Serin, posterboy of the foreclosure explosion. His blog seems to have fizzled, but he can still generate tremendous sparks by the mere mention of his visits to Starbucks, dining out, buying a car, turning down jobs - even though he is reportedly defaulting on $2.2 Million dollars in debt.

Oh, and, by the way, Mr. Serin's debt is not merely mortgage debt. He paid off his credit cards with some of the cash he got back at close - yes, he was able to buy houses AND get cash out at close, effictively paying him to buy - and he ran the cards up again. He lied to lenders to get his mortgages. He gamed the system. He is one of the so-called victims of bad lending practices.
Ironic how the pundits blame "Wall Street investors" for the mortgage mess, but only the far-right-wing media asks borrowers to shoulder their fair share of the blame. These supposedly genteel, wealthy "Wall Street" types are just as often teachers, blue-collar workers, white collar workers, grimy fingernail workers, and anyone else with a 401k. True victims of shady mortgage lending have recourse available to them without any additional government involvement. The investors who held mortgage company stock, mortgage-backed bonds, and related investments in their retirement account, they have no recourse. Even irresponsible buyers will be able to negotiate with lenders in this very shaky housing market. Government intervention at this point will just unfairly burden taxpayers - and it sends the wrong message to borrowers that borrowers needn't take responsibility for themselves, needn't read and understand contracts, needn't have rainy-day savings, needn't buy prudently, choosing homes that they can afford in good times and bad, choosing mortgages that they can afford both today and in the future.

Government spending and taxing the poor

Whatever happened to community involvement? I remember local organizations that were holding fund raisers, restoring parks, and generally taking the bull by the horns with their own hands when I was a child. Maybe it's just California, but community involvement seems to have morphed into lobbying the government and working to pass new taxes. Case in point: Sacramento's American River Parkway - "the parkway doesn't have enough funding to purchase equipment, do maintenance, make capital improvements and acquire land".

Which is better for a community? Higher taxes supporting improved community amenities, or voluntary civic involvement producing improved community amenities? Might a community that improved a park area through their own voluntary labor and monetary contributions, take better care of said park, appreciate said park more, and possibly utilize said park more? On the other hand, raising taxes on folks who don't want to improve the park - could that mean increased strain on taxpayers experiencing economic difficulties? Might it drive marginal taxpayers to another community where taxes are lower?

Oh, sure, no one wants to think about the poor - and, if they do, they say that they are doing these things to benefit the poor. The local city of Rancho Cordova has been gentrifying. They are trying to drive out businesses that cater to the poor - thrift stores, check cashing places, junkyards. Government exists for the benefit of the whole community, not as a tool for taxing the poor, middle class, and wealthy to provide amenities that the ruling class desires.

I propose that taxpayers who cannot afford - in time or money - to utilize an amenity, should not be required to pay for that amenity. If taxpayers cannot garden in their backyards, they should not be taxed for government gardens. That doesn't mean that government cannot provide gardens - it just means that the should raise the lower threshhold of taxable income before they use public funds for luxuries. If your poorest taxpayers cannot afford to eat, you do not buy food with civic funds. If the poorest taxpayers cannot afford to own cars, you put your government employees on public transit.

This does not mean that communities should live without amenities. It means that those amenities should be provided, voluntarily, without tax money. Hey, maybe we should offer low-wage taxpayers the option of performing community service hours instead of paying taxes. Wouldn't an hour of labor have more benefit to the community than 8% local tax and 25% federal tax on $10/hour worth of wages?

For wealthier taxpayers, lowering the tax burden might actually free them from long hours on the job, allowing them the luxury of volunteering to cleanup local parks. Or maybe not - because, maybe, just maybe, they don't want parks as much as they want something else.

Sacramento is building a new animal shelter, an honorable endeavor. They have provided $295,000 in funding for art works in the new facility. A local taxpayer, earning about $30k a year, died last year of being uninsured. She was an artist, who would surely have donated work to such a worthy cause. But she can't, because she couldn't afford health insurance, private school tuition, living expenses, and taxes. She couldn't choose not to pay the taxes, she wouldn't choose not to pay the tuition, so she scrimped on health insurance, and it killed her. The diagnosis on her death certificate was a preventable cancer, but what really killed her was lack of insurance, avoiding preventive care for fear of the costs, and waiting too long to seek treatment. Her child was left orphaned. Perhaps she should have made different choices, but those are the choices she made, and those are the choices many low-income taxpayers make.

The irony is, she would probably have supported a new tax for the parkway. If I have to pay a dime to get the government to squeeze an extra thousand dollars out of a wealthy person to fund something that I want, but don't want to pay for, well, the government will help me do it. What sense does that make?