Small Town in CA Solves The Housing Crisis?

[FORD]

[sadaist]

The family purchased a home for $200,000. It makes no difference what the "market value" is. They bought it at $200k. Just because the market says it's only worth $80k now doesn't mean shit. What if it were the other way? Say they bought it for $200k and the market skyrockets. Now it's worth $350k. Does the bank get to redo the mortgage for $350k? NO! And neither should the homeowner get to redo for $80k.

You owe what you bought it for. Whether the market goes up or down. Period.

Now if you want to talk about the predatory loan rates going from 3.5% suddenly to 7.0+ % and someones monthly payment more than doubling leading to a foreclosure.....that's something that should be fixed. But as for value of the home, you bought it for the price you bought it for.

[Romeo Delight]

Hmmm...I would tend to agree with you Sadaist at first glance.

But the concept of principle reduction does make alot of sense when you consider what the alternatives are.

Of course in the reverse you couldn't redo the mortgage at 350 k...everyone wins in that scenario...the family has more wealth and spends accordingly...the bank has a solvent account paying them a rate of return etc.

I am not entirely sure about the eminent domain arguement, but if a city wants to do this and can draw their position to the Constitution successfully, who are we to stop it?

The other taxpayers win too...instead of having 30 houses in their immediate vicinity labeled as "foreclosures" and affecting the market value of their house as well, this has to help them as well. Not to mention the sheer humanity of helping people maintain their part in the community.

I think thsi way will lead to a quicker recovery versus cities that don't do this...

[Romeo Delight]

How it was allowed to have a mortgage system with little/no regulation at all is beyond me. It's still not where it needs to be

[Va Beach VH Fan]

How it was allowed to have a mortgage system with little/no regulation at all is beyond me. It's still not where it needs to be

Regulation....

[tbone888]

Another example of rewarding those that make really bad life decisions. If, god forbid, this actually happens, the only way to be fair is to let those that do the right things (live below their means, pay their bills on time etc) reset their loans too. If not, youre just rewarding bad behavior.

[Romeo Delight]

I agree. But again, what do you do now? At the end of the day, decisions need to be made on how to move forward. We can sit here and tsk tsk all you want, but there were alot of mistakes made here, none bigger than the entire banking system at large and absence of regulation...even encoragement of abuse of the system.

Cities are making these decisions because they are in their best interests long term...isn't that at the heart of the capitalism? Who are you to judge? I suppose these same people shoudln't have access to medical care because they made "bad life decisions" and didn't get to go to Harvard?

There are people who are in trouble becasue their area is particularly hard hit and they are no longer employed. People in trouble aren't just those who made a bad decision buying a house they couldn;t afford. Its much deeper than that.