Friday's Rant: Homeowners, Bolsheviks and 47 More Months

Well, it’s been about one month. Only 47 to go - hopefully.

Earlier this week, the Dear Leader unveiled his bailout for homeowners - something like $275 billion. For years before our economic downturn hit, we were all hearing about the “housing bubble.” We heard about how ARM mortgages were going to come back to bite those who took them out. We heard news stories declaring that a reckoning was coming – the interest rates would reset and those who took ARM mortgages would find themselves in real trouble with monthly payments they couldn’t afford.

Listening to these warnings, responsible people lived within their means and purchased homes they could afford with fixed-rate mortgages. These people could have bought a bigger house with more square footage – if only they would have taken out an ARM – but they didn’t. Using common sense, they knew the potential consequences of an ARM and did the smart, responsible thing. What a bunch of suckers.

So now the disaster has hit. These ARMs have reset, payments dramatically increased and many of these irresponsible homeowner’s are in a world of hurt – with a dramatic rise in foreclosures all over the country.

What’s the Dear Leader’s response? Bail’em out. Who cares they made dumb choices? Who cares they can’t afford their house? Who cares they haven’t been making their payments? Who cares they were all warned? Let’s give them thousands of dollars each so that they can pay down the principal, refinance the mortgage, wait and see if they start making their payments. Mark it down – this will not work.  (For Barry's kids:  this is what we call "wealth redistribution")

What do the people who’ve been making their payments, living responsibly and paying their bills on time get? Nothing…except the satisfaction of continuing to make their payments and of course paying their taxes to bailout all these deadbeats.

So when a mob of responsible homeowners shake their lit torches and pitchforks and yell, “Why should I have to bailout those people who’ve made dumb decisions!?!” The response from the Dear Leader and his politburo is this:

"You see, all of these foreclosures hurt you, too. Even though you are paying your mortgage, living within your means, and acting responsibly, when a house on your street goes into foreclosure, it negatively impacts your home’s value, the property tax receipts to local government (of course) and the services it provides."

Got it. So it is in my best interest to make sure the deadbeat down the street stays in a house he can’t afford because it might mean that my value decrease if he can't. All the while, I’m expected to continue to live responsibly and within my means? Where’s the incentive for that? (hint: socialism always destroys incentive and individual initiative)

Now, I’m not so naïve to think that we live in a capitalist country where markets drive the value of an asset. Let’s be honest…those times ended at least 30 days ago. But humor me for a moment…

Apparently, over the last several years, housing prices and values have been artificially inflated. Obviously because of the fact that too many people were given more money than they could pay back – based on the deal they made. These people, with money to burn, drove up the housing market.

Here’s the deal. Let these people lose their homes. If the lender wants to work with them to renegotiate their loan, that’s fine. If we let the housing market find a bottom – it will. The market will reach a point where responsible buyers will swoop in and begin to purchase these foreclosed homes at what is seen as bargain prices (I KNOW this is the case because this is exactly how we got the Iowa Blog Cabin). This will likely set a floor on home prices – for everyone.

Thankfully, there are alternatives for those who can’t afford their homes – rent. Rent a house, a condo an apartment – whatever. Why is this not a reasonable alternative for someone who obviously can’t afford their mortgage? Home equity obviously can’t be the excuse.

Friends and neighbors, we all know this…if you reward bad behavior, you’re reinforcing and encouraging that same bad behavior. In fact, you’re removing the incentives for good behavior. That’s what the Dear Leader, his politburo and the Bolsheviks in Congress are doing with this mortgage bailout. As with most government solutions, it won’t solve anything, it will drive our nation deeper into debt, and have a serious impact on the confidence of those waiting to enter the market (e.g. people with money).

The one positive – it will further enrage those Americans who play by the rules, pay their taxes and go to work everyday – bringing nearer the day when they rise up and kick these incompetent children out of office.  We want that little fire to burn.

Breathe in, breathe out...this week's rant is over.