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December 10, 2007
My plan for solving the mortgage crisis
There’s been a lot said about the so-called housing and subprime loan crisis. I’ve not yet written about it much, but my mortgage is technically subprime. Although I’m a prime borrower, I have one of the 1.5% of subprime loans that went to prime borrowers in 2Q07. (To an underwriter, my application is thus “Alt-A”.) Now according to my state’s junior Senator, a robotic and conniving woman named Hillary, I’m surely a victim of a “predatory” lender and as a victim, I deserve something. Call it HillaryCare for Housing. And it would be just as much a disaster as the original HillaryCare for health care.
As an alleged victim, I thought I’d offer my support for the three-point plan offered by Michelle Malkin:
Suck. It. Up.
I’m a homeowner only because of the miracle of subprime mortgage financing (which dates back to the even greater miracle of junk bonds), easy credit, and investors who were willing to provide easy credit. I was fully aware of the risks, as was my bank, who went belly-up a mere 10 days after making me my loan.
The problem with HillaryCare, Barney Frank’s plan, and even the Bush plan is that all would make it harder for me to get a future mortgage or refi from what I have. They’d also make it harder for people in my situation – mid-20s with six figures of non-mortgage debt – to become homeowners. And that would depress prices when I go to sell.
The “rescue” plans so far would impose penalties on mortgage lenders and/or investors, destroy the sanctity of contracts (such as Hillary’s 5-year “freeze”), or cause outright elimination of certain products, like the mortgage product I have. If Senators like Hillary want folks with subprime loans to be able to refinance when necessary, they need to continue to make credit available. This means supporting a strong dollar, not raising the capital gains tax (as Hillary begrudgingly admitted to Maria Bartiromo this morning), privatizing Fan and Fred, and most importantly, not placing huge restrictions on the functioning of the mortgage market. Too often government's knee-jerk reaction is to regulate something to death. They've already done it with Sarbox, and we see the predictable result that financial business is fleeing from New York to London, Dubai, and Hong Kong.
The best thing for the housing market right now is for those who took bad risks to Suck. It. Up. Homeowners who can’t afford their houses will have to become renters again. Suck. It. Up. Lenders who made bad loans will have to decide whether for foreclose or make a workout. Suck. It. Up. Investors in securities will have to decide whether to let the special servicers renegotiate terms or take foreclosure losses. Suck. It. Up. All the rest of the people who made millions during the run-up can ride it down too. Suck. It. Up.
The worst thing that could happen is for a Sarbox-like “solution” from the government—like all the major proposals so far would be--that would further restrict the availability of subprime loans to people like me. Some 94% of subprime loans, incuding mine, are paid early or on-time. Given that, it's hard even to argue that there is any crisis at all. I’m old enough to make mortgage decisions for myself, I know a sucker bet when I see one, and the last thing I need is for Hillary to come with a heavy-handed “rescue.” Suck. It. Up. You too, Hillary.
Posted by adrianjo at December 10, 2007 12:29 AM