Detail, east Portland photo, courtesy Miles Hochstein / Portland Ground.



For old times' sake
The bojack bumper sticker -- only $1.50!

To order, click here.







Excellent tunes -- free! And on your browser right now. Just click on Radio Bojack!






E-mail us here.

About

This page contains a single entry from the blog posted on December 6, 2007 10:27 PM. The previous post in this blog was It's hitting the fan in Caracas. The next post in this blog is How's this work?. Many more can be found on the main index page or by looking through the archives.

Archives

Links

Law and Taxation
How Appealing
TaxProf Blog
Mauled Again
Tax Appellate Blog
A Taxing Matter
TaxVox
Tax.com
Josh Marquis
Native America, Discovered and Conquered
The Yin Blog
Ernie the Attorney
Conglomerate
Above the Law
The Volokh Conspiracy
Going Concern
Bag and Baggage
Wealth Strategies Journal
Jim Hamilton's World of Securities Regulation
myCorporateResource.com
World of Work
The Faculty Lounge
Lowering the Bar
OrCon Law

Hap'nin' Guys
Tony Pierce
Parkway Rest Stop
Utterly Boring.com
Along the Gradyent
Dwight Jaynes
Bob Borden
Dingleberry Gazette
The Red Electric
Iced Borscht
Jeremy Blachman
Dean's Rhetorical Flourish
Straight White Guy
HinesSight
Onfocus
Jalpuna
Beerdrinker.org
As Time Goes By
Dave Wagner
Jeff Selis
Alas, a Blog
Scott Hendison
Sansego
The View Through the Windshield
Appliance Blog
The Bleat

Hap'nin' Gals
My Whim is Law
Lelo in Nopo
Attorney at Large
Linda Kruschke
The Non-Consumer Advocate
10 Steps to Finding Your Happy Place
A Pig of Success
Attorney at Large
Margaret and Helen
Kimberlee Jaynes
Cornelia Seigneur
Mireio
And Sew It Goes
Mile 73
Rainy Day Thoughts
That Black Girl
Posie Gets Cozy
{AE}
Cat Eyes
Rhi in Pink
Althouse
GirlHacker
Ragwaters, Bitters, and Blue Ruin
Frytopia
Rose City Journal
Type Like the Wind

Portland and Oregon
Isaac Laquedem
StumptownBlogger
Rantings of a [Censored] Bus Driver
Jeff Mapes
Vintage Portland
The Portlander
South Waterfront
Amanda Fritz
O City Hall Reporters
Guilty Carnivore
Old Town by Larry Norton
The Alaunt
Bend Blogs
Lost Oregon
Cafe Unknown
Tin Zeroes
David's Oregon Picayune
Mark Nelsen's Weather Blog
Travel Oregon Blog
Portland Daily Photo
Portland Building Ads
Portland Food and Drink.com
Dave Knows Portland
Idaho's Portugal
Alameda Old House History
MLK in Motion
LoveSalem

Retired from Blogging
Various Observations...
The Daily E-Mail
Saving James
Portland Freelancer
Furious Nads (b!X)
Izzle Pfaff
The Grich
Kevin Allman
AboutItAll - Oregon
Lost in the Details
Worldwide Pablo
Tales from the Stump
Whitman Boys
Misterblue
Two Pennies
This Stony Planet
1221 SW 4th
Twisty
I am a Fish
Here Today
What If...?
Superinky Fixations
Pinktalk
Mellow-Drama
The Rural Bus Route
Another Blogger
Mikeyman's Computer Treehouse
Rosenblog
Portland Housing Blog

Wonderfully Wacky
Dave Barry
Borowitz Report
Blort
Stuff White People Like
Worst of the Web

Valuable Time-Wasters
My Gallery of Jacks
Litterbox, On the Prowl
Litterbox, Bag of Bones
Litterbox, Scratch
Maukie
Ride That Donkey
Singin' Horses
Rally Monkey
Simon Swears
Strong Bad's E-mail

Oregon News
KGW-TV
The Oregonian
Portland Tribune
KOIN
Willamette Week
KATU
The Sentinel
Southeast Examiner
Northwest Examiner
Sellwood Bee
Mid-County Memo
Vancouver Voice
Eugene Register-Guard
OPB
Topix.net - Portland
Salem Statesman-Journal
Oregon Capitol News
Portland Business Journal
Daily Journal of Commerce
Oregon Business
KPTV
Portland Info Net
McMinnville News Register
Lake Oswego Review
The Daily Astorian
Bend Bulletin
Corvallis Gazette-Times
Roseburg News-Review
Medford Mail-Tribune
Ashland Daily Tidings
Newport News-Times
Albany Democrat-Herald
The Eugene Weekly
Portland IndyMedia
The Columbian

Music-Related
The Beatles
Bruce Springsteen
Seal
Sting
Joni Mitchell
Ella Fitzgerald
Steve Earle
Joe Ely
Stevie Wonder
Lou Rawls

E-mail, Feeds, 'n' Stuff

Thursday, December 6, 2007

ARM-ageddon

I am not a big "personal responsibility" libertarian kind of guy, but when I see that we're going to start forcing lenders to freeze rates on adjustable rate mortgages, it gets my back up. I'd like somebody to order my lender to knock my mortgage interest rate back a couple of points, too. Where do I go to sign up for that?

Some -- repeat, some -- subprime borrowers were defrauded into signing up for their high-risk mortgages with "teaser" rates. But I'll bet most of them weren't. I'll bet most of them knew exactly what they were signing, or didn't think it mattered what the contract said. The government's new message that you needn't understand or honor your own home mortgage terms is just another step in the dumbing down of this country beyond recognition.

On its face, the mortgage "relief" effort looks like federal intervention on behalf of the little guy, but I'd look deeper before I'd accept that characterization. If the lender dudes actually wrote off everything that they already know is uncollectible, their stocks would plunge (as they should), and some seven-figure executive year-end bonuses would get pared back quite a bit. When that kind of threat is on the horizon, you know that it's George Bush to the rescue, for sure.

But get used to this, America, because it's just the beginning. Just as the sane people who took out fixed-rate mortgages are now going to pay for those who screwed around with ARMs, the sane people who put money away privately for their old age will soon have their Social Security benefits cut, so that the fools who didn't put anything away get the same standard of living in their retirement. There are so many indignities that middle-class families suffer in the Bush-Clinton Empire (27 years and counting). I'd like to kick my grammar school civics teachers in the shins right about now.

Comments (16)

I wish there was a way to securitize my dish-washing duty. That way if forgot to do the dishes and my wife got mad at me, I could have the bankers whine to the Treasury for help.

My first reaction when I heard this is that it protects larger banks that have significant subprime defaults looming in the future as a result of upcoming scheduled rate hikes, at the expense of smaller banks that didn't play such shennanigans with their borrowers. Now the debt of these smaller banks isn't worth as much on the books, even though they might not have the risk exposure of the large ones.

I am not a big "personal responsibility" libertarian kind of guy

JK: Oregon Libertarian Party is at http://www.lporegon.org/

Thanks
JK

Well said, Jack.

It may frighten you to know that Mr. Tee agrees with you 100%.

I refinanced my 5% "teaser" (7 year fixed rate, with a balloon or ARM reset) a year prior to maturity. I got a 5.6% 30 year fixed rate. So I'm paying $234 more each month for the comfort of knowing I don't care what interest rates are a year from now. I also won't be impacted by more restrictive underwriting criteria or fluctuations in my home's value. And the associated refi charges aren't even deductible.

There are alot of house flippers who are going to be moving back into their (previously vacant) "owner occupied" condos now. That's the only way to lock in the introductory rates.

From what I have heard - and I'm by no means fully up-to-speed on the issue - it's a voluntary program for the lenders.* From this I infer two things. One, that the president's plan basically amounts to him asking the banks nicely to do what they can. And two, I kinda suspect that what the lenders will do is re-evaluate the risks and cherry-pick the best remaining risks for relief, and also extend a bunch of interest-only deals for a few years. (And I suspect some lenders would have done that anyway.)

I doubt the lenders are going to shoot more of their own toes off just because the Prez asks them to.

[*: There is also apparently an FHA component, which presumably is not voluntary for the FHA.]

Is it likely that the lenders were losing money by loaning it out at 5 percent? If they were making money at 5 percent, a "freeze" at that level can hardly be said to hurt them - except the profits won't be as high as they otherwise would be. It seems to me it's in the lenders best interests to keep people paying these mortgages with the housing market the way it is. If a lender suddenly has a few dozen houses in a given market dumped back to them, what's the likelihood they will recover their full outstanding loan amounts? Probably pretty low.

This scheme is one cynical, political band aid designed to keep the hampsters(American consumers) on the wheel(consumerism) without interruption. Since when is a contract not a contract? I'm not a big advocate of predatory lenders but there has to be some bedrock and some degree of personal responsibility for knowing what you are getting yourself into. This whole issue is an extension of what scares me about the average American citizen. Idiots like Bush get elected because the voting public refuses to engage in the slightest critical thought over what they are really buying into. These same folks are out signing mortgages without any regard to how they will afford the payment once the "introductory" rate increases. Last weekend I watched Mike Judge's flick "Idiocracy". At the check out counter the clerk said to me "This movie should be in the documentary section." He was right.

It seems to me it's in the lenders best interests to keep people paying these mortgages with the housing market the way it is.

True, but it does becomea PR problem when lenders selectively extend deals to only some of their customers, if that's the way this is going to work. Once word gets out, those who are not in any risk of default will start asking why they also can't be cut some kind of deal, as Jack's commentary alluded.

Having bought my first house four years ago, I think that a lot of mortgage brokers and banks engage in what can charitably be called "aggressive" salesmanship (less charitably: "predatory lending"). I had brokers trying to sell me interest-only loans with huge balloon payments after five years and banks trying to convince me that I qualified for much more than I knew I could afford. One broker actually told me I was "stupid" to look at 30-year fixed rates and pay 6% when I could take a 4% ARM and just refinance in a few years. Even though I knew what kind of loan I wanted and what I could afford, the marketing of "alternatives" was relentless -- and often dishonest.

So yeah, people should have the personal responsibility to fully understand their mortgages. But lenders should also have some regulations as to full disclosure of all terms. The free market solution to this problem is to let the banks eat the losses, but that also means hundreds of thousands will lose their homes -- which will harm the rest of us economically. If we can hit a middle ground where banks take some hits (and they already have taken billions in losses) and people are able to keep their homes, I think that's a decent outcome.

"[...] it does becomea PR problem when lenders selectively extend deals to only some of their customers"

The horrible beauty of the scheme is that the President's request gets the lenders off the PR hook for most purposes. ("Hey, we didn't decide to do this, the President told us to do it.") It's a dazzling bit of theater that is a PR win for almost everyone, while hardly making any actual changes at all.

I'm reminded of the grasshopper (or was it a cricket) who fiddled each day away while the squirrel was busily gathering nuts for the upcoming winter.

This is just an example of an old saying; "If you owe the bank $100 and can't pay you have a problem. If you owe the bank $100 million and can't pay, the bank has a problem."

That is exactly what happened here. There were a huge number of greedy folks who thought they could make some money by flipping houses or by leveraging their home equity. They got busted and usually they would have to go to the corner and where a dunce cap. But this time there were so many of the greedy pigs that it actually started to threaten the credit markets. So a timeout is called in the hopes that it will get back to normal. Moral of the story is that greedy pigs usually get slaughtered, except if there are just too many of them to deal with.

Everyone who's 401k got nailed by the .com bust and didn't get compensated by the gummint, raise their hands...

Check out this British parody about how subprime american ("dodgy debts") become structured investment vehicles.

http://www.youtube.com/watch?v=SJ_qK4g6ntM&feature=related

Does anyone know what percentage of sub-prime is actually still held by the issuers? Seems to me that they dumped most of it after collecting the fees. That's what got us into the problem in the first place. Those who issued the junk no longer own it, so they never looked at the risk.

Jack,

You don't have to be a libertarian to support the idea of personal responsibility. Actually, if you're simply a parent, you've probably made the "actions have consequences" speech to your kids about a hundred times. You make that speech because you know that if you let kids just blame everyone else for their problems, they're never going to grow up.

Unfortunately, politicians thrive by telling everyone just the opposite -- that it's never your fault and there's alwasy some tooth fairy who can pay for your mistakes. As long as voters continue to believe that, we'll just get more bail-outs, more trams, more streetcars, etc.

John Charles


Sponsors


As a lawyer/blogger, I get
to be a member of:

In Vino Veritas

Lange, Pinot Gris 2015
Kiona, Lemberger 2014
Willamette Valley, Pinot Gris 2015
Aix, Rosé de Provence 2016
Marchigüe, Cabernet 2013
Inazío Irruzola, Getariako Txakolina Rosé 2015
Maso Canali, Pinot Grigio 2015
Campo Viejo, Rioja Reserva 2011
Kirkland, Côtes de Provence Rosé 2016
Cantele, Salice Salentino Reserva 2013
Whispering Angel, Côtes de Provence Rosé 2013
Avissi, Prosecco
Cleto Charli, Lambrusco di Sorbara Secco, Vecchia Modena
Pique Poul, Rosé 2016
Edmunds St. John, Bone-Jolly Rosé 2016
Stoller, Pinot Noir Rosé 2016
Chehalem, Inox Chardonnay 2015
The Four Graces, Pinot Gris 2015
Gascón, Colosal Red 2013
Cardwell Hill, Pinot Gris 2015
L'Ecole No. 41, Merlot 2013
Della Terra, Anonymus
Willamette Valley, Dijon Clone Chardonnay 2013
Wraith, Cabernet, Eidolon Estate 2012
Januik, Red 2015
Tomassi, Valpolicella, Rafaél, 2014
Sharecropper's Pinot Noir 2013
Helix, Pomatia Red Blend 2013
La Espera, Cabernet 2011
Campo Viejo, Rioja Reserva 2011
Villa Antinori, Toscana 2013
Locations, Spanish Red Wine
Locations, Argentinian Red Wine
La Antigua Clásico, Rioja 2011
Shatter, Grenache, Maury 2012
Argyle, Vintage Brut 2011
Abacela, Vintner's Blend #16 Abacela, Fiesta Tempranillo 2014
Benton Hill, Pinot Gris 2015
Primarius, Pinot Gris 2015
Januik, Merlot 2013
Napa Cellars, Cabernet 2013
J. Bookwalter, Protagonist 2012
LAN, Rioja Edicion Limitada 2011
Beaulieu, Cabernet, Rutherford 2009
Denada Cellars, Cabernet, Maipo Valley 2014
Marchigüe, Cabernet, Colchagua Valley 2013
Oberon, Cabernet 2014
Hedges, Red Mountain 2012
Balboa, Rose of Grenache 2015
Ontañón, Rioja Reserva 2015
Three Horse Ranch, Pinot Gris 2014
Archery Summit, Vireton Pinot Gris 2014
Nelms Road, Merlot 2013
Chateau Ste. Michelle, Pinot Gris 2014
Conn Creek, Cabernet, Napa 2012
Conn Creek, Cabernet, Napa 2013
Villa Maria, Sauvignon Blanc 2015
G3, Cabernet 2013
Chateau Smith, Cabernet, Washington State 2014
Abacela, Vintner's Blend #16
Willamette Valley, Rose of Pinot Noir, Whole Clusters 2015
Albero, Bobal Rose 2015
Ca' del Baio Barbaresco Valgrande 2012
Goodfellow, Reserve Pinot Gris, Clover 2014
Lugana, San Benedetto 2014
Wente, Cabernet, Charles Wetmore 2011
La Espera, Cabernet 2011
King Estate, Pinot Gris 2015
Adelsheim, Pinot Gris 2015
Trader Joe's, Pinot Gris, Willamette Valley 2015
La Vite Lucente, Toscana Red 2013
St. Francis, Cabernet, Sonoma 2013
Kendall-Jackson, Pinot Noir, California 2013
Beaulieu, Cabernet, Napa Valley 2013
Erath, Pinot Noir, Estate Selection 2012
Abbot's Table, Columbia Valley 2014
Intrinsic, Cabernet 2014
Oyster Bay, Pinot Noir 2010
Occhipinti, SP68 Bianco 2014
Layer Cake, Shiraz 2013
Desert Wind, Ruah 2011
WillaKenzie, Pinot Gris 2014
Abacela, Fiesta Tempranillo 2013
Des Amis, Rose 2014
Dunham, Trautina 2012
RoxyAnn, Claret 2012
Del Ri, Claret 2012
Stoppa, Emilia, Red 2004
Primarius, Pinot Noir 2013
Domaines Bunan, Bandol Rose 2015
Albero, Bobal Rose 2015
Deer Creek, Pinot Gris 2015
Beaulieu, Rutherford Cabernet 2013
Archery Summit, Vireton Pinot Gris 2014
King Estate, Pinot Gris, Backbone 2014
Oberon, Napa Cabernet 2013
Apaltagua, Envero Carmenere Gran Reserva 2013
Chateau des Arnauds, Cuvee des Capucins 2012
Nine Hats, Red 2013
Benziger, Cabernet, Sonoma 2012
Roxy Ann, Claret 2012
Januik, Merlot 2012
Conundrum, White 2013
St. Francis, Sonoma Cabernet 2012

The Occasional Book

Kent Haruf - Our Souls at Night
Peter Carey - True History of the Kelly Gang
Suzanne Collins - The Hunger Games
Amy Stewart - Girl Waits With Gun
Philip Roth - The Plot Against America
Norm Macdonald - Based on a True Story
Christopher Buckley - Boomsday
Ryan Holiday - The Obstacle is the Way
Ruth Sepetys - Between Shades of Gray
Richard Adams - Watership Down
Claire Vaye Watkins - Gold Fame Citrus
Markus Zusak - I am the Messenger
Anthony Doerr - All the Light We Cannot See
James Joyce - Dubliners
Cheryl Strayed - Torch
William Golding - Lord of the Flies
Saul Bellow - Mister Sammler's Planet
Phil Stanford - White House Call Girl
John Kaplan & Jon R. Waltz - The Trial of Jack Ruby
Kent Haruf - Eventide
David Halberstam - Summer of '49
Norman Mailer - The Naked and the Dead
Maria Dermoȗt - The Ten Thousand Things
William Faulkner - As I Lay Dying
Markus Zusak - The Book Thief
Christopher Buckley - Thank You for Smoking
William Shakespeare - Othello
Joseph Conrad - Heart of Darkness
Bill Bryson - A Short History of Nearly Everything
Cheryl Strayed - Tiny Beautiful Things
Sara Varon - Bake Sale
Stephen King - 11/22/63
Paul Goldstein - Errors and Omissions
Mark Twain - A Connecticut Yankee in King Arthur's Court
Steve Martin - Born Standing Up: A Comic's Life
Beverly Cleary - A Girl from Yamhill, a Memoir
Kent Haruf - Plainsong
Hope Larson - A Wrinkle in Time, the Graphic Novel
Rudyard Kipling - Kim
Peter Ames Carlin - Bruce
Fran Cannon Slayton - When the Whistle Blows
Neil Young - Waging Heavy Peace
Mark Bego - Aretha Franklin, the Queen of Soul (2012 ed.)
Jenny Lawson - Let's Pretend This Never Happened
J.D. Salinger - Franny and Zooey
Charles Dickens - A Christmas Carol
Timothy Egan - The Big Burn
Deborah Eisenberg - Transactions in a Foreign Currency
Kurt Vonnegut Jr. - Slaughterhouse Five
Kathryn Lance - Pandora's Genes
Cheryl Strayed - Wild
Fyodor Dostoyevsky - The Brothers Karamazov
Jack London - The House of Pride, and Other Tales of Hawaii
Jack Walker - The Extraordinary Rendition of Vincent Dellamaria
Colum McCann - Let the Great World Spin
Niccolò Machiavelli - The Prince
Harper Lee - To Kill a Mockingbird
Emma McLaughlin & Nicola Kraus - The Nanny Diaries
Brian Selznick - The Invention of Hugo Cabret
Sharon Creech - Walk Two Moons
Keith Richards - Life
F. Sionil Jose - Dusk
Natalie Babbitt - Tuck Everlasting
Justin Halpern - S#*t My Dad Says
Mark Herrmann - The Curmudgeon's Guide to Practicing Law
Barry Glassner - The Gospel of Food
Phil Stanford - The Peyton-Allan Files
Jesse Katz - The Opposite Field
Evelyn Waugh - Brideshead Revisited
J.K. Rowling - Harry Potter and the Sorcerer's Stone
David Sedaris - Holidays on Ice
Donald Miller - A Million Miles in a Thousand Years
Mitch Albom - Have a Little Faith
C.S. Lewis - The Magician's Nephew
F. Scott Fitzgerald - The Great Gatsby
William Shakespeare - A Midsummer Night's Dream
Ivan Doig - Bucking the Sun
Penda Diakité - I Lost My Tooth in Africa
Grace Lin - The Year of the Rat
Oscar Hijuelos - Mr. Ives' Christmas
Madeline L'Engle - A Wrinkle in Time
Steven Hart - The Last Three Miles
David Sedaris - Me Talk Pretty One Day
Karen Armstrong - The Spiral Staircase
Charles Larson - The Portland Murders
Adrian Wojnarowski - The Miracle of St. Anthony
William H. Colby - Long Goodbye
Steven D. Stark - Meet the Beatles
Phil Stanford - Portland Confidential
Rick Moody - Garden State
Jonathan Schwartz - All in Good Time
David Sedaris - Dress Your Family in Corduroy and Denim
Anthony Holden - Big Deal
Robert J. Spitzer - The Spirit of Leadership
James McManus - Positively Fifth Street
Jeff Noon - Vurt

Road Work

Miles run year to date: 96
At this date last year: 144
Total run in 2016: 155
In 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269


Clicky Web Analytics