On The Mortgage Crisis

So, I know I promised a full accounting of Floorpocalypse 2008*, but I'm still too close to the crisis to talk about it. If you don't like the way we run things around you, I encourage you to bitch about me on your own blogs. Or message me to complain...I look forward to ignoring you

Instead, I think I'm going to talk about something else that continues to annoy the holy living fuck out of me, the "mortgage crisis." I do reserve the right to veer at any time into more generalized bitching about people being fucktards, but let's just see where we wind up, 'kay? 'Kay.

Because you're reading this, I'm assuming you haven't recently woken from a coma. That being the case, I'm sure you're aware that the housing market in this country is well and truly fucked. Every day brings more and more bad news. Real estate was long considered one of the surest, safest places to invest one's money. I suppose this can be adequately explained by the intrinsic scarcity of land combined with the fact the folks need places to live and store their accretions of crap. Whether it's a rental or a ranch house, a home of some kind is a pretty fucking basic necessity. So what happened?

Stupid happened. In a big and important way.

Lots of people like to blame low interest rates; I can't imagine a parallel universe in which I cared any less, really, about the policies of former Fed Chair Alan Greenspan. I wouldn't want a job where I was somehow supposed to "steer" the US economy, as though such an absurd notion were even a remote possibility--might as well try to fucking test drive Greenland around the North Atlantic. I will weigh in on whether his fiscal policies were good or bad in my next life when I'm pursuing my PhD in economics. Or never. I like never, but I digress...

Bargain basement interest rates did, undoubtedly, contribute to the "housing bubble." When money is really cheap, it becomes possible to borrow more of it. Duh. The thing is, though, that's not what really caused the mortgage crisis, or even the housing bubble.

These things, you see, were actually caused by dummies who really, REALLY suck at math and really, REALLY excel at self-delusion.

Anyone who isn't storing his brains in a pouch duct-taped behind his scrotum (or in her vag...whatevs), should have looked at the housing market of the past few years and realized that was completely beyond the realm of possibility that houses were going to appreciate at, in some areas, double digit rates. Come. The fuck. On. The ONLY way your house should double in value in two years is if all the land to the West of you tumbles into the Pacific and you suddenly have beach frontage.

I'm not talking about a spectacular level of financial savvy, here. You don't need to read the financial trade rags to know that housing prices simply could not continue to gain the way they did in from, say, 2001 to 2005. You know why ANYONE can figure that out?

Because a shit-ton of borrowed money, even at a low interest rate, still winds up requiring a big damn monthly payment. Take the average salary in an area, divide by big damn monthly payment, and you have no one who can afford to live in a damn house. If people can't afford a home, they'll rent. Or move away. Housing prices get high enough, and no one will buy houses.

Which actually might have happened, if not for various "exotic" loan products and the dumb fucks who signed on the dotted lines.

Okay, quick PSA here. If someone asks you to sign something promising to repay tens or hundreds of thousands of dollars, and you don't understand what it says, DON'T for the love of god and all that is holy sign the damn thing. I'm not talking about all the legalese and whatnots, most mortgage paperwork is made entirely of equal amounts of nonsense and absolute shit. However, there are important bits. They have numbers on them. If the numbers don't make sense, or aren't what you thought you agreed to, or seem to have an unexpectedly large collection of zeros to the left of decimal, then walk away. Maybe shank a fucker with the pen on the way out.

Of course, people didn't do that. They were going to buy houses! Or refinance and put on a deck! A bigger kitchen! Designer Laser Vaginoplasty! As though the general idiocy of people running around off-leash isn't bad enough, banks jumped in to help them acquire absurdly overpriced houses that they could never hoped to afford using any sort of halfway normal loan product.

When finally even interest-only mortgages were not enough to help borrowers overreach to get into houses, banks came up with the so-called "pay-option" ARM products. The premise behind this loan is so stupid that I can hardly imagine the individual for whom it would be appropriate. Still thinking. Still nothing. Maybe people who are in their last year of residency to be a brain surgeon or a crotch redecorator and, as such, expect to realize a 500% jump in income in the next 6-12 months. Maybe.

Now, there are undoubtedly people out there who wound up with these loans who didn't ask for them, who didn't understand the, who didn't really want them. HOWEVER, these are also people who either willfully ignored the fact that the loan in question was substantially below market rates (as though they lived in a rarefied vacuum exempt from the machinations of market competition), or who didn't even bother finding out what a normal loan should have cost them. Whatever. Either way. Please report to the gonad irradiator so that my children never have to put up with your children.

Add to that people who knowingly lied on their loan applications, or allowed others to lie for them. Everybody goes on and on about stated and no-documentation loans and how awful they've turned out to be. Again, duh. If you have to LIE to get into a house, it probably doesn't bode well for you overall. These loans actually have legitimate uses, and if not used in the service of acquisitive morons they aren't necessarily bad. They are now, though, exceedingly difficult to get at all.

Yes, there were stupid loans and bad loan officers. There is plenty of blame to dole out to the loan companies and the banks and the dipshits who weren't paying attention as the lunatics took over the asylum.

Who, however, do I really blame?

I blame the people who didn't read their loan docs. The people who didn't ask a fucking question. The people who decided that somehow, someway, arithmetic just didn't count in their own special case. I blame the idiots who thought that $30,000 income = $300,000 house. Locally, I blame the morons who weren't going to be happy unless they had 4 bedrooms and 3 baths and brand new through and through. I blame the people who, pissing logic and reason the wind, made a series of incredibly stupid choices and who now, on the far side of it, don't even recognize their own culpability.

I have given this a lot of thought, more even then the average bear. I've concluded that a large proportion, possibly a majority, of people who are at risk of losing their homes actually DESERVE to lose them. Yep. You heard me right. Most people who are in this mess put themselves there, and did so either purposely or with so little actual thought as to border on the absurd.

As for whether or not to circumvent the actions of fate and try to save these morons from themselves, I'm somewhat torn. A small part of me does feel bad for the offspring of these unholy unions of greed and stupidity--these kids didn't ask to wind up losing their bedroom because Mom and Dad blow at math. A much larger part of me would like to see something keep things based only on self-interest--I would like my home to at least RETAIN its value (although in my area price gains were much more modest so the crash is not so keenly felt). I like my little 30-year fixed rate cottage, but I do hope to sell and move in the next few years.

That all said, though, I refer back to my earlier points regarding attempting to affect this economy, and to this article, which explains why some people would be foolish to pay their loans no matter what.

Now THAT, my friends, is what we call an unforeseen consequence.

*Credit The Boy for this well-turned phrase.