Friday, April 04, 2008


Mortgage Crisis in Maryland is Over

One good thing about being an economic illiterate is that you can then play the populist with a clean conscience. While anyone losing their home to a foreclosure is a regrettable event, I’m still trying to figure out how mortgage companies MAKE money off it.

O'Malley Signs Foreclosure-Relief Bills

For years, while real estate prices were rising, our elected officials were coming up with more and more ways to spend the money the increased real estate was bringing to our state and local governments. You heard nary a peep from these people while all these bad loans were being made. Now that the borrowers – read: Democratic voters – are being asked to pay back what they agreed to pay back, all hell breaks loose.

Some of the new provisions sound good on paper but trust me – they will be paid for by future borrowers (“our children”?). Extending the foreclosure timetable merely means that the borrower has that much more time to not pay his mortgage and still maintain his residence (although certain exceptions to the extend timetable are in place). Chances are that additional time is NOT going towards making the place more presentable for the next purchaser.

Another quality innovation is the banning of pre-payment penalties. When I bought my condo, I willingly agreed that, in return for me not pre-paying 20% or more of my loan for the first year, I would get a very attractive first year interest rate. Now that’s illegal, meaning that if I were to try to buy a property today, that quid pro quo would not be available and I’d pay a higher rate. Thank you for saving me from myself, Annapolis (and that’s a bipartisan sarcastic “thanks” since the Republicans were on board with this too).

I leave it to our governor to capture exactly what all this means:

"There will no longer be in our state the draconian fast-track to foreclosure that has existed in the past," O'Malley said at a bill-signing ceremony in Annapolis. "People who unscrupulously try to prey upon the suffering and challenges of people who are economically vulnerable will face stiff criminal penalties when they try to profiteer on the backs of vulnerable people."

You mean like imply electric rate relief in a cynical attempt to profiteer with the votes of vulnerable people?

It cracks me up to hear about homes being "lost". They're not "lost", they're just re-sold. And hopefully to folks who can afford them and who will keep the promise they make when they sign on the bottom line.

And you're right, this will mean that Maryland mortgages will be even more expensive.
Ok, Sir Conservaterian, what then is the answer?
The answer, sms? Let the markets work it out.
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