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alternative draft letter

marinite — Mon, 02 Apr 2007 23:28:21 CDT

[Today's Date]

Dear [Representative's Name]:

I am writing to voice my opposition to the proposed legislation that would effectively result in a sweeping and carte blanc financial "bail-out" of homeowners defaulting on mortgage loans during the so-called "subprime meltdown" in the mortgage industry.

While I appreciate that the intention of such legislation is to promote and provide for affordable housing, current proposals are grossly inequitable in the manner by which they seek to address the issues. They fail to recognize that there are a great many people other than those at risk of foreclosure who have been severely impacted by what has occurred and is continuing to unfold in the real estate market. The viewpoint that the only “victims” in this crisis are those at risk of foreclosure and that their plight is largely attributable to predatory lending per se is myopic, to say the least.

Approximately 30% of the US population are not current homeowners. Their desire to live the American dream and become homeowners has been preempted by the escalating housing market of recent years as prices were driven to unsustainably high levels by the introduction of “novel” mortgage products and their euthusiastic adoption by many borrowers who used them to engage in bidding wars. It is now widely recognized that, as a result, prices are out of line with fundamental value. Many of these aspiring homeowners were faced with the choice of either buying with a “novel” and risky mortgage product or waiting for the real estate market to cool and for prices to return to levels consistent with fundamental value. Other, younger segments of the population, have been priced out as increases in their earning power lagged behind the escalation of prices.

Now, as a result of the events of the last 3-4 years, we are witnessing a correction in the housing market. This is as it should be, in order for prices to return to levels consistent with fundamental values and incomes. The affordability of housing over the long term, for all Americans, is dependant upon a correction occurring unimpeded by government intervention that favors one constituency (those at risk of foreclosure) over another (aspiring homeowners). Make no mistake about it, a sweeping “bail-out” of those currently at risk of foreclosure comes at the expense of aspiring homeowners. A “bail-out” will act as an artificial prop to current price levels as the normal mechanisms for price correction, such as negotiated short sales and foreclosures, will have been subverted. If such legislation is passed, aspiring homeowners will remain priced out of the market for many years to come and particularly so as the “novel” mortgage products that allowed those currently at risk of foreclosure to buy become increasingly unavailable.

While it is true that instances of predatory lending occurred over the last few years and efforts should be made to identify those responsible and to compensate true victims, it is unconscionable to presume that the vast majority of those currently at risk of foreclosure are “victims” of illegal practices per se. Predatory lending occurs when the lender fails to disclose the terms of the loan. There is, and has always been, a presumption of responsibility on the part of the borrower to understand the terms. The simple fact that many people may not have exercised due diligence in their responsibility to understand the terms of their mortgage simply underscores the need for better financial education, perhaps through FHA or other existing government programs.

I am appalled by the narrow and inequitable viewpoint embodied in current legislative proposals to address the issues associated with the problems in the mortgage industry. What is needed are proposals that treat all individuals equally and provide for the long-term afforability of housing for all Americans, whether currently at risk of foreclosure or not. I urge you to oppose the current proposals and to offer and support alternatives that are fair and equitable. I will be watching very closely to see how you are representing my interests in this important matter.

Sincerely,

[Your Name]
[Your Address]

Home

marinite — Sun, 01 Apr 2007 16:59:26 CDT

Welcome to the Marin Real Estate Bubble Wiki.

The intent of this site is to allow invited readers of the Marin Real Estate Bubble Blog to collaboratively edit content that relates to real estate, especially Marin's.

Currently, the only active project is a letter to our elected representatives stating opposition to possible mortgage bail-outs. Click here to go to that letter (or here to an alternative letter) or find its link in the left-hand margin of this page.

If you would like to contribute to this site, send an email to Marinite, the administrator of this wiki, and request membership.

Letter Against RE Bail-Outs

marinite — Sun, 01 Apr 2007 16:55:20 CDT

Note to Visitors: If this letter fairly represents your thoughts regarding the possible government bail-outs of lenders and borrowers due to the "subprime meltdown" that has been in the news lately, feel free to copy it to your text editor, customize it to better express your thoughts and feelings, and email it to your elected representatives. Or better yet, print it out, sign it, and then snail-mail it. It would probably be a good idea to mail it out multiple times. Here's a list of senators and their contact info.

Don't like this letter? Take a look at an alternative letter.

[Today's Date]

Dear [Representative's Name]:

I am writing to inform you that I am absolutely opposed to any legislation that would result in the financial "bail-out" of mortgage lenders, banks, or borrowers due to the defaulting on mortgage loans that is occurring during this so-called "subprime meltdown" in the mortgage industry.

If lenders did not do their prior due diligence and risk analysis before granting a loan and as a result lent too much money to a borrower who later was unable to repay that loan, then whose fault is that? It's the lender's fault. If a borrower took out a loan that they were unable to repay, that they possibly lied to get, or that they did not understand or read carefully, then whose fault is that? It's the borrower's fault. It's a matter of personal responsibility and integrity.

Ours is supposedly a free-market and is one of the reasons why America is the great nation that it is. But government sponsored bail-outs are not how free-markets are supposed to work. Let the free-market sort things out on its own.

A bail-out is also hypocritical. If someone took out a mortgage loan 10 years ago, before the housing mania gripped this nation, and they default on their loan due to illness, a divorce, etc., should they be bailed out too? No, of course not.

Is a tax-payer-funded bail-out fair to all those prudent people who did not fall hook-line-and-sinker for the housing speculative mania hype, who saved their money instead of banking on housing, and who did not refinance into a "toxic loan"? No, of course not.

Is the U.S. government now in the business of "privatizing profits and socializing risk"? I sure hope not!

If this country does bail out lenders and/or private citizens, what message are we sending? What we would be saying is "it's ok to take on risky investments and eschew personal responsibility in the event of failure because Uncle Sam will always bail you out". This is the wrong message to communicate. Furthermore, such a bailout would only encourage more credit abuse, and extend the severity of the housing correction.

I agree that if someone was defrauded by a lender, appraiser, and/or a real estate agent and they can prove that they were defrauded, then they should be entitled to recourse. But a general bail-out of either lenders or individuals who, for one reason or another, got caught up in the real estate mania is abhorrent.

I will not allow my hard-earned tax dollars to be used to bail out defaulting borrowers or failing lenders. If a tax-funded bail-out does come to pass, I guarantee you that I will not support you the next time you are up for election.

Sincerely,

[Your Name]
[Your Address]