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Real Estate Correction: I Don't Want Help From My Government

Today's Active Rain front page Featured Posts included this title, by Lenn Harley: MASSIVE FORECLOSURES COMING? THE MARKET IS SPEAKING LOUD AND CLEAR. You might want to read it, and the commentary it's attracted, before continuing.

By the time I read Lenn's post, almost eighty people had commented. One comment, by my AR friend, associate and blog subscriber Kate Bourland, (also a lender with a focus on eliminating debt and creating wealth) prompted this exchange:

Kate: "I think that what you are saying is that the free market system is broken. The free market brought on the current real estate crisis. Leaving it to the free market to solve will destroy our economy and the future of many people. True, wages have not kept up with the rise in real estate prices. This is a crisis that cannot be dealt with through cavalier free market speech.

The free market has failed, our political leaders have failed - bring me solutions. We in, the industry must stand up and bring real solutions to the market. I for one am tired of hearing free market BS. There is nothing free about our system when politicians can be bought at the expense of the electorate."

Me: "I understand Kate's frustration, but the free market system is not broken, it is asserting itself. The correction in real estate will be local. It will not respect neighborhood, position or income. Buyer/borrowers who have leveraged themselves to maximize wealth without the resources to ride out the market correction will go bankrupt. The government is neither the villian nor the savior of the situation. At the same time that Tucson's MLS numbers show existing home sales substantially up for the month of September, year over year, they show a correction in new home sales. While the average and median price of existing home sales is up for the same period, the average and median price of new home sales has dropped substantially. Today's Sunday Arizona Daily Star's headline above the fold reads "Foreclosure Surge Hits Every Corner of Tucson." I've got more to say, but this is beginning to turn into a post."

This is the rrrest of the story! The government of our republic is neither good nor evil. It is not a benevolent entity; neither is it a villian.

One wouldn't know that in this political climate. Both Republican and Democrat strategists seek to paint the other party as deluded at best, and deliberately evil at worst. Since the proliferation of 7 x 24 newscasting after the Twin Towers tragedy, even our news "programs" feature people talking over each other, trying to win ratings by shouting each other down.

None of this is useful to our growth as a free and independent nation in the world, nor is it useful to us as individuals, as parents and grandparents, or as business people.

The idea that "someone ought to do something" is what got this great nation rolling. The idea itself, however, did nothing. Individuals did something, often at great cost to themselves and their future.

Never forget that the signers of the Declaration of Independence were openly commiting treason against Great Britain and the King. Had they failed in their war of independence, they would certainly have been hanged. Had they been hanged, it would have been because they made a choice that resulted in that outcome.

Personal accountability and contribution must be the bedrock upon which our lives and careers are built. Did the rising market help your net worth? Is your home being foreclosed? In either case you made a choice to finance the acquisition as you did, believing that the market would continue to appreciate. Depending on your timing, you made a good choice, or you made a poor one. Still, the choice was yours. Good or bad, it was--is--yours.

I've been wealthy, and I've been bankrupt. In both cases, choices I made resulted in the outcome. I had, and still have the freedom to choose for myself. This has implications in every area of life and faith. I choose not to give that freedom away to a bureacracy. Elected officials are no smarter that we are.

And that's the real estate opinion of this Tucson, Arizona Mortgage Lender.

EDIT: Please read my related Lenderama.com post on accountability: Dead Until I Do Something

Mike in Tucson

content copyright Michael W. Jones
photo courtesy of Fotosearch.com

Posted by Mike Jones on 11/26/2007 01:00 AM

Comments (69)

Foreclosures in the ActiveRain Channel

real estate opinion, real estate, tucson, arizona, mortgage, mortgage lender, mike in tucson

Originally posted at: Tucson By Choice!: Real Estate Correction: I Don't Want Help From My Government

Post is included in group: Realtors®
Post is included in group: RE/MAX Active Rain Bloggers
Post is included in group: Silent Majority
Post is included in group: The Economics of Real Estate

69 Comments on Real Estate Correction: I Don't Want Help From My Government

NOV

2007

I like this post Mike in Tuscon :) I think we will be ok! I think if the government intervenes any more it can cause more messes!

Mike,

I remember my grandpa used to say, "it is up to us to do what we need to do so that things are done right". I learned at a very young age that we get to look at the options, choose then work hard to get things done right. I have carried that for many years. He was not a huge fan of the government getting involved to solve our problems. He liked decisions and action, not committees, studies and projects. We had some lean years and some fat years, but they were always because of our decisions and actions.

Wishing for the ability to worship freely, "individuals did something" and built this country on the foundation that "individuals, not governments" should be the main focus. Thus our freedom to choose and responsibility for our actions.

Great topic for debate... Great post.

www.RentonHomeFinder.com List and Sell, (freely)

NOV

2007

Mike- I wish, Oh, how I wish , the rating stars was here! I would give you a high 5. By far, this is one of the best posts I have read in a long time! I am so impressed. Personal accountability is the key. People decided to take out equity lines on their own, they decided to refi with their equity and go buy expensive cars and pay off CCs only to turn around and max them out again. IT is all about personal responsibility.

The free market does work. It scares me to hear Americans say that the free market no longer works. What on God's earth are they proposing instead? To be socialists like in Europe? Well, before they want that, they need to go there and live for a while! The grass is not greener.

The other alternative, is to have our forefathers turning over in their graves as Communism becomes the market of choice! The scary thing is that communists have always said they will take over our country without ever even shooting a bullet. The people will just begin to accept it little by little until they have agreed to relinquish all of their liberties and freedoms.

Mike, this is scary talk! This is serious talk! Why does everyone want government to do it all for them, to bail them out every time! Katerina

Hallelujah!! Mike in Tucson hit a HOME RUN!

All your stuff is good, but this one hit home. Personally, I bust my hump to make sure my bills are always paid in advance, and would never consider saying that the market is broken......B***S**T!

The market works just fine.....you saw my post on Lenn's blog. I made it clear where I stand, but I absolutely want to thank you for putting it out there.

My parents taught me well....."Take care of yourself, your education, your credit, and buy real estate." If you do these things, you will never have to worry about having to ask others for help. Gee, I didn't always agree, but I sure followed their guidance, and I'm very thankful I learned personal accountability at a very early age.

Mike - You have stated it the same way I tell my 16-year-old every day: There are consequences for your actions and/or inactions. Nobody put a gun to your head. If everybody else was jumping off a bridge, would you jump too just because everybody else was doing it? Everyone has to take responsibilities for their actions. As you said, some are good decisions and some are not. I'm so tired of the blame game.

And why on earth would we want the government to fix anything. It's been 2+ years since Katrina and we see how our government has "fixed" the gulf coast. WE got ourselves into this and WE gotta get ourselves out.

Mike- YEAH! Congrats on the feature! I just saw it pop up on top! This is so important it needed to be featured. Katerina

Mike- another high 5 here! Where has personal accountability gone? And it's not just about accountability it's about personal drive - to aspire for something more and better - or not...but having the choice and then taking the risk knowing full well there are rewards and potential losses that come with risk...I'm confused, isn't that one of the beautiful things of free market?

Jackie

Mike, I'm torn. I *see* both sides of this debate. What I see more clearly however on a day to day basis is NOT the foreclosures by investors/speculators but the foreclosures caused by job losses. How can we help those unfortunate people stay in their homes while they find new employment without some kind of government intervention?

Mike, the free market is not broken, we do not need the gov't to bail us out. We are correcting ourselves. It is hard in Michigan because of the loss of so many jobs due to the big 3, but it's not like the big 3 didn't have years to correct what was wrong, now they are and we will bounce back. Time to diversify our economy in Michigan both politically and economically.

Mike, We can make it on our own with the govenment bailing anyone out. Great post.

Mike,

Right on! Right on! Right on!

Who are you liking for President?

Lucky :)

I agree - I think that hard work - and smart work - makes it all work. I mostly want them to stay out of my way. But - I do wish my Goverment would stop making so many stupid decisions.

Well, of course. Well done.

The fundamentals of our political system have been fairly well corrupted by a Congress that will advocate for any interest that makes a sizable political contribution to their party or pocket. Political power for the purpose of plunder drives the Congress and this isn't the cabal I want to solve the financial mess in the housing market.

The original post that started this debate was not mine. I responded to a post that lauded the proposal of Governor Schwarzenegger (love that guy) for mortgage servicing companies to give relief to consumers with ARM mortgage products. My post proposed that we let the market work. Actually, whether some folks like it or not, the market is working. The market will work. Any interference will simply delay, favor one group over another or cause more trouble for the future financial health of all home owners.

There is not one single cause that Congress has foisted on the country that has not been abused. When government mandates give benefits and favors to one group, it inevitably comes out of the pocket of another group. I believe it would be very nice for the California home owners whose ARM products are going to reset that they not have to pay a higher mortgage payment. That would be nice for home owners across the country. However, I don't know that the California home owners with ARMs are any different from home owners in Florida, Nevada, Maryland, Virginia and Texas.

I can speak from experience about the ones in MD and VA, because I saw it happen. Buyers speculated and lost. They took ARM products knowing they would reset and counted on the continuing escalation of home prices to either refinance to a fixed loan if they were going to occupy later or sell if they were investor buyers. Many of these speculators were real estate agents and mortgage people who wanted to get in on the gravy train.

Real estate agents and loan officers thought they were making an investment that would pay off in a quick $50-100K in a year when the new home was finished and they could sell quickly. We also sold new construction to folks who would build a home, get an appraisal that was $100K higher than what they paid and then turned right around and sold and pocketed a cool $100-200K and put the money right into another property. Some speculated and lost. Some speculated and won. It all depended on the timing of when they purchased and when the property was finished. I know a couple of investment buyers who lost when they likely could have gained because, when new construction was delivered, they tried to sell it for far more than market. The homes that they purchased with ARM products are still on the market waiting for a buyer. Many have gone to foreclosure or have been rented. Should these speculators be given relief at a cost to others??

"NO ONE TOLD ME" is the famous claim of a real estate speculator whose investment went bad. Fact is, although it may be true that "no one told them", it is absolutely true that they received the Good Faith Estimate and the Truth in Lending statement. If they didn't understand the documents, they could have obtained counsel. There is no shame for a consumer to say "I don't understand". But, when they don't ask for counsel and ACT as though they understand and complete a transaction, they have no one to blame but themselves. I do not believe that this group of home owners can now say, "I want someone to save me from higher mortgage payments because I didn't know what I was signing". I believe that real estate professionals who are representing these buyers have a duty to make sure they know what they are signing. Show a buyer an amortization table early on and it may save them from financial disaster later.

Anything less than receiving the disclosures is mortgage fraud and the lenders should be prosecuted. Were consumers defrauded? Yes, but that's not the cause of most of the pending foreclosures in California or anywhere else. There are known areas where mortgage fraud existed, Minnesota comes to mind. That is not the problem in California or Maryland or Virginia or Florida where consumer speculation is at the root of the problems. In that consumer speculation, I include overpriced properties that are pricing properties out of the qualifying range of average home buyers. Sellers can't complain about the market when their overpriced properties don't sell. Agents can't complain about the market when they buy listings promising what they can't deliver.

The fact that 25% of pending foreclosures are resetting ARMs is not reason for the ARMs not to reset. Nor is it reason for the Government to intercede and take money from others to help the home owners who are in trouble. The home owners speculated and lost.

Areas such as Michigan where massive job losses are the cause of foreclosures are not in the group above. That is a more serious and more intractable problem. Michigan needs strong leadership to lead it back to prosperity. Knowing nothing of Michigan politics, I leave that to members who have been eloquent in their description of Michigan's housing problems.

Mike: Make sure Bryant Tutas adds your post to his compendium.

Lenn: Well said.

Kevin: If you want the government to do or stop doing something, get involved. Wishing won't do a darn thing! "If wishes were horses, then beggars would ride. If wishes were fishes, then we'd have some fried."

Lucky: I'll tell you next November 8th.

Aggie Kay: I think you meant to say "without." Thanks for commenting.

Missy: We have children and grandchildren in Michigan; people like you getting involved in the politics of the state will turn it around.

Kris, my friend in Detroit: My post "Dead Until I Do Something" on Todd Carpenter's Lenderama.com applies to Detroit and the Big 3.

Jackie: Thanks for commenting.

Katerina: Thanks for the encouragement!

Rhonda: You must be related to my mother! She said the same thing! LOL

Bill: Your parents did a good job!

Katerina: Special thanks for your comment. You sound like the voice of experience. If you grew up under a socialist government, please edit your comment and tell us your personal experience.

Gary: Your grandpa and I would have gotten along!

Renee: Thanks for being the first to comment. We're in agreement, you and I.

Mike in Tucson

Mike, Great post. I agree with your comment "In either case you made a choice to finance" You really are right on target

Mike, you know that I am a student of the Law of Attraction which would suggest that we collectively brought this market mess upon ourselves. We as a nation were focused on something that brought about something we don't want.

Now the job is to begin thinking, desiring, focusing on what we Do want. Ask, believe, and stop resisting, and receive.

Oh, I wanted to say.... Thanks so much for reading and commenting on Why I Unsubscribed from Your Blog

Mike, this is the best post I've seen written on this subject. I know that whenever something goes wrong in my life it's because of a bad decision I've made. My responsibility and it's not the government's responsibility to bail me out. My choice. My bad. No one elses.

But, I agree with Missy and Kris, a job loss can't be avoided when it comes to the Big 3 or any other large company that goes belly up.

Well said Mike! You are absolutely right. We all are accountable to our own actions and decisions. I find it humorous that people will blame the government for loosing their home to poor financing decisions. I've been on the receiving end of those consequences myself at one point. Believe me, Uncle Sam did not force my hand to sign those mortgage papers. :)

Excellent post Mike. Government intervention really doesn't solve the problem.

Hi Mike,
I'm with you on this. Getting the government involved is asking for more trouble. We do not need more laws, rules and red tape!!! Personal responsibility is what people need to understand and accept. I find many people want to blame others instead of stepping up to the plate and facing the result of decisions they have made.

Mike, great work. Great to see this exchange. I agree with your perspective and yet I feel a responsibility to prepare the consumer for the road ahead. The free market will do the correction but I have clients who are not prepared for what will come. I guess that is where my motivation comes from. Understanding all the dynamics are difficult and pulling all the pieces together in a coherent manner for our clients gets complicated and difficult. Your post, however reminds me and alleviates my problem in that area.....as agents we are responsible for understanding the market dynamics and conveying this to the consumer. It is a partnership however, and there is responsibility on both sides to become knowledgeable about the economy and how it affects the real estate market. I will endeavor to present the diversity of perspectives to my clients, but their conclusions remain their own responsibility. Thank you for your work and featured it should be!

Looking back at our home purchase at the height of the market in October 2005, we were takers of the locked 2 year arm. It just unlocked as I had expected it would. But we were prepared, because I asked the question. Even though I was in the business, am in the business, I feel comfortable that is the lender did not cover it, it would have been when signing loan docs.

As far as the market ever increasing... All things are temporary. I think that was a lesson by DAD!!!

Connor

Conner: Your Dad and I would get along! Do you mean "if" the lender...etc?

Jeanean: Your focus on educating the client will bolster your business.

Cynthia: I hear you!

Al: Ditto

Melissa: I have a different take on people blaming the government, and it contains no humor. Blame is a mechanism to take the focus off me and my responsibility and put it somewhere else. It eats away at really effective government like osteoporosis eats away at our bones, with the same potential outcome.

Linda: Regarding job loss, please check out my post Dead Until I Do Something. (Clicking the link will open another window.)

Dan: Implicit in the law of attraction is the need to act. Thought without corresponding action is impotent. I appreciate your comment.

Matt: Thank you!

Mike in Tucson

Mike, This is a very good post. I does all get down to personal reponsibilty. I made several good investments during the boom in 2005 and also made a couple that weren't too good. But they were all my choice to make.

OK I'm adding this to the resource post I put up. Really good stuff Mike.

ACTIVERAIN MORTGAGE/HOUSING CRISIS RESOURCE

Mike, thank you for this timely post. It's an unfortunate fact that life isn't fair, and the government's job is not to make it fair. But in many cases, it is the government's job to give life a chance to be fair. I believe they have already done that in this case by regulating required mortgage disclosures.

I agree that there's been a lot of personal irresponsibility among buyers and sellers. I don't expect the government to bail them out any more than I expect it to come and save me when I screw up. The flip side of responsibility, though, is our side. Anybody sell someone a house they probably couldn't afford in the last 5 years? I know that I did.

Sure, maybe I couldn't have stopped them...but I speak up now instead of just figuring, hey, if there's an approval letter, it must be OK. The real estate community (agents, mortgage bankers and brokers, everybody) has a responsibility to customers...after all, we are the professionals.

Let's make sure financial education is a positive part of our presentations, particularly to new buyers. We can be part of the solution here. If they still make bad choices, at least we know we've done our personal best for them.

Thanks again, great post!

Mike,

Well written and expressed commentary...whatever happened to the notion that 'we are the government'...'of the people, by the people, and for the people'? Thanks, Fran

Mike, You have stimulated more great discussion and hit the nail on the head...we are all going to be all right, if we just take the reality that is here today, look for the opportunities now and move on. And always have spotless integrity in all we do!

I agree with you and the theme of the thread. This is something that we've all been discussing. I think if you look back on the posts and comments on this topic, you will note that the majority agree with what you are also saying. Yet, you have put it in print so well.

Listen we are in a cycle. We are on the downside and I think turning the corner. This is to be expected. A government bailout is not the answer and definitely the wrong one at that. The market needs to go through its stages and it will correct itself in time.

But yes, like you said, these were personal choices. I think people have greatly forgotten about accountability except when it comes to others. It's an interesting social question, but it is obviously the times that we are in & what we have created. It's usually the other person's fault and we're pointing fingers. Many forget to look within themselves.

Marc: ...people have greatly forgotten about accountability except when it comes to others. That's so true. Thanks for commenting!

Joeann: the commentary usually outshines the post on Active Rain, in my opinion. Thanks for commenting.

Fran: If it's going to be done well, it will be done by "we the people..."

Judith: If I'm your buyer, I don't want you to tell me what to do, even if you believe I'm biting off more than I can chew. You're not my mama! LOL

Broker Bryant: Thanks for adding the link to your Resource Post!

Mike in Tucson

AMEN! I didn't read all the comments but I bet a lot of us agree that the thing that makes this country great is our free will and those who got themselves in big trouble may have been ignoring that little queezy feeling in their stomachs when signing up for that option arm. It's unfortunate that sometimes our decisions get us in trouble, but I'd rather it be *my* decision and not some government guys.

Mike - great post! Government intervention is NOT always a positive-

Mike, I think your post is great, responsibility is the key to life. Unfortunately people have forgotten to take responsibilities for their actions because it is easier to blame some one else, although it is wrong.

Regarding Linda's comment on Job loss, she is right, but I also believe that job loss is a temporary state, if again, the person is responsible they can find another job, it may not be the job of thier dreams but it will keep them on thier feet so they can keep searching for the right one, I can say this because I have experienced this personally.

Thanks for your post.

"Personal accountability and contribution must be the bedrock upon which our lives and careers are built. Did the rising market help your net worth? Is your home being foreclosed? In either case you made a choice to finance the acquisition as you did, believing that the market would continue to appreciate. Depending on your timing, you made a good choice, or you made a poor one. Still, the choice was yours. Good or bad, it was--is--yours.

Mike! Great Post!

Mike - Great comments and I happen to agree that the less government gets involved the better. Big government is costing the American public too much at this juncture. Just take a look at the fees and taxes on your phone bill or any other utility, not to mention an income tax system rigged to rob the hard working middle class in this country. I for one believe that the market will adjust without government intervention. Remember the early 90's when sellers came to the table with money? It happens, especially when we have spent the equity already no matter the reason.

Judy: Thanks for commenting. People are coming to the table with money again!

Anonymous: It's ironic that someone who likes my post on personal accountability commented anonymously! I usually delete anonymous comments, but I'll leave this one because it's just so amazingly ironic! Mike in Tucson

Ruth: Thanks for sharing your experience.

Barbara Jo: Thanks!

David & Lisa: Come back and take the time to read the comments! Like the filling in the Oreo cookie, it's the best part!

Mike in Tucson

Hi Mike,

Love the picture - it says it all. We do all have choices and cannot put blame on anyone for making those choices. We are all our own best advocates in everything we do. Having said that, Lenn's post was pretty much of an eye opener. So now what? That trickle down theory is bound to hit many who may have made the "right" decision at the time but are now being hit by the outcome of many who did not. We are all individuals and we are all "ONE". Thanks for a great post.

Lisa & Bob: "So Now What?" sounds like the title of your next post, and I'll bet it gets featured! Write it, post it, and we will come comment.

Mike in Tucson

I too don't think the government can step in and "save us". The market needs to correct itself. There were signs of things to come that were ignored, we saw what happened to the dot.com companies it was similar rise and fall.

Geeze Mike you're becoming an AR "star"!!

I do agree that personal responsibility is the is the reality but I also feel that the government should take some responsibility for promoting their "spending is patriotic" attitude. I also feel that Credit Card Companies -who don't require good credit- and encourage spending with abandon have contributed. Is there no accountability for entrapment? There has been an air on "Entitlement" in this Country for a generation...

And what of those who have been caught in he middle of this scenario because of job loss or Health Issues? They may still have their equity intact but are unable to liquidate because of "the market"...and are at risk of losing everything!

This is definitely "The Perfect Storm" and cannot be simplified by the term "personal responsibility"

Hi Mike, Add me to the list of those in agreement. Especially the line where you speak of both political party strategists trying to paint the other deluded. I think that the news right now regarding most anything has an end in mind, ie, the stock market, jobs, the real estate market. Thank you for the post.

Hi Mike, I don't try to be anybody's mama, but I don't think silence or complicity by an agent is the right choice either (not accusing you of either...actually kind of accusing myself of it).

Lots of issues here, from people getting out of school without any financial knowledge, to plain greed and irresponsibility, to whatever...just trying to point out our possible part in fixing the problem.

Enjoying the topic and comments, thanks again!

Mike,

Great post! I totally agree with everyone here. We are responsible for our own actions. We should not be blaming others for what we do. We have minds of our own. No one put a gun to our heads to do anything. WE decided to do things ourselves. The government should keep it's nose out of our business. The government should not be controlling us. That defeats the purpose of democracy. My parents and grandparents moved over here to get away from Communism. It seems like Communism is making it's way over here. My grandparents must be rolling over in their graves. No wonder we keep paying higher taxes to the government. We, the people, are baling others out of their problems. When will this ever stop. Our pockets are only so deep. Maybe we should have another Boston Tea Party.

Great Post! I am so tired of hearing about how bad the market is but no one taking responsibility over it.

Before I was in Real Estate, I worked for a financial institution. During my training process there, they spoke of a very basic financial principal, the bigger the risk, the better the return- I am am sure that their is a better name for that somewhere. They put real estate as the most risky investment that we can make.

Back in the 90s, this took me a back. My family has been in the real estate business since 1980s. The 90s were so strong and solid that the thought of real estate being a risky investment shook me and stayed with me.

We have been fortunate that real estate has been so stable. The stability has been falsified by the actions of the secondary market, the fed by artificially low interest rates, which has allowed builders to build up way too much inventory, mortgage companies to approve people with no credit, no money, and part time flippers to come into the market to try to make a quick buck.

Some one does have teh pay the piper for this. Unfortunately it will be with several people in the real estate business no longer being here in 2 years. Real estate needs to become more of a professional business with well qualified agents to serve the public with their housing needs.

If anything is coming out of the real estate market right now is that for who ever survives, we will be better, more educated, and better able to serve the public. I plan on making it through and no just surviving this market, but thriving in this market.

The real estate market is changing with these market conditions and the new technology. If you don't plan on chaging with it, then perhaps you should find a new career.

MIke,

I have been watching you climb the rankings here in Tucson. That was one of THE most right on POST's I have ever read on Active Rain. Great Work my man.

Jeff Wilhems www.TopAgentToolbox.com

I totally agree with you!!! I have seen a huge number of people who refuse to take personal responsibility for their choices. I talked to a young man who wanted me to help him buy a house that the monthly payment was 1 1/2 times the amount of his gross income each month. He got mad and won't talk to me because I told him the truth. He cannot buy the house, even if he is going to rent out rooms to his friends.

My goal is to be very clear. My clients know exactly what the terms of their loans are when they sign papers.

I had an option arm. It worked for me for a while but I just this month refinanced out of it. I did the option arm when I was a brand new loan officer. I think I sold myself a bill of goods on it. Again, my own fault.

Take responsibility, please!!!

Karen

You made a statement in where you say"Personal accountability and contribution must be the bedrock upon which our lives and careers are built". This is one of our greatest problems we have in our society. No one wants to take responsibility for the things they do. And then to think the government will bail us out. Not a chance. There will be "quid pro quo" here if that really happens. There again government will not do it for "free". Take responsibility for what you've done to yourself. Figure out a solution. Reap the reward of saving yourself then dont get into that mess again.

Robert: Government solutions favor one group at the expense of another. It can't be otherwise. That's why I vote to limit legislation and create consequences for bad behavior.

Karen: Thanks for sharing your experience.

Jeff: Thanks for commenting. Let's grab a cup of coffee sometime.

Angela: Your comment is better than the post! Thank you!

Brigita: I appreciate your comment. Rhetorical questions won't move us forward, though. This will stop when committed people like yourself run for office and represent their constituents. Run for local office!

Judith: Thanks for coming back! I'd encourage you, too, to run for local office. People would support you, and you'd be in a position to make a difference!

Pat: Thanks for commenting!

Joan: It's because of people like you that I've attracted a readership. Thank you. I heard on the radio as I was driving this morning that "In the Black" Friday saw an increase in holiday gift spending that, despite the tight credit market, is up 10% over last year. Who would have guessed? Every interest group, whether political or business (like NAR) has a political ax to grind. Take them all with a grain of salt; not one can replace the bedrock of the American Dream. That bedrock is, and will remain, personal responsibility. My elected officials know where I stand on issues. I tell them what I think. The State of Arizona, where I live, does not license Loan Officers. No education is required to become an LO. No ongoing education is required to make sure they are up to snuff on banking or credit issues. No education regarding FRAUD and fraud prevention are required. That sucks scissors! As a result, I met last week with the individual who wrote many of the mortgage banking and mortgage broker laws which have been adopted in our legislature. She is retired, but a powerful lobbyist in Arizona. We in the industry are actively pursuing similar requirements for Loan Officers to those required for Real Estate Agents. The point is, we are active in our politics. Please forgive the rant.

Christina: Thanks so much for commenting.

Mike in Tucson

Mike - I suppose your post would suffice. Of course, the dozens that have gone before you saying the same thing should have sufficed.

There seems to be a need to discover that "silver bullet" inherent in people that work within our industry. The same people clammering for some magic government program to fix the problem spent time complaining that lead generation companies were crooked in the past.

We have never accomplished anything in this country waiting for the government to intercede.

John: And I suppose you're right! What worries me are the people outside our industry that think we should take a bullet for them! (The word intercede means "to pray." Government praying? Don't hold your breath...) LOL Thanks for commenting; come back any time!

Mike, On a purely emotional level I agree with you. We should all take responsibility for our actions, and if we take responsibility there has to be accountability, so let the chips fall where they may. Logically, I know that before this whole mess has run its course the Government will have to step in, and the sooner it does, the better we all will be.

I don't think we have seen the worst of this yet. Right now the damage has been mostly confined to the Sub Prime, Alt A and to a lesser extent the Jumbo products. If you have good credit you are going to be able to get a loan. But last week Freddie Mac announced that there loss was much bigger than expected, and that they will need more capital to continue to operate. Freddie and Fannie are looked at as safe as can be. What does that say if they are in trouble?

Right now the spread between bonds and mortgage backed securities is historically huge. This means that mortgage rates have hardly budged as bond rates spiral steadily lower. That is because mortgages are considered much riskier than before. What happens if Freddie goes out? (It seems inconcievable, but much of what we have seen seemed inconcievable not that long ago.) What happens to the ability to get a mortgage? If it gets harder to get financing, this means fewer people will be able to buy a home and prices move lower.

The other part is psychological. We are not in the panic stage yet, but we could get there quickly if any of the major players (Wall Street Houses, major banks) go out. We talk about personal responsibility, but our whole economy has become Enronized and too much of our value is in paper profits. We need leadership and some action, both symbolic and real, that will give consumers and the markets confidence that our system is in good shape.

We need leadership, but I don't have great hopes that we will see it. Sorry for the long rant.

Personal accountability and contribution; amen brother!

Great article Mike!

The government paying consumers debts- heck they can't pay their own debts. We're in a war that costs trillions that we can't afford we can't afford to bail out speculators and flippers and those who make bad financial decisions. Life is tough.

Free markets works unfortunately most Americans think "free Market" means they get everything for "free" Something as important as a home is definately not free. If it's worth keeping it's worthing paying for. Sacrafice something else to save your home.

I was brought up there is NO free Lunch. Save for a rainy day. The American Dream has become the American free ride.

Mike, nice blog and I respect your views. However, you were talking about homeowners. What about the lenders. If the banking industry falls, then won't all notes be excelerated like what happened to send this country into the Great Depression. And how will the stock market react? Homeowner correction is one thing, but what if our lenders all fail?

Mike, thanks for the thoughtful commentary. We lost plenty in the hi tech bubble so we fully understand calculated risk. First and foremost, these should have been homes not investment vehichles. Save for them and treat them as valuable possessions.

I shudder to think about the above commentary. If we lose the secondary market the landscape changes so dramatically and I fully realize I don't have the fiscal understanding to know how to fix it.

Mike. Great post. I agree with some points, and disagree with others.

First, if the government gets involved to "help" they most certainly will curtail the exact steps that NEED to be taken in order to fix the mess.

To say that government is neither good nor evil is a little weak. The government is made up of people. Some good... others, not so much. But, as people are destined to do, those in government tend to look for ways to accumulate more power. Politicians are especially prone to this little malady. And, "helping" is one of the best ways to do it.

I won't dive into Libertarian philosophy, but there are a lot of examples of the government "helping" and making the situation worse... or just spending a pant-load of cash for no benefit.

I see a lot of mouths in DC watering at the prospect of helping now, and all of the power that could be gained.

Libertarian Lane: My philosophy is a whole lot closer to yours than you may think! I sure appreciate your comment. At the congressional level, it seems most of our elected officials believe that since God helps those who help themselves, they're free to help themselves to my wallet. The title of the post says it best: I don't want "help" from the government. Let the market sort itself out. Thanks for a thoughtful comment.

Josette: It's all going to turn out all right if we stay on top of events in the market. The ten year bond fell substantially below 4% today, and banks are scrambling to lower their mortgage rates.

Mark: There are possibilities, and there are probabilities. Possibilities are endless. Probabilities are a much narrower set of numbers. Bank failures to the extent seen in the late 1920s fall under the heading of "possibility." Ain't gonna happen.

Mitch: Remember that every penny of debt the government pays off, it pays with your tax dollars and mine. The government is always dead broke; it has no money of its own. The best we can get is to have debt paid off. That happens when GDP grows. The American Dream hasn't vanished. It's still out there to be claimed by hardworking individuals who are out to stake their claim, not take it from someone else.

Paul: Thanks!

Peter: When the ten year bond yield fell below the support level of 4% today, most of my lenders improved their pricing mid-day to improve market share. Demand is still there. I'm still funding purchases for my REALTORS. The sky may yet fall; I don't know. I know I'm not running for cover.

Mike in Tucson

Mike- Many years ago, I lost a house because of personal difficulties. There was no one there to bail me out and I survived to be stronger because of it. While I'm sure there were buyers that were taken advantage of, my guess is that most homeowners didn't ever expect for the interest rates to rise. They continued to take the equity out of their houses every time they increased in value and when the rates went up, they could no longer make the payments. I don't believe a bailout is the answer. It is called taking personal responsibility for your actions. Great post and wonderful comments. Keep it up!

Mike, ain't gonna happen because the Gov will bail them out.

Good spot. Good info. Food for thought. Thanks for posting.

NOV

2007

Good post Mike. I SO agree with you. I would caution people looking to be be bailed out to be careful what they wish for. Too much government involvement CAN be a bad thing.

Rita: Thanks for adding to the discussion!

Bob & Carolin: You're welcome. Thanks for visiting and commenting.

Mark: Let's stay in touch; we disagree on this one.

Jennifer: Thanks for telling your story. Come back any time!

Mike in Tucson

Mike ... Excellent read and commentary. Personal responsibility and professionalism would have stemmed this crisis in the beginning. First, personal responsibility ... not lying on your mortgage application, not stretching your budget to pay for things you can do without. Second, professionalism ... as real estate agents and mortgage lenders we need to advise our clients about what they can expect and it is our job to "balance" their emotions with reason and strong rationale.

Again great post

Mike. I don't doubt that our philosophies are close. I've found that almost everyone is a libertarian, even if there are only a few that are Libertarian. It's that "World's Smallest Political Quiz" (Google it). One a one to one level, when asked about specific things, people tend to want to let the market do its owrk, and let people do theirs... except for a couple of things. Those "couple of things" are what separate the Ds, Rs, Gs, etc.

On this one, I am hoping for "Beltway Gridlock".

Top-notch post, Mike! Have enjoyed reading you here on AR; my appreciation for your posts continues to increase.

Brian Wilson, Zolve.com

From the aborted buyers perspective :

What about all of the real estate agents (and Realtors) and mortgage brokers/bankers who excessively pressured more than just a few people into loans they new those people could not afford? What personal responsibility does a Realtor have to putting the brakes on a buyer who should not be buying?

My circumstance two years ago:

To say that I was pressured by a real estate agent at one point would be an understatement. I recall a mortgage broker and a Realtor two years ago telling me to just refinance in two years and I would be fine. The mortgage broker could only approve me for $115,000, but with an ARM I could have received up to $125,000. Which by the way is not much money for the Austin, Texas market if you want to live in or near down town. Had I taken their advice or been pressured into a decision I probably would be declaring bankruptcy now.

This is not to say personal accountability should be shirked or that I disagree with the poster Mike. I actually agree with Mike. In my case I am very happy I trusted my own research and knowledge and did not purchase a home at that time. I went looking to buy a home since I had been employed for two years and was making $40k a year. After looking at my credit and being honest with my debt-to-income (DTI) ratio I bailed. I admitted to myself that I was not ready to buy a home. I was not willing to suffer an 80/20 loan with 9% on the first 80 and 14% on the piggyback 20. I told myself screw it I can save the 20% down to have a better negotiating platform, better home choices, and by that time my credit will have substantially improved.

So what do you all think?

Should Realtors put the break on buyers who have shaky finances?

I've said it on other people's blogs and I'll say it on YOURS: You "free market cowboys" have rocks in your head. Not popular but true. Want socialism? GREAT WAY TO GO ABOUT IT ! No market is truly free. That is a fallacy. An unfettered market is simple capitalistic anarchy. A few on top will call the shots and make the money at the expense of everyone else. A free market like that is a recipe for revolution. You let the US slip into a bad recession or worse - a DEPRESSION, the free market will be GONE because of the backlash. The masses - whom you are now blithely consigning to foreclosure - will demand a change and the supply-siders will be SOL.

We need to look at policing OURSELVES and stop pointing fingers at the very customers and clients we made commissions off of over the past few years (I say "we" even though I wasn't a Realtor until the second half of 2005.)

Look at what happened with the Great Depression. My late mother knew an Asian diplomat. He was a capitalist, but he understood a very important concept that is missing here. This was during the late 1950s- early 1960s. My mother asked "Why aren't the Chinese intereseted in FREEDOM?" His reply was "Don't ask someone with an empty rice bowl about freedom. First you have to fill the rice bowl." the communists DID fill the rice bowl - where capitalism couldn't. Want another example....look at our health insurance. That's an example of free markets run amok. Actually the market (lobbyists) are writing the legislation...how's that been working for you?

Sam: You're making my point. "...a buyer who should not be buying?" We're not talking two in the morning, nearly passed out drunks on a barstool saying "Just one more, bartender!" A home is not an impulse purchase. That's why there's no 3 day right of recission after signing papers.

Brian: Thanks for the encouragement!

Lane: I'm with you on the beltway gridlock. Rates improved today, even with the market going back up. Things are moving in Tucson real estate.

more later, folks...

Mike in Tucson

NOV

2007

Hello Mike,

I know I was making your point. Like I said in my earlier post I agree with you on this issue. I wanted to emphasize that a buyer still has a choice and can walk away; as I did. I wonder why this is so hard for others?

Which now leads me to my concern:

I will be entering the real estate business soon as a new Realtor. My concern is that I know of one person, an associate of mine, who allegedly sued his mortgage broker and real estate agent for predatory actions after his home got foreclosed upon. This is a concern of mine. As you previously quoted me "...a buyer who should not be buying?" How is a real estate agent/Realtor (agents) held legally liable for their client's decision to purchase a home above their means? Perhaps this is because of fiduciary responsibility? An agent must do what is in their clients best interests. I could envision a lawyer getting a judge to see that logic. "Your Honour the agent did not act in the client's best interests when he allowed the client to buy this home." Do agents have a responsibility to protect our clients from themselves? This sounds absurd, but a legal argument based on the agent's fiduciary responsibility may exist. Of course the Realtor could respond that the client signed documents that they should have read, but litigation is time consuming and expensive.

I am thinking I will consult my attorney and draft a document for all my clients to sign that states they are aware of the financial responsibility (especially if they use creative or non-standard financing) they are pursuing and indemnify me if for any reason they fail to be able to pay for the property after purchase.

On the issue of government intervention in foreclosures:

My frustration with this issue is that I am responsibly saving and waiting to purchase a home, but now I hear that the government is going to step in and bail out some of these other people who did exactly what I did not do. So effectively I am watching government reward irresponsibility* (at taxpayer expense) while I will wait another 5 to 6 years before I will realistically be able to consider buying a home.

* I know that not all of the people nationwide are being foreclosed upon due to bad decisions. Some people just had a run of bad luck, lost their jobs, suffered medical issues etc. I am criticizing those who knowingly purchased a property that was realistically above their income (both flippers and non-flippers) and sought out creative financing to accomplish this act. I also criticize those who can not control their credit card spending and are losing their homes for that issue (FYI: My DTI is due to $77k in student loans).

DEC

2007

The market is absolutely correcting itself. The ways in which predatory lenders lent their money is no longer possible. The credit industries have constricted and there is not more place for dirty lenders. I agree that the government is not the devil, but I definitely think that they should stay out of this mess, they will only make it worse. Time will correct everything that needs correcting.

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