Times Redefines "Homeowner"

No matter how hard you ignore them, unsigned newspaper editorials just linger on: regurgitating factoids, disgracing the newspapers they appear in, falsely claiming to speak on behalf of institutions that are themselves no longer coherent, vanishing unmourned up the cavernous wazoo of their own stare decisis, but somehow appearing again the next day, unbidden, unwelcome, unread.

Before "Foreclosures: No End in Sight," one of today's proems from the seventeen good people who collect paychecks on the New York Times editorial board, fades away, it's worth dissecting, just to see the fungus of dissembling and illogic that infects it like mold in an REO property:

Since [the Obama administration's anti-foreclosure plan]  went into effect in March, some 100,000 homeowners have been offered a modification, according to the Treasury Department, though a tally is not yet available on how many offers have been accepted.

That's a slow start given the administration's goal of preventing up to four million foreclosures. It is even more worrisome when one considers the size of the problem and the speed at which it is spreading. The Mortgage Bankers Association reported last week that in the first three months of the year, about 5.4 million mortgages were delinquent or in some stage of foreclosure.

The problem, says the ed board, is that 15.4 million "'undwerwater' borrowers" are "at risk of default" due to "a lack of home equity." Thus these folks have "no cushion to fall back on in the event of a setback, like job loss or illness."

It's good that some relic of shame still keeps even the Times from using the word "homeowner" in a paragraph that describes people who do not own so much as an eight-penny nail of their homes. But think for a second about what that "cushion" is: a home equity line of credit or refi to pay for immediate living expenses.

Given the fiscal performance of the papers' finance reporters, this view isn't surprising. But as a personal finance curative, this is pure Ebola. Your house is not a credit card. The last 36 months should have made this clear. Even if they hadn't, a house owned by somebody else is really not your credit card. The ed board "has long argued" that we can get around this second situation by "reducing the loans' principle principal balance," a move that would "restore some equity to borrowers" and "give them further incentive to hold on to their homes."

Never mind that this "incentive" is already gone, per the ed board's own scheme. If you've borrowed against your equity for life emergencies, you're back in the same boat, only deeper in debt. Can the same value (in a declining asset) be spent twice?

More to the point, why isn't the ed board objecting because renters (I hear there are one or two of those in the Times' hometown) don't have any positive equity in their properties? Renters have to make tough monthly payments too. Renters are equally subject to the vagaries of job loss; that's why the ed board, elsewhere in the same editorial, calls on the government to "make far more aggressive efforts to create jobs." So why should lenders have to give the gift of home equity to borrowers, when landlords are not required to give their renters ownership stakes in their apartment buildings? Why is an unemployed borrower-resident entitled to a "temporary program of loans or grants" when an unemployed renter is out of luck?  

I weep not for the renter. But it's worth noting that there are still millions of renters in this country: Renters are 30 percent of the population -- far more numerous than the four million or even 15.4 million deadbeats who claim the ed board's sympathies. Many of these people could become homeowners too, if the market dropped another 30 percent or 50 percent. Is there some reason (other than that declining is clearly what the market wants to do and thus is unacceptable) that the interests of 30 percent of Americans don't figure into the ed board's calculations?

It's not surprising that the ed board chooses to avoid the moral implications of its own claims. But the Times is also wrong in its utilitarian arguments. "There will be no recovery until there is a halt in the relentless rise in foreclosures," the editorialists inform us. That's not true. Real estate values have remained relatively flat during some periods of prosperity in the past. During the boom from 1960 to 1966, the median home price increased cumulatively by less than 10 percent, while the Dow nearly tripled. Homeownership would not be the norm in America if homes were never relatively cheap.

So why is The New York Times opposed to affordable housing? And why can't 17 people make an indefensible point more persuasively than they have here?

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  • ||

    why can't 17 people make an indefensible point more persuasively than they have here?

    "The Times editors will no longer suffer from retardation and emotional difficulties."

  • ||

    Obviously the editorial board has read Punch Sulzburger's business plan, and applied it to homeownership. In that case, the "real ownership" doesn't go to the people with the money but the people with the best special pleading. When you are a broke aristocrat, what could be better?

  • Shannon Love||

    The perverse thing here is that traditionally homeowners in a bind evoked sympathy because they had spent decades building equity in their homes and they could lose it all owing to a few months of rough luck. We value homeownership as a matter of public policy because homeowners are investors who create positive externalities for their communities by risking their money and time buying and maintaining a house. Renters by contrast risk little and produce fewer positive externalities. (That's the theory anyway.)

    People that have no equity in their homes aren't investors who risk money in ways that benefit the community. In fact, they are just elaborate renters. If they lose "their" homes, they are no worse off than a renter who has to move. We shouldn't confuse our sympathy with investor homeowners with these quasi-renters.

    We've made homeownership into a symbolic fetish but we've forgotten why we valued it in the first place. Just because someone is described as a "homeowner" doesn't mean they have the positive attributes that made "homeowner" such a powerful symbol in the first place.

  • ||

    The problem is that the Democrats want "affordable housing", but they need rising home prices to win elections. You have the interests of the urban poor butting up against the interests of the suburban middle class.

    This conflict has been papered over by extending loans on increasingly lenient terms, translating the meaning of "affordable" from the principal house price to the monthly payments on the mortgage. I.e. A home is considered "affordable" if you can keep making the payments on the mortgage. Regardless of the length of time that the loan is stretched out over, of the health of the lenders (fuck those dirty capitalist bankers anyway!).

    As long as the banks keep making loan terms more lenient, the Democrats can keep advocating pushing home prices up, thus satisfying both of their constituencies on this issue.

    Obviously, this modus operandi has already crashed and burned horribly. But the Democrats are so focused on how deregulation caused all this that they haven't noticed yet. So they're still mindless pushing both higher home prices and looser credit.

  • ||

    The real problem is that bureaucrats, politicians and newspapers alike think that they can stop the market from correcting and keep prices from going back down to more normal/appropriate levels.

    The problem, says the ed board, is that 15.4 million "'undwerwater' borrowers" are "at risk of default" due to "a lack of home equity." Thus these folks have "no cushion to fall back on in the event of a setback, like job loss or illness."

    What no one seems to publicly acknowledge is that the problem with being underwater (especially when you had little to no down payment and never had much equity other than appreciation) is that underwater borrowers have absolutely zero incentive to do anything other than mailing their keys to the lender a finding a place to live.

    Considering how long it takes to foreclose, anyone underwater should have ample time to find a new place to live and move your shit to your new place. Sign a new lease, and then use what would have gone to the mortgage to pay your rent and tell the bank to keep the house.

    Sure you'll take a hit on your credit report and it will take 24-72 months before any lender offers you a loan at an interest rate that makes sense...but so what? Use that time to scrape together a nice down payment.

  • D.A. Ridgely||

    Cue Jennifer to explain how only the wealthy own homes....

  • 24AheadDotCom||

    Helpful tip: do what I do and blame everything on Andrew Rosenthal, the head of their ed. board.

  • ||

    What's with the Norwich/UN Flag ad on the top? UGH!

  • zoltan||

    I'd consider owning one's own home a sign or indicator of wealth, but not a guarantee of it. I have low standards of wealth though.

  • ruffruff||

    "Renters are 30 percent of the population -- far more numerous than the four million or even 15.4 million deadbeats who claim the ed board's sympathies. Many of these people could become homeowners too, if the market dropped another 30 percent or 50 percent. "

    As a responsible renter that didn't enter the housing market, I couldn't agree more. It is not mentioned enough how we renters are asked to sacrifice for the greater good of homebuyer speculators.

  • ||

    Tim,

    Principal balance, not principle balance.

    I can't help it, I think about mortgages a lot.

  • ||

    exactly, ruffruff. i'm also a renter. i'll pay the higher taxes to help people stay in their homes; i'll be unable to benefit from lower home values because the government will artificially prop them up so that i still can't afford to buy; and as a result, i'll be renting for a long time.

  • ||

    Hey LoneWacko.

    Eat a dick.

  • ||

    How many of these "homeowners" being "helped" were previously helped by the CRA and other programs to get the house in the first place, thus allowing the Dems to lie about how those foreclosure rates are so low?

  • ||

    Isn't it neat how the renters pay money into the fund that keeps them out of the housing market?

    It reminds me of Orlando's "local first" program. All local businesses pay taxes. If they don't pay an extra fee to join the "local first" program, the city uses tax dollars to provide marketing and expertise to their competitors.

    The more government expands, the more it uses your own money against you.

  • ||

    The problem, says the ed board, is that 15.4 million "'undwerwater' borrowers" are "at risk of default" due to "a lack of home equity."

    What utter morons. Whether a borrower has equity in their house has absolutely nothing to do with whether they are in default on their loan.

  • ||

    Whether a borrower has equity in their house has absolutely nothing to do with whether they are in default on their loan.

    It might alter the odds of them just walking away from the loans, tho.

  • ||

    And why can't 17 people make an indefensible point more persuasively than they have here?

    Like the inspirational poster says, "Meetings: None of us is as dumb as all of us"

  • ||

    Need I point out that the "borrowers" DO own their homes? I sincerely hope the author is a renter-- surely someone educated would have read the paperwork associated with a home purchase before signing?

    They DO own the homes. The bank cannot sell the home out from under the owner, because the bank doesn't own it. It may be 125% mortgaged, but the borrower still owns it and can sell it at will (possibly with a huge loss).

    It's not like a car-- there the bank actually does own the car until it's paid off.

    With a home, you can sell it to me right now, though the loan will remain your obligation (and the bank can still foreclose and take my house). But it's yours to sell. RE investors do this all the time.

  • JB||

    The New York Times hates people and logic, but boy do they love that Obama cock.

  • Paul Thornton||

    Cavanaugh, you and I both know the tired trope offered in response to any argument that brings up renters' interest: "But this crisis affects us all."

  • Tim Cavanaugh||

    It may be 125% mortgaged, but the borrower still owns it and can sell it at will (possibly with a huge loss).

    Presuming that your pedantry is seriously meant, yes, you're right: Only you can sell the house, and the bank can't sell it until it takes the house back from you -- as it inevitably will if you are 125% mortgaged, unless they're being charitable and allow you to do a short sale, or you have some sucker lined up to pay your mortgage until the end of time.

    I consider the reality that you have negative equity in the house more important than the legal fiction that your name is on the title. A CEO can make decisions about a company, but that doesn't make him or her the owner of the company. My name is on the title of a lovely four-bedroom in the Commonwealth of Virginia, but I'd be a fool to say I own it in the same way I own this computer I'm typing on. And that's with a 60% loan to value ratio, which is considered healthy in the blizzard of bullshit that is the real estate market.

    There are real, moral reasons to take equity more seriously than leverage. Opposition to eminent domain (which is close to unanimous at this site) is founded on the belief that if you own something somebody can't just take it away from you. If we're counting crapola negative-equity (in which another party has the clear right under certain circumstances to take the asset away from you) as ownership, that moral basis goes away.

    Calling a dog's tail a leg doesn't create a five-legged dog, as Abraham Lincoln or Abraham Simpson said.

    It might alter the odds of them just walking away from the loans, tho.

    True, but RC's right to mock the Times. The full quote makes it clear they think (or more probably, think that their stupid readers think) there is causation here: "For 15.4 million 'underwater' borrowers - those who owe more on their mortgages than their homes are worth - a lack of home equity puts them at risk of default, even if their monthly payments have been reduced. They have no cushion to fall back on in the event of a setback, like job loss or illness."

    Principal balance, not principle balance.

    I'm stoopit. Thank you.

  • Tim Cavanaugh||

    Thornton, hasn't Eddy gotten the LAT to block reason.com yet? What's he waiting for?

  • ||

    Need I point out that the "borrowers" DO own their homes? I sincerely hope the author is a renter-- surely someone educated would have read the paperwork associated with a home purchase before signing?

    They DO own the homes. The bank cannot sell the home out from under the owner, because the bank doesn't own it. It may be 125% mortgaged, but the borrower still owns it and can sell it at will (possibly with a huge loss).


    I might point out that in Virginia (where I live) and several other states, we don't have mortgages, we have "deeds of trust," which are functionally equivalent but not exactly the same name. In states using deeds of trust as the vehicle for giving the lender a security interest in the property, legal title to the property is vested in a trustee, for the benefit of the lender and the borrower (in proportions that vary as the loan is amortized). Once the loan is paid off, the trustee conveys legal title to the borrower, who only at that point really "owns" the property.

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