New Haven Independent

Posted by: on whalley | December 6, 2007 2:01 PM

Am I the only one who still doesn't feel bad about the families who "didn't know better" or the lenders being out their investment?

Somebody has no or poor credit history, no down payment and grosses an income at or below the poverty level has no way to purchase a house in New Haven as the real estate around here stands obscenely over priced.

And, as the borrower, if you don't understand the terms you have no business signing a document that promises you will repay a sum of 300K plus dollars. Hell, I can't commit to a cell phone plan because I refuse to squander $30 let alone $300K. Do you have no blocks in place? No butterflies in the stomach or nervous reservations?

This should be seen as a good thing. Those being "hurt" are supposed to learn a valuable financial lesson, those with the sense to not agree to a $300K mortgage on a $30K annual income for a property that is so obviously sitting on an inflated price tag (the bars on the windows should be a dead give away) and have instead saved money and researched properties here and otherwise should be rewarded by a sea of foreclosures and an overall collapse of real estate prices to create the buyers market of the century.

No, instead we get tax payer funded bailouts, artificially maintained bloated prices, proposition of government reinforced guidelines set to eliminate homeownership as a possibility for nearly every person earning middle-class wages and less and not one person learns a thing. Well, maybe one person. I've learned yet another reason to distrust government.

Posted by: cedarhillresident | December 6, 2007 2:06 PM

ok ok lower taxes and the whole city can be saved. It is not just the subprime! It is all of us!!

Taxes sky rocketing
gas...heating and car
UI
Food

All doubling in the past year!! The subprime may be effecting 4000 households but the taxes are effecting all of us. PLEASE HELP EVERYONE.

Lets not mask the fact that alot of people will be leaving in the next year or two because of the tax hikes for the next four years not subprimes.

I did do one of those subprimes to...but my guy was honest... he said get it to reestablishes yourself and before 5 years time MAKE sure you refinance and I did. And I got a good rate that I locked in. Thank goodness.

Posted by: robn | December 6, 2007 3:11 PM

On Whalley,

If you lack compassion for others, you should at least start feeling sorry for yourself...when the doo-doo hits the fan and banks and hedge funds start eating it, it will seriously affect Connecticut's tax revenue and therefore New Haven which, by virtue of anachronistic non-profit status for huge cash-cow corporations like Yale, is beholden to Hartford for almost 50% of its budget via PILOT reimbursements.

Posted by: D | December 6, 2007 3:15 PM

Things are getting pretty shaky right now. Houses in Fair Haven are now selling below their former appraisal value. When this is over, East Rock, Morris Cove, and Westville will have to pony up with higher taxes....again...

Posted by: on whalley | December 6, 2007 4:07 PM

@ ROBN and D

Are you two Aldermen? One of you the mayor himself perhaps? I notice the simple notion of CUTTING SPENDING is just overlooked I figured you must be politicians of some sort.

If you or I overspend do we run around threatening our neighbors with violence and imprisonment to make up the difference or do we just not spend so much? We do one thing, the government another. Guess which does what.

This scenario is just what the city needs to be reminded of what fiscal responsibility is. I say "reminded" because though I have not seen it in my life or my parents lives I am sure at some point during this city's life it was managed in a sound and responsible manner. The city needs to be chocked financially just as many of these lenders and borrowers do. Sadly, I don't believe it will be allowed to feel the repercussions of decades of poor management as it, along with all the others who need this lesson, will be bailed out at the expense of those foolish enough to run their lives with a little propriety and responsibility.

Besides, current taxation policies, out of control crime and inflated costs are responsible for a far greater flight of the tax base than this "crisis" could ever be responsible for.

Posted by: charlie | December 6, 2007 4:59 PM

The problem isn't the loans. It's the fact that people are clueless as to the amount of "social waste" in our society as a whole (with billions being used to subsidize suburban sprawl and roads, at the expense of our communities), and have unrealistic expectations about the "American" standard of living. This generation is going to have to repay the mistakes made over the past few decades, and what it will require is pretty simple:
1) Massive cutbacks in standard of living. People can't expect to be able to afford a 2,500 SF house, prepackaged food and two cars anymore. Think a 400-700SF apartment, beans for dinner, and a few bus passes for a family instead. Hopefully that's not too optimistic.
2) Raise taxes on the ultra-rich. There's no reason why a CEO should be making 27 times what the President of the United States makes, or 1,000 times what a family makes. The increased pay primarily goes to "social waste": yachts, air travel, 20000SF homes.
3) Stop subsidizing suburban sprawl and roads. Raise the gas tax to $7.00 per gallon and use the revenue to fix our bridges and invest in real infrastructure, like mass transit, instead of infrastructure/commuting patterns that just creates more and more "social waste." Stop giving Federal tax credits for mortgages: this is primarily a subsidy for more suburban sprawl, i.e., "social waste." Stop funding the wars, the money for which primarily goes not to Iraq, but to defense contractors in the United States and suburban-sprawl-type military complexes: forms of "social waste."
4) After the above is done, use the savings from the reduced "social waste" to better fund our schools and communities. Then we can hope to begin increasing our standard of living again, instead of seeing hundreds of billions of dollars of our money being sent to Dubai, China and the bank accounts of rich people every month.

Posted by: Fedupwithliberals | December 6, 2007 5:22 PM

You wanna know how this whole mess started? Flash back 4 years when you were extorting banks to make loans to less than creditworthy people for political purposes. Don't blame financial experts with the common sense to know who is and who is not a good risk. Point the finger to big spending , feel good political leaders such as yourself!

Posted by: ontheotherhand | December 6, 2007 11:54 PM

It will be interesting to see what the local flavor is on subprimes. Since home ownership is not up, one possible area where they could hit is people with medical expenses they could not afford to pay so they refinanced homes they have had for a long time. Another example is that in national figures, I have read that about 15% of people who have subprimes have good enough credit to qualify for better quality mortgages, but because the brokers could make more money on the subprimes, they represented that those terms were the best they could do.

I think it's important to get the actual facts before waxing self righteous about who is hit by this crisis and why.

Neighborhoods in which foreclosures occur can suffer from blight, can suffer a change in the neighborhood quality as crime moves into abandoned areas, and regular citizens who pay their bills and taxes and mortgages can have the value of their homes drop by 5%, I have read, if there's even one foreclosure nearby.

Thus, it IS everybody's problem when numerous foreclosures occur. Add to this the recent news that municipalities and retirement funds may have investments in subprime mortgage investment vehicles, and it clearly is not "someone else's tough luck."

Posted by: Esbe | December 7, 2007 12:17 AM

Fedup -- the notion that Wall Street bankers funded a couple of trillon dollars of subprime loans because they felt bad when liberals scolded them is silly. If you are fed up with liberals, then educate yourself on how capitalism works (hint: bankers are in it to make money, not to make liberals happy.)

And On Whalley: when abandoned, foreclosed homes start showing up near your house, it is yourself and your neighbors you might start feeling sorry for. I don't feel at all sorry for the Wall street guys. But a fair number of folks were fooled by lying mortgage brokers, often folks who re-financed out of good mortgages into bad. We are all going to suffer for those lies, as the economy slows.

Posted by: Dean Moriarty | December 7, 2007 12:34 AM

I have to own up to this. I made a huge mistake. Some twenty years ago my wife and I bought a house in New Haven. A couple of times we re-fied and now we are down to about 5.25%. Not many years from now we will be through with the mortgage, free and clear. Twenty years ago I spent many a night on the phone with the real estate agent (a very informed and intelligent individual, who also taught real estate at a local college) and I drilled him on every aspect of what I was about to get into. From locking in a rate, to inspections, through PMI obligations, to FHA rquirements. Property tax rates, sewer use fees, etc. Through neighborhood evaluations, to future cost considerations, to the benifits of adjustable or fixed rates, to our own financial condition at the time. I'm sure at times he was exasperated with me, but he dutifully answered all my questions. I needed to know exactly what I was getting into, and with the help of his knowledge and patience I felt comfortable enough to make a move. Twenty years later, we're still here, and our house is soon to be ours, free and clear from the banks.

So, what's my mistake? Well...first of all I went for a three bedroom, when I should have looked for four. I didn't go for larger acreage. I didn't opt for the one with the jacuzzi, extended deck and built in pool out back. I should have looked for the new Anderson windows and fireplace. And central air would have been nice. And of course, maybe I should have looked a little closer to St. Ronan street. And yeah, I should have gone for that too good to be true rate. But alas, I wasn't as prescient as I thought. I should have gone for the whole shebang, and would have, if I had known that in the future the government would bail me out of my dumbness. See, if I did, I could now hold on to the house that I never should have been qualified to buy while the Feds freeze my rate for the next five years. And who knows, probably after the 2012 election they may take pity on poor me again and maybe even reduce my rate.

And Mr.Goldfield, please! You think it's a burden to spend 45 minutes examining a document that will affect you for the next 30 years??

My point is, when I got into this I did my research, read my documents (for much longer than 45 minutes, more like months) and made what I thought was a sound decision. I have a hard time feeling sympathy for those (local and nationwide) that believed they were able to cirumvent basic financial principals (like buying a 300K house on a 30K income). Please, spare me your talk about the social and economic ramifications. I know all this will have a huge impact on the economy, but let's place some of the blame where it's deserved. Sure, the brokers were absolutely deceiving, but come on, if you didn't think a mortgage rate just above 1% was crooked, then shame on you.

My only concern would be for tenants in buildings where landlords took on these ridiculous mortgages. THIS is where government should be focusing it's attention.

Posted by: Tim Kane | December 7, 2007 8:13 AM

Will the Corporation Counsel please STAND UP?

Posted by: dylan | December 7, 2007 9:09 AM

charlie, you might as well be James Kunstler (go ahead folks, google as you wish), but that's not saying i disagree.

robn, you and Ralph Ferrucci share this idea of taxing Yale just because they have good cash flow. Lets remember that they are, in fact, an academic institution. Their non-academic holdings like property on Chapel Street and Broadway are taxed like anywhere else. Correct me if I'm wrong. Unless we subscribe to some strict Marxist ("from each according to his ability, to each according to his need") dogma, does it not seem a bit wrong to tax them just for that reason? Should UNH, Quinnipiac etc be taxed as well? Yale and New Haven co-existed long before current tax woes. I would agree that government subsidized sprawl is a far better candidate to blame. This facilitated desire to turn one's back to cities has exacerbated the very problems people initially fled.

Posted by: robn | December 7, 2007 9:13 AM

DM,

Wry and witty observation, however, before you mistake W for being too generous, the dust is quickly settling on his "bailout" proposal. It appears that his "bailout" only appears to cover 10% of the estimated 3 million sub-prime mortgages.

To be frank, I'm a pretty smart person but I didn't really understand a lot of the contractual language in my mortgage agreement (fixed-rate) ...I put a lot of trust in my realtor and lender.

Personally, I'd be pleased if the conversation shifts away from "bailout" to "prosecute", as in, "prosecute predatorial lenders and let their stockholders eat it." Help for subprime borrowers should only be considered a special treatment "bailout" if you assume that their realtors and lenders were on the up and up.

Posted by: Ned | December 7, 2007 10:02 AM

I can't wait for "Ten Cents a Dance", and "Brother Can You Spare a Dime" to regain their former popularity... Robn, if you didn't understand the terms of your mortgage agreement why did you sign it? Trusting your financial future to a realtor or lender is like trusting your child in the hands of a Catholic priest. Would you take the word of a used car salesman too? The usual misguided social engineers can share some of the blame for the current credit mess:
http://query.nytimes.com/gst/fullpage.html?res=9C0CE1DA1538F934A3575BC0A966958260

Posted by: steve beck | December 7, 2007 11:27 AM

James Kunstler, I cannot start my week on Monday without reading his update - in fact i was frantic this week because it was not until Tuesday that I read his Monday update. the guy is on the money.

Posted by: robn | December 7, 2007 1:01 PM

ned,

I signed my mortgage agreement for the same reason that millions of people do the same every day with mortgages, credit card agreements etc... we're not lawyers and we don't understand contorted legalese....especially when its 50 pages of 6 point type ...we have to trust that our legal counsel and realtor are giving good faith advice, as they are legally bound (unlike your poor analogy of a used car salesman and your offensive analogy about preists.)

Posted by: James | December 7, 2007 1:20 PM

Hey, at it's rot my response is let em all rot. You bought too much house? Spent more than you really had? You didn't read the terms of your loan? Sorry. You get what you deserve. I, as a responsible, taxpaying citizen shoud not be held liable for your mistake. What's my reward for actually buying a house I can afford and paying my bills? What ever happened to personal responsibility? Oh, that's right, this is New Haven where everything is somebody else's fault.

But Goldfield is right. At the end of the day blight and lower market value of homes is the result of mass foreclosures. Simple market economics. More homes on the market means each is worth less. Fewer home services, contracting jobs, movers, etc. means fewer jobs, less spending, all bad things. I hate the idea of money coming out of my pocket to bail out somebody who didn't think things through or bit off more than they can chew. But the last thing this craphole needs are more abandoned or ill-maintained homes.

Posted by: Ned | December 7, 2007 3:41 PM

Robn,
So why are you and millions of other people signing financial agreements, the terms of which you don't understand? I'm sure that when the Catholic Church agrees to financial and legal settlements that they know exactly what is in the fine print.

Posted by: concrenedwestvilleres | December 7, 2007 3:58 PM

A few points from me:

1. I feel sorry for the people who were duped. But that said, a major problem in this country is a lack of financial education. I bought a house, hired my own lawyer (not one recommended by the bank or seller or real estate agent), ensured the loan was what I wanted (fixed rate), and ensured I could afford the house even if taxes and insurance went up. We need to find a way to educate people on finances, debt management, and budgeting. I bet the city could chip in say $16,010 (the Mayor's salary increase) and help educate the poorer people regarding finances. Education would go a long way- now we need to convice the Mayor's Board of Education.

2. Carl Goldfield's concern could be less than genuine. First he is an estate lawyer for those who have an estate over $300,000. Decreasing home values will hurt his clientele and reduce the clientele base. Second, if the houses in his Ward foreclose it could harm his electoral base if people who understand anything about government move in. Third, will Goldfield and DeStefano make a plan of action to help people in foreclosure or to help ensure the houses that are foreclosed don't become blights or will they hold press conferences and complain?

3. The government shouldn't bail out people in this situation. It will have dire consequences for future lending and investing. The reality is that investors who bought Mortgage Backed Securities are not willing to take a cut in their rate of return and help people to stay in their homes. Let the investors freeze the rates or increase them very little. Let the investors and not the taxpayers take the hit. Yet, the investors believe they will make more money letting the house foreclose than by helping people stay in their houses. Investing is a risk and investors need to know that they may lose money on their investment. If the investors freeze the rates they will still make what they were making before the reset. Put the pressure on them to do the right thing. Subject gains and interest on subprime mortgage securities to ordinary income tax rates. Don't let the investor write off losses on their taxes.

This is a mess caused by the desire to earn more and make more money. It used to be that you got a mortgage from your bank or lender and they would keep the mortgage until paid off. You could deal with them if you had a problem. Today, many originate the mortgage and earn the fees and then sell them to someone else.

When the mess hits Westville, maybe I can upgrade for cheaper.

Posted by: andy ross | December 7, 2007 4:16 PM

Is our society bent on self-destruction? When I see people not taking responsibility for their actions, I can't help but wonder. I am referring specifically to the current so-called subprime mortgage crisis. Mortgage loans are an integral part of our society. They allow people to buy homes and by doing so they allow people to build equity to use for education, for retirement, or for future generations. Mortgage loans make the pride of ownership possible for many levels of our population. When the price of homes became increasingly expensive, banks and other lenders devised programs to serve a broader spectrum of buyers, buyers who might otherwise have been closed out of their piece of the American dream.
Everyone has heard about loans with reduced down payments, loans with no down payment, loans with deferred principal paybacks, and other newer mortgage vehicles. Professional mortgage bankers and brokers are prepared to educate the public about these loans, but the public needs to be honest with them. Each person applying for a loan must be accurate about how much he or she earns, and each person needs to be realistic about his or her prospects for future income. Many mortgage brokers offer literature about mortgages, there is much to be learned on the Internet, and many states require an attorney to represent the borrower so that the borrower understands the terms, risks, and conditions of the loan. These are fine steps toward educating borrowers, but both borrowers and lenders deserve more.
When I sit across the table from someone who is applying for a loan, that person must understand that it is in his or her best interests to be upfront and honest with me about their financial resources. This is no time to oversell oneself or to be overly optimistic about making more money in the future. This is a time for a realistic assessment. It is not enough to factor in the cost of the mortgage. People have to make allowances for tax increases, insurance rate rises, and skyrocketing energy costs, to name a few. This is a time when instant gratification has to be set aside in favor of looking at the big picture--perhaps sacrificing a bit now in order to put the future on a firm foundation.
Let's not sit here blaming the media for hyping the situation. Let's not blame attorneys who made money on fees and title insurance for each borrower. Let's not blame Wall Street, which made all this money available to the banks, who then made it available to the brokers. Certainly there are ruthless salespeople and brokers out there who would stop at nothing to close a sale, but there are also salespeople and brokers who are there to help the buyers make the right choice. What we as an industry, and what you as the public, must do is to educate ourselves. Our industry must provide materials to help buyers make the right choices, but more than that, buyers must take responsibility for their own decisions. A buyer might feel entitled, but if a buyer feels responsible, then he or she will fulfill a commitment properly.
We have a tremendous buying opportunity now. Home prices are dropping, and this is a great time for buyers. Despite the uncertainties in the mortgage market, there are plenty of reputable mortgage brokers who will listen to clients and give them a fair deal. The catch is that the client must take some responsibility and be fair with them, too. If the public puts entitlement aside and begins to take responsibility, we will all be the happier for it.

Posted by: charlie | December 7, 2007 4:17 PM

"I bet the city could chip in say $16,010 (the Mayor's salary increase) and help educate the poorer people regarding finances."

How about the $50,000 for Reggie Mayo's new hybrid SUV? You know, the one the taxpayers are getting him so that he can be "safer" (than the rest of us) driving to work every day?

Posted by: Bill Saunders | December 7, 2007 5:42 PM

I heard an interesting (inside) rumor at the Thanksgiving table this year -- the Saudis have already purchased most of these sub-prime loans, -- notice GW's new sub-prime program

This is another 'big picture' distraction that John wants to whet his whistle on, rather than actually manage our ballooning budget.

Aren't there a bastion of regulatory agencies empowered to deal such banking 'crises'?

Why does King John feel that managing this 'crisis' falls under the purview of local governance?

Conspiring minds want to know......

Posted by: cedarhillresident | December 8, 2007 9:11 AM

Bill Saunders

"This is another 'big picture' distraction that John wants to whet his whistle on, rather than actually manage our ballooning budget."

that was the point that I was trying to make....thank you! It is a side track.... before the dodo hits the fan. We have an excuse for why the mass exitise happens in a year or two. We can blame it on subprimes. But that will be able to be proven easily ... when the city starts to crumble lets see how many of those people actually have subprime loans...

They should freeze the taxes as they are right now. At least until the nation is back up and running again (when the trillions that are being sent over seas are funneled back into the city of the US)

I know my comment is not as educated a comment as others posted. But as an average jane this is the only solution I see saving New Haven. And yes hard choses are going to have to be made and cuts of over payed jobs that have no real purpose are going to have to happen. Cuts to expense given to over payed employees (Dr Mayo and others) are going to have to happen. If the city can get the balls to do these things they can freeze the taxes were they are. And at the least keep the value of our property were it is at. instead of having it drop like the rest of the country.
I think people we can have our property's reassest every year. So as the value on it drops that may be a way of keeping your taxes from rising...Not sure Andy... can we do that??

Posted by: robn | December 8, 2007 9:50 AM

ned,

Understanding every last little point in 50 page 6 point type legal agreement that most people encounter only one time in their life is a bit like trying to understand the physics of a microwave oven before you cook something. (meaning that normal people lack the expertise to fuly understand either.)

In the case of the microwave, since we're not physicists, we trust that the people we pay in goverment regulatory agencies have sufficiently looked out for our best interests and only let safe products come to market.

Same with loan products.. and Congress should have been more observant and more careful about letting snake oil products get onto the market. This goes directly to Andy's point..I think that he's getting a bit defensive about the situation because in reality, we're talking about a 15-20% segment of overall mortgages that are important to the economy, but don't indict the majority of well meaning brokers.

As to Mayor D's motivations...who knows...but this is such a serious issue and the White House is filled with such unrepentant scoundrels that if its possible for us to do something locally, we should do it.

Posted by: Ned | December 10, 2007 8:24 AM

I wonder how long it will take for people to start "gaming the system", re. getting bailed out of their mortgages? I'm sure that there is enough fraud, from borrowers and lenders to keep the courts busy for at least ten years. Purchasing a microwave (unless you put it on your credit card and carry a balance), is not analogous to making a 30+ year financial commitment. My mortgage is not anywhere near 50 fifty pages, nor is it printed in 6 pt. type - maybe you need to have a talk with your lawyer?
http://www.yaleherald.com/archive/xxvi/9.4.98/news/scandals.html
http://www.marketwatch.com/news/story/how-game-white-house-mortgage/story.aspx?guid=%7B9DB9CA92%2D070D%2D4F8E%2DA3A8%2DE5169D4FD359%7D

Posted by: robn | December 10, 2007 12:56 PM

Ned,

Tsk tsk..Purchasing a piece of technology that has the power to sear animal tissue without understanding the technology is quite foolish of you and is arguably more important that purchasing a 30 year mortgage. Death from a faulty microwave would be immediate of course.

Its interesting how you've diverted the conversation away from your view of sub-prime mortagage customers, which is just social darwinism (eugenics) shrouded in Reagonomic so-called fiscal conservatism.

Posted by: robn | December 10, 2007 1:11 PM

Oh one more thing,

Since there seem to be a lot of people who think there is no such thing as predatory lending, here's a hit list of signs to watch for.

http://www.responsiblelending.org/issues/mortgage/sevensigns.html

Posted by: Ned | December 10, 2007 2:48 PM

"There's a sucker born every minute..."
http://en.wikipedia.org/wiki/There's_a_sucker_born_every_minute