bailout, financial crisis

Financial Crisis

Here is one way to tackle it. First let’s look at the numbers. I am just a laymen who is not in the position to obtain these numbers, especially real numbers. I would like to start right before the housing bubble around December, 1999 when there was a created rumor that the would will end New Years Day. Who created and why has to do with the beginning of a real-estate thrust. Year 2000 houses were still cheap. I’m from NYC and happen to come to visit Sarasota Florida where my brother Joe owned a nice house that he paid $50,000 in 1999. At that time there were these homes through HUD and these veteran homes and loans. The internet is a key here; (keep that 2000 meltdown on the back burner for now) this is a easy way to sell houses. Handyman specials were the craze. A baby-boomer like me coming from New York seized on a veteran loan even though I wasn’t a vet. One didn’t actually have to be a vet, but if you were you got a little better rate. So a girlfriend and I purchased a house out in Holiday Florida for $35,000 and $500 down, a handyman with parts of the roof missing. She cosigned because I had no credit. I fixed it up with my money and we soon broke up two months later. Since she was on the deed and I had no credit the banks were giving me a hard time to stand on my own two feet. I didn’t have a job to top it off (still don’t but that’s beside the point). Through battling back and fourth, they finally gave me what they called a none-conventional with a 10.5% rate.

The baby boomer era has a part in this because in places like Tampa there were millions of houses that were built in the early 70’s when codes were slacked. Fixer uppers were being swooped up especially by investment companies that owned huge amounts and renting them out. I was a student at USF through 1998-2005 and during around 2002 vertical everyday prices were going up and my house was worth about 65-70 k. 2004 I sold that house and took the profit and put 20% down which allowed me to obtain $90,000 nice house with what they called a no-doc loan with a decent rate of 6%. During 04-05 prices went up at one point my house was worth 140,000. I was just about to sell it again but I backed out just in time thinking I would only have to buy another expensive house.

Here is were I would like to know these numbers. By rule of thumb if a person bought a house for $100,000 at a rate of 6% he still needed 10%, $1,000/mo with taxes/insurance. My particular problem is not so bad, although here is where the failure accrued. At the peek of the high priced homes using my same neighborhood, someone would buy my house at $150,000 with a monthly payment of $1,500, who probably purchased their house with the equity from their previous house. Which meant, with all their expenses phone, cell, cable, utilities, car, insurance, and food, their income would have to be at least $3,500/mo. Someone who took a second mortgage at that time when the prices began to drop helped fuel the crisis. The brave who lived in places like California who did this same scenario in a 350-450 k house got humbled quick.

We can sit here and say the banks and the buyers are to blame and somewhere there’s a greedy con-artist hiding in a condo, but it’s not the solution to our problem.

Out of all the foreclosures out there, how many of them are the buyers only home? Out of those numbers, how many are out in the street? The next number is how many are living with relatives? The next number is how many are renting now? Now the biggest number and in my view is the most important of all is, out of the number of foreclosures how many are priced over the head of the actual incomes.

Here is my suggestion; let these people humble themselves and get in homes adjacent to their actual income. Second, the homes that are left after all the musical chairs of houses are left then these should be simply put up for auction.

If we did this we wouldn’t have to use billions of taxpayers’ money.