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Thursday, May 22, 2008

The New Face of Mortgage Bailouts

By now, most of you folks know this face. This is Congresswoman Laurie Richardson and according to a report Cogressional Capitol Qaurterly, she has walked away from her property and it is in foreclosure. Yesterday, she vigorously denied this report, however, today, Michelle Malkin has unearthed some information that puts that assertion in doubt.

Richardson declined to be interviewed Wednesday about the foreclosure, which was first revealed in Capitol Weekly, a Sacramento-based publication. But in a statement, Richardson denied that the home was in foreclosure and said it had not been seized by the bank.

“I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement - with no special provisions,” Richardson said in the statement. “I fully intend to fulfill all financial obligations on the property.”

That would come as a surprise to James York, the Sacramento real estate broker who bought Richardson’s house at auction. York specializes in buying and selling foreclosed homes, and said he eventually intends to resell Richardson’s home, which overlooks a park in an upscale neighborhood.

While the media, mostly the Conservative media, has been having all sorts of fun in raking the Congress woman over the coals, I would like to take a different view of the situation.

Given my unique place in the world (a mortgage broker) there is very little more important to me in the political world than making sure that absolutely no bailout occurs for anyone. What is striking about the Congress woman's story is how eerily normal it is. She bought a property with no money down. The half million dollar property likely carried a mortgage payment entirely too high for her means. With no money down, I would venture to guess that with taxes and insurance the total monthly payments would have been in the neighborhood four to five thousand total. (depending on just how vicious the taxes were in her area. I am unfamiliar with tax rates in Cali). Furthermore, it doesn't appear as though the Congress woman actually lived in the property altogether much. She maintains a residence that is in her district and she currently continues to live in that condo. Thus, she either got a no money down loan on an investment property (that was available for some time), or worse than that she lied about her residency. (quite common in the industry)

It appears that she has already been foreclosed on so this next question is somewhat hypothetical. Should we, the taxpayers, bailout the Congresswoman. For the most part the answer is no. That's because a member of Congress doesn't have the natural sympathy that poor folks have. Yet, she is not any different from any other borrower that the government is ready to give major bailouts for.

Now, some may point out that her half million dollar mortgage puts her in a category that others wouldn't be in. That maybe true, however that's because most folks haven't seen some of the changes to the industry. Just recently, by legislative fiat, the limits on FHA loans were raised from 275K to over 400k. This was done as part of a package to bailout struggling homeowners.

Furthermore, the Congress is in the final stages of raising the limits on Fannie Mae loans to over 700k. This is also part of another package to help struggling homeowners. If the Congresswoman wasn't given a bailout in terms of simple government cash, she likely would have received one in terms of artificially lowered standards in new loans she had no business qualifying for.

Furthermore, it appears that the Congresswoman began having her troubles when she ran for U.S. Congress. (she was a state senator prior to it) Well, job loss is one of the first things politicians mention when they give reasons for bailouts.

In fact, in just about every dimension, the Congresswoman is not only the face of the homeowner in need of a bailout, but also the target of one. There is only one glaring difference...she is in Congress herself. That's why she is the perfect candidate to become the new poster child for the anti bailout movement.

Congresswoman Laurie Richardson must become the new poster child for the movement to stop the massive government bailout. The bailout has never been about good policy. Of course, Congresswoman Richardson doesn't deserve a bailout, but frankly she doesn't deserve a bailout any less than anyone else that the politicians are dying to give one to. No one does. The reason that the bailout is so attractive to politicians is because it is associated with poor folks that appear sympathetic. It is NOT policy but politics.

Well, now the forces of anti bailout have their own face. It is the face of a Congresswoman that should have known better but didn't. Yes, she was irresponsible. She ran for Congress even though she clearly couldn't afford to. Yet, she was no more irresponsible than anyone else that bit off more than they can chew. Make no mistake, if someone can't afford to pay their bills, it's because they acted irresponsibly. It's simply bad policy to give them a bailout. Now, we have the face to make it bad policy.

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