Williamsburgs Real Estate Blog and more!

As a REALTOR in Virginia nothing would make me happier than to see everyone be able to buy a home, or stay in their home. It’s heartbreaking to see someone struggling to make their payments on time and needing to sell but unable to get out of a house they bought within the last three years. Either because the buyers can’t qualify or today’s value is below their mortgage balance.  A lot of this blame has to fall on the lenders who bent the rules and made it possible for people to “overbuy”. Of course there is sufficient burden on the borrower that "stretched the truth" on their application, or the lender who facilitated or suggested they could.There should be no rescue for them. Irresponsible people will always blame someone else for their problems and look for the easy way out.

I am adamantly opposed to any kind of write down in the mortgage to get their debt to equity down to 31%. Especially when the write down is funded by the 95% of the honest, moral and hardworking people who are struggling to meet their own obligations. There are several considerations to keep in mind when toying with this latest proposal. 1) What happens when the borrower finds the market rebounding and decides to sell in a few years. Who will reap the rewards of any gain? We see time and time again communities create affordable housing opportunities, but as soon as the prices go up, so does the for sale sign. I see the banks as getting a windfall. They wrote the mortgage, cashed the check and spent it, now the buyer gets to write down their mortgage to lower their monthly payment to an arbitrary 31% of their income. The only loser is the American taxpayer who is trying to do the right thing. 2) what other debts might be causing these people to not afford their mortgage? Do they have brand new cars or a boat in the driveway as well? Do they have brand new big screen TV’s and stereos throughout their house and a $7500 line of credit that’s maxed out at Best Buy? Did they take out an equity line to pay off credit cards only to run the credit cards back up? I have a daughter in college, a son heading there in two years and I'm driving older paid off cars. I don't take vacations and I have a job that I don't draw a weekly or even monthly paycheck for doing. Yet I seem to be able to make ends meet and at the same time spend what money I do have left for on my buyers and sellers to make their life better/easier. Thousands of REALTORS are doing the same thing and not standing in line for a hand out. The ones who are, unfortunately will be getting out of a very rewarding career that just wasn't suited for them.

I am sympathetic to the layed off workers or victims of corporate downsizing. There is a need to provide assistance to these people. But there is also a way to find these people. These are not people who have been on welfare or unemploymeny for the last 2 years. These are not illegal aliens already getting assistance with health care, unemployement,housing and any other subsidy normally reserved for legal residents. There has to be a systematic and reasonable effort to find out how much people are behind on the mortgage and why. Simply a reduction in value CANNOT cause anyone to be behind on their payment and should not be considered.

I believe the housing debacle can be fixed for far less money. It will hurt, no doubt. But if we loosen the rules for investors to invest in some of these properties, there will be a great rental market for all of the people unable to afford their current obligations. If the government allocated more than 7% of nearly $800 billion toward housing (grouped with transportation), we would have some confidence in the housing market. We can’t simply make it easier and penalty free for them to stay in their home without risk.  We have all bought declining assets all of our life-cars,clothes,boats,timeshares-nearly everything we buy is a declining asset except our home. While a home should be something everyone strives to own, it’s not a guarantee or a right. It has to be earned, and that comes with responsibility and some risk.  

Jim Mellen