Mandatory Negotiations

What?

Roy Barnes is so full of it.

The constitution of the State of Georgia is pretty clear that the government cannot interfere with contracts between people. Tonight Barnes has up a commercial that he’s going to force banks to negotiate with deadbeats who buy a million dollar home and know they can’t afford it.

The state cannot and should not do that.

This is like the SEIU thugs who showed up on the front porch of the Bank of America employee’s home in Maryland two weeks ago. One of them said he was there because Bank of America wouldn’t negotiate with him to let him save his home.

Well, you know what? If I buy a house I can’t afford or fall on hard times, the bank should not have to give me my house. Life ain’t fair. Never was. Never can be legislated to be fair.

50 comments

  1. PaulRevere says:

    Classic populist nonsense. Surely Barnes doesn’t really believe this is a good idea. He’s just playing to the crowd. Gotta be. This is a terrible idea. Worst ever.

  2. trainsplz says:

    I get it, dude – but it seems like you are saying that the state can’t interfere with contracts between people, although they must eventually extend public resources to enforce them.

    So why can’t Barnes just say “we’re not serving eviction notices until you negotiate.” That seems pretty efficient to me, and frankly, I’d rather that my tax money went to police and firemen than serving evictions.

  3. trainsplz says:

    Also – are you wasted? It’s yer berfday, dude. Even if half of us totally disagree with, like, everything you say. Belated congrats on CNN.

  4. Henry Waxman says:

    With all of those problems in Maryland, maybe Karen Handel should go back to her home state and help solve them…

  5. Doug Grammer says:

    Tell Gov. Barnes to lend money out of his own pocket. When someone doesn’t pay him back for whatever reason, tell him that he can’t sue them. Tell him that he can’t take what collateral they have promised him in the specific event of them not paying. Tell him he has to forgive the debt, or part of it, or give him worse returns on his money than what was agreed to than when he lent it out.

    The mortgage industry is showing some signs of life. I’d hate to see this man kill it in Georgia.

      • Henry Waxman says:

        The Louisiana Department of Health and Hospitals is already working on forcing BP to reimburse the Louisiana fishermen, shrimpers, and oystermen.

        • ByteMe says:

          BP rang up over 850 OSHA violations over the past 3 years (compared to the other major oil companies with less than 10 each), with about 90% of them considered “egregious willful” violations. I think BP won’t want this to end up anywhere near a court, so they’re going to keep paying whatever anyone tells them to pay.

  6. dj says:

    What happened to my post to Icarus about Stan Thomas and the other dirt diggers in Fayette Couny??? Censorship???

    • ByteMe says:

      It’s “simple” in the minds of bloggers and most blog commenters, of course. Anyone who understands the role that Georgia law plays in making it ridiculously simple for banks to foreclose on a house understand that changing the rules to bring them more in line with the way it works in other states is a good thing for both property values and the banks who really don’t want the houses anyway.

      But populist anti-Barnes nonsense is easier to sell.

      • BuckheadConservative says:

        If you pay your bills, you have nothing to worry about. That works in all 50 states

        • John Konop says:

          BuckheadConservative,

          As tax payer I have worries that other people under government guarantee loans do not pay their Moorgate since we are on the hook for the loan.

          De-regulation is fine in a financial transition as long as it is in the private sector, fully disclosed and not fraud. Nothing is conservative about de-regulating financial transaction and using tax payers as a back stop for taking risk. The behavior is irresponsible not fiscally conservative.

          • BuckheadConservative says:

            I agree that govt backing of the loans is bad policy. But these “mandatory negotiations” are going to expose the entire mortgage industry to unprecedented moral hazzard (see Jeremy Jones post below) and even more systemic risk.

            Essentially you are compromising an entire industry to relieve the pain of a few irresponsible borrowers.

        • ByteMe says:

          And if 1/4 of your neighbors can’t pay their bills or decide that their house isn’t worth what they paid for it and walk away from it… you also have something to worry about.

          • John Konop says:

            ByteMe,

            The truth is unless employment and wages pick up no micro-management from the government will help. And even if the economy picks up the values for high 6 figure and 7 figure homes will be in the toilet for a loooooooooooong time.

            As you know I made the point years ago that only about 2 % of people can afford the homes and many in that income bracket are savers not spenders. And we probably have inventory of at least 5 times the amount of buyers that can afford the homes. This is a basic supply and demand problem and the write down rate will be ugly.

            I am less concern with homes in the 150k to 250k range because they are rentable property. The higher you get over that the math just does not work relative to buyer with the income to afford the houses verse the abundance of inventory. It will take years to fix this problem.

            • ByteMe says:

              You already knew that I knew all that.

              Our talks with realtors indicates that any house under $300k can be sold if it’s priced for the market (as opposed to those over $400k, which still have to be priced under the market). “Market” at this point appears to be 2003-2004 pricing, which is reasonable if you didn’t buy your home after that.

              My point was that BC is convinced that this problem is everyone else’s, when in fact if enough other people in his neighborhood have a problem, so does he. Foreclosures take down property values throughout the entire neighborhood, not just for the foreclosed house.

              • John Konop says:

                ByteMe,

                I am not sure how mandatory negotiations help. The problem is two fold, the bank either writes down the equity which lowers values anyways because the bower are walking via being way upside down or the person lost a job and cannot make the payment. That is why I think jobs are a biggest factor in fixing the problem. And the houses in the higher end I have no idea how to fix that other than over a long period of time inventory depleting to a reasonable level via supply and demand.

                My issue is both sides are offering window dressings rather than dealing with the issue head on.

                  • John Konop says:

                    Icarus had an interesting idea. Eliminate tax breaks for mortgages on government backed loans if the person gets a 3% rate. With the fears of inflation ie interest rates going up this could help the problem. And banks would go for it to stabilize portfolios ie values and defaults.

                • ByteMe says:

                  Short of devaluing the loan and taking the write-off or delaying any foreclosures for X years and hope the price of the property increases in value, there’s not much that can be done… but the draconian Georgia foreclosure laws need to be adjusted to make it take a little longer than 30 days or so before the home can get sold out from under its delinquent owner. There needs to be a bit more balance in the relationship.

                  • B Balz says:

                    Byte is spot-on correct on this point.

                    Plantation V. everyman or whatever example of GA law being hard on its’ populace.

                • Lady Thinker says:

                  John,

                  Jobs are a huge factor in slowing down foreclosures for the unemployed and the underemployed.

                  • John Konop says:

                    This why Icarus has another good idea of replacing FICA with a national sales tax. This would create jobs via companies having more money to invest via payroll tax savings.

                    • trainsplz says:

                      If it’s to be revenue neutral, the employer share of FICA would then have to be leveraged somewhere else. Probably onto the employees.

                      You get more jobs, but with lower net wages, and you tie social security and medicare to a more volatile funding source.

                      Maybe that’s what you want, but the whole sales tax/FairTax thing is often loaded with caveats.

                    • John Konop says:

                      I am not talking about a FairTax that eliminates income tax. A NST would capture underground activity currently not being taxed and the extra employment created by no payroll tax would have a stimulus affect on the economy. And unlike the FAIR TAX the rate would be at a reasonable rate not killing sales.

                    • Dave Bearse says:

                      Replacing FICA with a sales tax is a step toward converting social security from insurance to welfare.

          • BuckheadConservative says:

            I believe we’re over the worst of it. Roy’s just trying to squeeze a little more juice out of the issue with this nonsense pandering.

            • ByteMe says:

              You are incorrect on the first belief and correct on the second one.

              Foreclosures have been staying near an all-time high for months. They’re not coming down any time soon because of higher than usual unemployment. It’s not about sub-prime mortgages any more; it’s about the ones where people could well afford their houses up until their job disappeared.

              And, yes, it’s bringing up a topic that has an emotional appeal to a large segment of the population right now… sort of like the abortion discussion in the other thread. Which politician doesn’t pander to emotional issues?

      • Lady Thinker says:

        Byte,

        I agree with your comments. Working with homeowners is a win-win for everyone.

  7. HowardRoark says:

    Isn’t this what spurred the Rick Santelli “Chicago Tea Party” rant on CNBC over a year ago?

  8. Jeremy Jones says:

    The requirement should be on the home owner. I assure you, the lender does not want the house. In speaking with banks, I have found the problem is getting the home owners to engage in a reasonable conversation. I have heard stories where the bank has agreed to waive payments for six month, reduce the payments thereafter to about 30% of the home owners income, and they still refuse to pay. In other words, the HO are wanting to lower their house payments, but not give up the monthly health club membership, the fancy car, or whatever other lifestyle choice.

    I know of exactly zero cases where someone was late on their mortgage and were served eviction notice without some type of compromise offered by the bank.

    Does anyone really think this law is NEEDED? I don’t care if you think it is a good idea, do you really think the bank wants a home inventory? The banks ARE trying to work with homeowners.

      • Jeremy Jones says:

        Obviously there are those that truly cannot afford their house, and the bank should take those houses, as they see fit. My point was about the segment, a large segment as I am to understand, of people who are just not putting their house near the top of their budgetary priorities.

        • John Konop says:

          JJ,

          We do not have debtor jails, so the problem is when people are way upside down they have no incentive to pay. And the lender has no leverage. Similar to when you got healthcare from a hospital without insurance and you negotiated a good deal for yourself.

          The other group is people unemployed with no money. How do you negotiate with a person who has very little money?

          • benevolus says:

            The problem with that is, the bank doesn’t necessarily have the good of the community as one of it’s motivations. Which is fine under normal circumstances, but when 1 in every 288 houses is already in foreclosure, just letting the the stock owners in New York and Germany decide what’s best for us is a mistake.
            Banks don’t have a conscience. A bank president will likely do what their shareholders want, and most of those shareholders could care less what happens to some homeowners in Cordele or Ringgold. Somebody has to make sure they don’t pull the rug out from under these communities, and that’s what we pay our representatives for.

  9. Atticus Grinch says:

    They should learn form Tom Graves and Chip Rogers: if you get behind on your mortgage (1) blame the Bank and (2) sell your house to someone else and your debt goes away …….

    It would be interesting to see Chip Rogers’ comments on this proposal. I am sure his opinion would be properly scornful, without the slightest hint of irony.

    • Lady Thinker says:

      AG,

      I put my house up for sale three years ago so I could sell my house, pay off my bills, and get my Ph.D. According to my real estate agent, not one person expressed interest in my house because it is older and needs some remodeling. So trying to sell homes in this market is not easy.

      • Doug Grammer says:

        Maybe you are asking too much for it. It will sell if you market it low enough. I just lowered the price on mine Thursday.

        • ByteMe says:

          We sold ours before even publicly listing it (just last week… seriously) by pricing it properly and having a property that other people desire in that price range. Doing the upgrades — especially kitchen and bathrooms — helps even if you won’t get the money back for the work.

  10. Atticus Grinch says:

    They should learn from Tom Graves and Chip Rogers: if you get behind on your mortgage (1) blame the Bank and (2) sell your house to someone else and your debt goes away …….

    It would be interesting to see Chip Rogers’ comments on this proposal. I am sure his opinion would be properly scornful, without the slightest hint of irony.

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