Sat
Jan 14 2012
08:39 am

This morning I opened up my email to find Sen. Corker's weekly disconnect with reality. One of his screeds this week is that Tennesseans should not pay for the irresponsible borrowing of people and specifically targets California and New York.

“Reducing the principal on home loans for borrowers who put no money down amounts to a massive wealth transfer from places like Tennessee, where most homeowners have borrowed responsibly, to places like California and New York, where exotic mortgages were widely used to finance a speculative housing boom,” Corker said. “It is absolutely egregious that the Federal Reserve would insert itself in this manner and ask people in Tennessee who played by the rules to bail out reckless borrowers in other parts of the country.

Let me inject a little reality here.

A recent report shows that home purchasers in New York and California put down far more than home purchasers in Tennessee. New Yorkers put down an average of 13.51% and Californians put down an average of 13.25%. Home purchasers in these states rank 3rd and 5th for purchasers with the highest down payment.

Compare that to the average Tennesseans put down, 11.70%. Out of 50 states, Tennessee ranks 47 with one of the lowest down payments on a home purchase.

The map from Lending Tree is very interesting (not sure how to get it into the blog post, so please jump over and take a look)

Sen. Corker is one of the Washington elite that is pushing for a 20% down payment for homeowners. In all honesty, the NAR (National Association of Realtors) is fighting the large down payment, because the majority of people cannot afford a 20% down payment these days, and there is plenty of information to back that up. Does that mean these people that put a lower than 20% down payment on their home purchase borrowed irresponsibly? Absolutely not!

leavemealone's picture

CE Petro

Down payments in these states may be larger than TN. What is really in play is a bailout for those who may have had a large downpayment, but are now not paying the mortgage.

Take a look at the default rates. Here

(link...)

You will note that California (more than NY) has a huge problem with default. Downpayment does not indicate a basis that the loan will be paid back. Why should any taxpayer anywhere, have to pay to reduce the principle on those who can not pay?

TN may have a lower downpayments, but they also pay their mortgages.

rikki's picture

Write-downs on mortgage

Write-downs on mortgage principals don't impose any real costs on taxpayers. It's all just figures on balance sheets, and a write-down is just banks acknowledging that their figures have become imaginary. It's a transfer of imaginary wealth.

The hit to taxpayers happened in the waning days of the Bush regime, and Corker speaking about it now as if it's something he can prevent is deeply dishonest. He's pushing a fairy tale that protects bankers and their bonuses and does nothing whatsoever for homeowners in Tennessee, California, New York or anywhere.

rikki's picture

Playing states against each

Playing states against each other like this is crass and disgraceful. Rebutting Corker's assertions gives them more credit than they deserve. The whole notion that "irresponsible borrowing" is at the root of the financial crisis is propaganda that should be nipped in the bud.

At best, this is a crisis of irresponsible lending, and really it is more a crisis of irresponsible bundling and collateralization built atop the lending market. The only people being bailed out in all of this are bankers. Everyone else is a victim.

Corker is engaging in serious and reprehensible class warfare. He ought to crawl out of the board room, get off his knees and apologize to his constituents.

Up Goose Creek's picture

Taxpayers

Write-downs on mortgage principals don't impose any real costs on taxpayers

Since we taxpayers "own" Fannie and Freddie now these are OUR costs and not just the costs of bank shareholders. However in most cases it will be cost effective to write down the value of the loan and keep the homeowner in place rather than leave the home open to vandals and thieves.

CE Petro's picture

Fannie and Freddie were

Fannie and Freddie were skewered and served up to the banksters. Conservatorship was the plan, a la Henry Paulson.

The reason folks in states that have higher down payments is that the housing prices in those state are much higher. ultimately, because home prices, and cost of living in general, is more costly in California or New York (using the two state Corker uses), he is wrong to compare them with Tennessee, unless put in the appropriate aspect.

This, and much more, makes one wonder how in the world did the Fed miss the housing crisis.

Bbeanster's picture

Corker is such a creepy

Corker is such a creepy little pigmy. A friend of mine whose wife is very close friends with Corker's wife lost his toddler son in a tragic and highly publicized accident back in the 90s. A few years later when Corker ran for Senate, my friend gave him a substantial contribution. Corker thanked him for the gift, then said "How's the boy?"

I know some self-absorbed people, but Corker takes the cake.

leavemealone's picture

We should not have

Bailed out the banks and we should not bail out underwater or delinquent mortgage holders! The sooner all this is washed out of the system, the better it will be for everyone.

Mr. Creek is right. We "own" fanny and feddie and the taxpayers will eat this at some point. If, as Mr. Creek suggests, that we take a write down to sell the properties and get them off the books, then maybe that is what we should do.

My problem is that just b/c someone can't make a payment on a loan they signed on, why should they get a break? I would love to have a portion of my mortgage forgiven, but I am current. Do I have to stop paying in order to get some of that?

Min's picture

Personally, Bob, I'd rather Tennessee's representatives...

...do something to help people stay in their homes. Being a finger-wagging, self-righteous scold may appeal to your sense of rich man superiority, but your position would lead to more people walking away from mortgages they can no longer afford and leaving empty houses that become a neighborhood blight.

This is exactly what has happened in my own neighborhood.

Up Goose Creek's picture

Values

Leaveme, look at it this way - people in the bubble areas payed waaay too much for their houses because that was their only choice. Rather than be bitter, perhaps be grateful you live in an area where you could buy a house you can afford.

So what do you propose - we sell the houses wholesale to well connected insiders? We (the taxpayers) would lose more money that way.

Up Goose Creek's picture

Corker

Does anyone know whether Corker voted for the public takeover of F&F?

gonzone's picture

Just when we thought we

Just when we thought we couldn't get a dumber TN representative ...

Hey, maybe Politifact will call him out on his lies! /snark

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