Don't Throw Sergeant VerSteegh from His House

I'm delighted Senator Webb's GI Bill and Senator McCain's opposition to it presents another opportunity to emphasize that the neoconservative elite who lied about Iraq also lied about "supporting the troops" -- the very club they used to silence criticism when they lied about Iraq. If we can reach the place where a super-majority of the U.S. population is permanently convinced that you can't trust anything related to military affairs said by neocon elitists like Pastor John Hagee's AIPAC, it's quite plausible that we could, at long last, enjoy a Presidency of the United States in which the U.S. commits no new violations of international law with respect to the use of military force.

In the latest evidence that neocons "support the troops" as long as it doesn't cost anything to them or their rich elitist friends, Bloomberg reports:

In the midst of the worst surge in mortgage defaults in seven decades, foreclosures in U.S. towns where soldiers live are increasing at a pace almost four times the national average.

You might think veterans' groups would be very concerned about this. You'd be right.

"We've never faced a situation like this, not in the Vietnam War, World War II, or the Korean War, where so many military are in danger of losing their homes," said Paul Sullivan, executive director of Veterans for Common Sense, a Washington-based advocacy group started in 2002 by Iraq and Afghanistan War veterans. "No one asked them for their credit score when we asked them to fight for us."

How does this affect the family of an individual soldier?

U.S. Air Force Technical Sergeant Jeffrey VerSteegh...departed...in April for his third tour in Iraq. The father of four may lose his home when he returns.

The four-bedroom farmhouse he and his wife, Kathleen, own...went into default in December after their monthly mortgage costs doubled to $1,100. Kathleen missed work because of breast cancer and they struggled to keep up the house payment, falling behind on other bills. Their bankruptcy was approved by the court a week after VerSteegh left for Iraq.

Congress has at its disposal a simple means for making sure that Sergeant VerSteegh and his wife Kathleen are not thrown out of their house. Representative Raul Grijalva has introduced H. R. 6116, "To allow homeowners of moderate-value homes who are subject to mortgage foreclosure proceedings to remain in their homes as renters." The bill draws on economist Dean Baker's "own-to-rent" proposal. Moderate income homeowners facing foreclosure could stay in their homes as long as they paid fair market rent.

If you agree that your America wouldn't throw Sergeant VerSteegh and his wife Kathleen out of their house, why not call your Representative at 202-225-3121 and ask them to co-sponsor Grijalva's bill?

Comments

[bgregs]

As NABNYC says, rent to own is not a solution to this problem. That would simply be where you pay the same amount, but you don't ever gain any equity in your home.

I also agree, partly, with his statement that the taxpayers don't need to buy every military member a house. Instead we need to go back to the good old days of the original GI Bill of Rights, which provided a MUCH better option than the VA home loan guarantee program that we have now. The program as it now exists was actually useless to me, as a veteran. It made a lot more sense for me to get an FHA loan, because it was able to get me a better interest rate......

[NABNYC]

Rent-to-own is not the answer. How much would the rent reasonably be? Enough to cover the mortgage, taxes, insurance? That's no solution, it's just changing what you call it.

There's no benefit in getting emotional about one individual's problem while avoiding looking at the big picture. Allowing military people to stay in homes when they're in default is irrational, and saying taxpayers should buy them a home and give it to them is even more absurd. The problem is much bigger than that.

When the feds artificially held down interest rates and eliminated any standards for making loans, the price of real estate escalated. Someone who realistically could afford to pay $250,000 suddenly could pay $500,000 because of the absurd lack of standards. The only solution to our current problem is to let the lenders foreclose and re-sell, and let the prices fall. Not by 10-20%, but maybe by 100% or more. The fact is that 40 years ago people paid 4x gross (of one income) for housing, on average, and today they often pay 10x gross (of two incomes). The bubble must burst. Lots of people will get hurt.

People with medical problems like breast cancer should receive free medical care paid by the government, but talk to the government about that one. People who can't afford their mortgage with a moderate interest rate can't afford to own the home, and they've got to move.

[RobertNaiman]

You mean, own-to-rent is not the solution.

The bill specifies how fair market rent would be computed. It's not rocket science.

There are two main reasons that it's not just "changing what you call it": one, the mortgages were based on bubble-inflated house prices, and the fair market rent is not; two, many of these mortgages had deceptive balloon payments, and those payments bear no necessary relationship to the fair market rent.

[NABNYC]

Let's take a $500,000 purchase price with nothing done and an adjustable rate. Maybe interest-only for the first few years. The current interest rates would leave a monthly mortage of let's say $3,000 before taxes and insurance. Who is going to pay that mortage? There is $500,000 owed on the property whether it's rented or not rented, probably $3500 or more per month if you include utilities. If it rents for $2,000/month, that's a $1500/month deficit. Where and how does that get paid? Or, does the mortgage get extended to 50 years?

I think what Congress has in mind is that the taxpayers should pay the lenders say $100,000 on each mortgage, buy-down what is owed. So the lenders get paid in full for their reckless business practices, and taxpayers get their treasury even further looted.

The 50-year mortgage may become the norm, where people never really own a home -- they just pay money to the bank, interest, late fees, other fees, and the banks get to keep the inflated real estate prices. It would be better to let the foreclosures proceed, let the property values crash down to the level where real people can afford to buy a home.