Wednesday, October 22, 2008

I Don't Deserve a Bailout, But I'll Take One

From today's (10-22-08) Wall Street Journal (California Home Sales Revive, But Not Without Intense Pain By MICHAEL CORKERY and JONATHAN KARP):

People here talk a lot, and agree little, about what should be done to fix things. On a recent day in the Verona subdivision, an upscale development riddled with for-sale signs, Bill Knoff laid out pizza and beer for a half a dozen members of his van pool. The co-commuters, who drive nearly 80 miles from Los Banos to Silicon Valley each morning and then back each night, sparred over who's to blame for local foreclosures and whether the government should bail out mortgage holders.

Mr. Knoff's house has traveled the arc of the local market. Built on vacant land in 2002, it sold for $280,000. Its original owner unsuccessfully tried to sell it in 2006 for $450,000. Mr. Knoff bought it out of foreclosure in March of this year for $320,000. Today, based on local sales, he figures the house is worth about $220,000.

Mr. Knoff paid nearly half of the purchase price in cash, so most of his equity has been wiped out. But he said he believes in taking responsibility for such choices. "The government can buy up troubled mortgages. But it should kick the people out of their houses," said the 61-year-old information technology manager. "Why should I pay for someone to buy their house?"

Darryl Williams blamed mortgage companies for granting the easy loans that fueled the boom. "I don't like hearing that the people who got houses and couldn't afford them are the bad guys," said Mr. Williams, a 55-year-old warehouse-services manager. "These are families with children."

Then Steve Sherman Sr. spoke. "I am one of those troubled borrowers not making any mortgage payments," Mr. Sherman said. The 61-year-old shipping and warehouse supervisor refinanced his house in Los Banos two years ago for $365,000, spending much of the new loan on home renovations. Now, he figures, the house is worth $140,000.

Mr. Sherman said that while he can afford his payments, he had planned to sell the house in a year or so to supplement his retirement income. But now, he figures, he couldn't afford to live there as a retiree. So four months ago he stopped writing mortgage checks, setting the cash aside in his retirement savings. He says he's waiting for his lender to kick him out or to reduce his loan amount. He'd also be happy for the government to modify his loan.

"I don't deserve a bailout," Mr. Sherman said. "Will I take one? You are darned right I will."

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