"Nightmare on Main Street" [March 10] missed the point about the skyrocketing increase of home prices since the beginning of this decade, which was caused more by the Fed's continuous rate cuts than by the rampant and reckless release of subprime loans.
In my neighborhood, a condo's market value catapulted from $150,000 to $400,000 in less than two years, effectively pricing out of the market many medium-income earners like me. Is such a price quantum leap normal, when I, a tenured college professor, can't even afford a modest one-bedroom studio? What is happening to the housing market today is its rational return to normal. It is a misnomer to call it a crisis. When a person's high fever is subsiding, his condition is improving, not deteriorating.
Diamond Bar, Calif.
It is clear to me that eager homeowners are not entirely to blame for the situation that they now find themselves in. Loans with zero down and home equity loans that wring out all possible spending money are first the fault of those who made the loans: the banks, mortgage companies, and the investors who bought the bundled loans. Those who made the loans and investors who took on the risk will have to write off the risk that they bargained for. Rather than forcing foreclosures and possibly losing 50 percent on each home walked away from, rewrite the terms of the loan so that excess principal is written off and the terms of the loan are palatable.
My husband and I were saving to buy our first home and literally were priced out of the market in a matter of months. During those years of saving, conversation in social settings revolved around real estate and how much money people were making buying and selling at a profit. Even families were talking about how much their home had gone up in value and what bigger and better houses they were going to buy with all the money they made in such a short period of time. If these homes had been homes in which to live and build a community, and not speculative investment vehicles, I might be inclined to have sympathy. I say let the home prices fall. Americans need to learn a lesson that their actions and intentions carry consequences.
Kimberly A. Muresan
San Clemente, Calif.
Guess who is profit-ing from home foreclosures? The United States government. Typically the largest tax deduction a person has is mortgage interest. When the foreclosed homeowner becomes a renter, that goes away. Lenders could try innovative approaches like renegotiating mortgages based on current value that would reduce payments. The difference would be due on sale or tacked on the end of the existing loan. Or why not renegotiate existing loans for a longer loan term for lower payments? The borrower keeps home and credit. The lender helps stabilize the market without foreclosure and protects the value of the lender's other neighborhood properties. The neighbors are happy with fewer foreclosures. The lender has deferred compensation, not a loss on the books, which is better for stockholders. Everyone has a chance to recover.
Everyone's a capitalist until socialism can save them from bad economic decisions. People bought homes they couldn't afford with loans they should never have received. Bailing out irresponsible lenders and borrowers in order to keep housing prices artificially high will only reward fools and punish future homebuyers.
Rising oil prices are a rootcause of the subprime mortgage crisis imperiling families in our far-flung, car-dependent suburbs and exurbs. Conservation is imperative, but we cannot conserve our way to growth. To provide hope for a brighter future for our children, we must invent our way out of oil dependency. This will require a spirit of national mobilization, aggressive research and development, and deployment of clean, renewable energy technologies.
John B. Howe