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The New York Times on Bear Stearns and the Foreclosure Crisis

posted by Angie Littwin

It was easy to miss among the multitude of legal news articles about the Supreme Court rulings, but the New York Times issued an excellent editorial today on "Housing and Hedge Funds."  The piece picks up where Credit Slips blogger Elizabeth Warren left off on Sunday and is well worth a read. One of the editorial's most interesting points is that the involvement of hedge funds in the mortgage crisis means that struggling homeowners are no longer the only people suffering as a result of bad mortgages.  Wall Street is now losing money too. And the negative effects could spread throughout the whole economy. This makes it more likely that Congress will step in and take action, but it also makes the ethics of Congressional intervention more complicated.  Congress would no longer be helping only ordinary families working to keep their homes; it would also be bailing out Wall Street firms who squarely shouldered the risk.


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I would like to share my side of the story. I deal with the foreclosure crisis each and everyday. Foreclosure today are mostly often driven by the issuse of adjustable Arm mortgages. For example when the mortgage payment goes from $1100 to $1950 This is called payment schock. Borrowers dont have the comfort level of speaking with their lenders when things go wrong and when they do I hear from clients that the lenders sometime don't offer a helping hand instead there tatics make most feel inferior. I have created a website going by the name www.freedomloan90.com to assist those who face foreclosure and give them a feeling of help and education. I always suggest for borrowers to call their lenders and should that fail there are other alternatives. The current situation should only get worse before it gets any better. Its just a matter of how one focuses on solving the issues and the willingness of the lender to work with the borrower.

William Steiner
senior loan officer
1st metropolitan mortgage

Angie -- You're right that the ethics become more complicated. But also, as the above comment makes clear, the commodification of the underlying security abolishes the once familial relationship between borrower and lender. Yes, we've had mortgages packaged and sold for years, and yes, Old Man Potter wasn't all that nice to begin with, but I still think we have entered a new era of consumer mortgage default dynamics.

Benefits of Paying Yourself First

Paying yourself first involves being sure you have money saved for emergencies and for your future. Many people take their paycheck and put it towards their expenses and then if there’s anything left over, they put money aside for themselves. This can make your savings account grow at a snail’s pace.

If you reverse this habit and pay yourself first, you’ll soon become accustomed to the budget you’re setting and saving won’t be difficult at all. If you earn $1,500.00 a payday and decide that the first thing you’ll do is put $200 aside, you’ll soon find a way to live within your means of $1,300 a pay.

If you have trouble with this, consider doing automated withdrawals from your checking account to your savings account so you won’t have to remember to move the money.

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