How does the new Bankruptcy Bill change the nature of going broke when the housing bubble deflates?

Professor Warren seems to be on some strange kick, lately.

She appears to think the American middle class is composed of single moms making $35,000/year and buying $180,000 homes with no-money-down interest-only mortgages.

And she's convinced they don't know what they're doing and require guidance from above. 

I don't believe Dr. Warren is that far off.  When I bought my house five years ago with no down payment, the mortgage payment was well over one of my twice-monthly paychecks.  The only people who I know of who are buying houses in very similar or worse situations, financing their 20% down using  a variable 5-year ARM and again, spending more than a single paycheck on their mortgage payment.

The very nature of the housing market right now in metropolitan areas is driving people to purchase houses that they really can't afford.  The feeling among the people I know who rent is that they need to get into the market before the prices get even higher.  While purchasing a house that you can afford is definitely a good investment, purchasing a house that eats up the majority of your income (and here in Portland it is difficult to find a house for which that is not the case) leaves you a good small disaster away from real financial problems.  

So no, buying a house or refinancing is not a sure-fire way to destroy your financial situation.  But the nature of the market and the national attitude about housing is driving people to take risks while at the same time believing that they're actually making a sure-fire investment for the future.  In that respect, I think Dr. Warren is right on. 

Good article in the New York Times today on the topic:

http://www.nytimes.com/2005/06/16/realestate/16arm.html

You say my comments are sarcastic.  I prefer to characterize them as "irritated irony," because, yes, Professor Warren's patronizing tone accompanying, as it regularly seems to, her fact-deficient when not fact-free generalizations and anecdotes does annoy me.

It is the attitude of the self-satisfied expert who thinks his or her opinion, unsupported by fact and rigorous argument, should be welcomed by the rest of us because he/she occupies a position in some elite organization.

If you want to know why we Democrats have lost so much of the working/middle class, ask yourself how many of our intellectual leaders express that same attitude.  And yes, as a Democrat it angers and frustrates me. 

That means I agree with Warren's positions on Bankruptcy Law, on Consumer Fraud Law, and on the Rules governing class-action law suits.  There are probably any number of additional positions of hers that I don't know about but would agree with if I did.

But that doesn't mean I don't think this blog is a disaster.  She's never defined what she means by "middle class" which is, afterall, the subject of the blog.  In not one of her complaints has she ever said what portion of the "middle class" is affected by the "l'horreur du jour".  As an aside, her name's on the blog which obligates her to moderate the "stories" published on it.

What I see is someone who believes she knows what's best for all those financial innumerates out there.  Fine!  Let's have the facts that support the belief, not a bunch of half-baked quotes from whatever newspaper landed in her driveway that morning.

I don't know about where you live, but where I live the "middle class" is generally composed of two-income families making $50-$80K per year and attempting to buy their way into or make mortgage payments in a housing market where a 3 bedroom house is currently selling for $300-$400K, with prices rising at many times the rate of our wage increases.

People are buying homes they can't really afford because they're afraid the prices will keep getting higher, and they're borrowing against their home equity to pay for their kids' education.

It's true that the collapse of a housing bubble will not bring down Western Civilization.  But it will result in a lot of people losing a lot of money, and a lot of previously middle-class folks joining the ranks of the less fortunate who are unable to relocate, and who risk being faced with bankruptcy if they get sick or lose their jobs.  The concerns described by Dr. Warren are very real for me and my family.

I gather that you don't appreciate her tone.  Fine.  But don't belittle the concerns of those of us who are stuck in out-of-control housing markets.

Furthermore, I don't think it would benefit Dr. Warren to define "middle class"  in some sort of way that's meant to apply nationwide.  A middle class income in the rural midwest would amount to poverty wages in the northeast or the west coast.

Y'know...from my vantage point, (working at a brokerage) that assessment isn't too far off the mark in many cases.

Maybe not 180k...but I've seen plenty of single income families attempting and successfully securing mortgages that would make me nervous.  Straight hundreds and 80/20s are common as all get out and after taking a gander at some of these credit histories I wonder what they are thinking.

Most people DO NOT understand the associated costs of home ownership.  Definitely problems can arise when values dip.

If you can't save money without a mortgage...how do you figure you're going to build a nest egg AFTER you have more money going out monthly?

Ah...the power of optimism.