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Saturday, January 16, 2010

The Government’s Mortgage Mess?

Today I deposited my first unemployment check. I’ve also listened, read and watched the President RateTabledemand that banks, who paid back the TARP money with interest, refund the government for the TARP money the government won’t get back from other failed companies who did not make it. That doesn’t sound quite fair considering the government has a big hand in causing people to lose their home. Much has been made about banks providing loans to people who couldn’t afford it, but what hasn’t been covered is the way unemployment is paid out which impacts the middle class causing them to lose their homes.
In the State of California unemployment is paid at 50% of your salary up to $46,696.04/yr. After this point for each dollar you earned before losing your job you don’t get any benefits. Because of this, at least in my case, means I’m getting around 30 cents on the dollar. Considering when banks  give out home loans they want to keep housing costs maximized at 30% of income, it doesn’t take a genius to figure out the math doesn’t work and people are losing homes.
Now it’s nice and easy to blame banks for the mortgage mess, but I think it’s time the politicians acknowledge that it’s not all the bank’s fault for houses falling in default. Now I’m not calling for the government to raise the amount I get for unemployment, I’m just wishing that they’d stop blaming the banks.
Now what’s really bizarre is that if I do lose my house the purchasers will get a $6,500 (or $8,000 for new home buyers) tax credit. Remember that a tax credit is subtracted directly from the tax paid, so it’s essentially a government check to the purchasers of homes. If I did the math correctly that means that the purchasers of my home would get an additional $1,725 (or $3,225) over than the amount it would have taken for me to get paid at a 50% rate (for the 13 weeks unemployment benefits last). At a 50% rate I have a better chance of keeping my home without further assistance. At half that I don’t really have a chance, if I remain unemployed long term, to keep my home without further assistance.
In this blog post losing my house means selling it, not foreclosure, unless the housing market falls further.
In case you wanted to know how unemployment is paid, from the State of California’s website:

“UI is paid by the employer. Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year. The UI rate schedule and amount of taxable wages are determined annually. New employers pay 3.4 percent (.034) for up to three years. EDD notifies employers of their new rate each December. The maximum tax is $434 per employee per year. (Calculated at the highest UI tax rate of 6.2 percent x $7,000.)”

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