You always hear tales about people diving out windows the last the stock market crashed. Mostly it’s a myth, but this financial crisis has brought an incident a lot more real and very tragic. A 90 year old woman in Cincinnati shot herself over the weekend after her bank tried to have her removed from the home they had foreclosed on.

Fortunately, she lived, but unfortunately, it’s very possible we might see more acts of desperation in the months to come if the economy stays as bad as it’s been.

If you saw any news last weekend you had to hear about the federal takeover of Fannie Mae and Freddie Mac. If you didn’t, you still need to know what it means because it will affect the whole economy. Here’s a quick rundown: Fannie Mae and Freddie Mac are companies that make it possible for millions of people to buy homes by purchasing mortgages from banks. Banks use that cash to do more mortgage lending. But so many people are behind on their mortgages, Fannie and Freddie have been taking one big financial “L” (that’s a loss, get it?).So after some background power moves over the weekend, the feds announced they were stepping in to take over both companies so they didn’t fail, which would have the potential to tank the entire economy since Fannie and Freddie own nearly half the mortgages in the entire country.So what’s that mean to you? First, the feds will put up a bunch of money to allow Fannie and Freddie to lend more, which should be good for some borrowers. Its been hard to get a mortgage because banks didn’t want to take the risk, so Fannie and Freddie having more money to buy mortgages will help. It should also mean banks will lower some interest rates on mortgages, so if you’re looking to buy a house soon, it could get cheaper — but only if your credit is good.On the other hand: once again, you’re paying for the bailout with your tax money. 

It’s a dream come true: you’re down on your luck and the good folks from ABC decide your story would make for great television. They swoop in and build you your dream house, for free, then hand over the keys and deed.

Then three years later, you wind up in foreclosure. Sigh.

It happened to a family in Atlanta, who faced foreclosure on their 5,300-square-foot, five-bedroom mini-mansion after they used it as collateral for a loan to start a construction company. I know: it’s wrong to pass judgment on folks for trying to live out their dreams. At the time, I’m sure the crib seemed like manna from heaven — a paid-for haven from sleeping in a van with enough equity to launch an enterprise. I can’t say I wouldn’t have at least considered doing the same.

Still, I can’t shake the feeling that any number of cliches apply. Something about looking a gift horse in the mouth maybe? or how about leaving well enough along?

Seriously, though, if there’s any lesson to be learned here its that coming up a winner through contests and game shows isn’t all it’s cracked up to be sometimes. Luck, in these cases, requires planning of the tax and financial variety. How many times have you read about somebody hitting the lottery for a kajillion dollars then filing bankruptcy the following year? Or somebody who wins a car but can’t keep it because they forgot that the car counts as taxable income and they can’t pay the bill?

Point being, there’s nothing wrong with luck, but if you do find yourself that lucky, try a little discipline along with it.

Bush finally signed a housing relief bill yesterday that’s supposed to help people stay in their homes by providing affordable, government-backed loans for people who can’t afford and need to refinance out of their current mortgages.

The plan also has some other tenets in it, like $3.9 billion in “neighborhood grants” (can’t wait for the indictments on the first people to get caught bilking the system on those) and more regulation of Fannie Mae and Freddie Mac. They’re the government-backed mortgage companies that are also getting bailed out under the new bill.

Anyway, how many people are ultimately helped by the bill remains to be seen. But it still brings up an old question for me: how many people are really “deserving” of said help as opposed to those who simply got too greedy and bought cribs they knew they shouldn’t have? I don’t mean to sound cruel, and surely there was a ton of predatory activity in the housing market. If you got vic’d by some shark of a banker, I’m all for you getting help on my tax time.

But what about people like myself, who stayed renters while other fools dove nose-long into crap like interest-only loans, 40-year mortgages, ARMs and the like — where’s my help in buying a house? Might it not make more sense to let some of the froth out of the market by letting those folk lose the house so someone who can actually afford it might pick it up at a decent price?

Roxbury in Boston, Harlem in New York, Bronzeville in Chicago. All of them famously “black” neighborhoods that had fallen on hard times for decades but are undergoing renaissances now with houses being renovated and new stores opening up.

But then there’s the newer, richer and sometimes white residents: do they belong? Is it a good thing to change a neighborhood’s character as long as property values go up and streets get cleaned?

I was on NPR on Monday talking about gentrification. It’s another fallout from the housing boom: prices jumped so high that in many places that had been mostly black for what seems like forever, many black folk can no longer afford to be there. In Harlem, a black real estate agent is being blamed for handing the hood over to whites on a platters; in eight metro areas around the country, more whites are moving back into cities than moving out. 

Are there examples of gentrification where you live and do you agree or disagree with the idea that neighborhoods should be ‘preserved’ for blacks, whites or whoever was there first?

Sorry for yet another housing post, but there’s just so much going on in that part of the economy and it affects so many people that it’s hard to ignore. The latest twist: now banks and mortgage brokers want you to come to the table with a ton of cash before they’ll lend to you, in some cases as much as 25 percent.

Honestly, I don’t think this is a bad thing in and of itself. A house is too big a purchase for anyone to make without having to come to the table with at least some of your own cash. And I’d never want to be in the position of knowing the bank owned 100 percent of my crib, leaving me with no equity. You should have at least some downpayment.

The problem is it’s been the banks, mortgage companies and brokers the past few years that changed the game so drastically, allowing people to get loans without bringing any money to the table at all. Now that folks are used to no downpayment loans, the lenders want to change the rules to suit their business models. Great for them, not so much for all the folks who can’t afford a 20 percent downpayment on a house that costs way more than it should because the banks helped the cost of a house explode so much due to their own lending practices.

Unbelievable.

I had an interesting conversation on the radio yesterday about the housing implosion and its impact on black wealth. I was on-air with Kai Wright, who wrote a story in the New Yorker about mortgage fraud and how it devastated some black families and threatened generational wealth. He also wrote about the topic this week on TheRoot.com.

I actually expected to get into more of a debate with Kai given I’m not as willing as he is in his writing to give borrowers a pass for making bad decisions. There were plenty of scams and schemes cooked up by mortgage lenders to dupe people into bad loans, and many of them were aimed at black folk. But not everyone was tricked: some folk knew better and just got greedy, or decided to take the ‘easy’ route to a new crib instead of saving until they were ready.

In the end, though, we found a lot of common ground. Here’s the show.

A major reason for all the turmoil in the housing market is that for a few years, so-called creative financing got way too creative. When I lived in Boston, I had people tell me that I could afford condos that were way overpriced (a Dorchester two-bedroom in the $400s? Please). All I had to do was get me an interest-only loan. Or an 80/20. Or an ARM. Or a 40-year mortgage.

Sound crazy? EXACTLY the point. People should understand by now that buying a crib is complicated, but not rocket science. If you need a mortgage that feels like you’re jumping through a flaming hoop wearing a kerosene thong, the house  is too expensive. And if you’re not an experienced investor, anything outside of a regular old, 30-year, conventional mortgage, or maybe a 15-year with a fixed rate, is putting your ass on the line.

Guess not everyone was paying attention, though. I’m watching “My First Place” on HGTV and they showed this couple who got the CRAZIEST mortgage: The place cost $279 grand; to afford it they took out two loans, one for 80 percent of the purchase price at 6.75 percent and one for 20 percent of the price with an  8.875 percent interest rate. And the 80 percent loan is INTEREST ONLY for the first10 years, so they’re not building ANY equity for the first decade!

Even with all that going on, their monthly payment was $1,885!  I’m amazed that anyone would still go for that.

One born every minute, I suppose.

Gas prices are up, interest rates might climb, inflation’s a near certainty and people are out of a job all over the place. And this is an election year, which means three things: promises, promises, promises from both candidates about what they’ll do to turn things around and make sure your bank account is healthier in the next year.

So Fortune magazine this week has two covers: one with Republican nominee John McCain and one with Democrat Barack Obama. Both covers say the same thing: “How I’ll Fix the Economy.” There’s a great chart in there that I’m going to liberally quote from that shows where they stand on:

• Taxes: McCain wants to cut the corporate tax rate by 10 percentage points and keep the long term capital gains tax at 15 percent, while Obama would keep corporate taxes where they are and raise the capital gains tax by 10 points, to 25 percent. Obama also favors repealing the Bush tax cuts for wealthy individuals and using the money to pay for things he said would help the middle class.
• Housing: Obama wants a $20 billion package to help families facing foreclosure; McCain wants $10 billion.
• Health care: McCain wants “tort reform” — in other words limits on lawsuits against doctors and insurers, which he thinks will bring the cost of health care down. He also “would shift the burden from employers to individuals to shop and pay for plans”, according to Fortune. Obama wants to spend billions to expand public health care programs but wouldn’t  require you to buy health care coverage.

So which plan works better for you?

There might finally be jail time for some of the people involved in mortgage fraud during the housing boom.  The FBI is locking up hundreds of people in the mortgage business in jail for fraud, and has also targeted to Wall Street investment bankers.

I’m kinda glad to see this happening, not in the perverse sense of actually getting off on seeing people go to jail but as it relates to the debate over who’s responsible for the housing mess. I’ve always argued that people who bought houses they should have known they couldn’t afford, but they’re not the ONLY people responsible. Somebody had to approve all those loans and somebody had to profit from the unreasonable rise is home prices, and those folks need to be called to account.

I can’t wait to read the details of the cases against these guys.