If you read my blog you know we’ve been talking about this so even though I just stopped working for the day and it’s almost Saturday (!) I had to get this posted. The House passed the foreclosure assistance Bill, with the support of 39 Republicans, including Steve LaTourette whom I may not always agree with but is one of our brightest legislators and is worth quoting from today’s Washington Post article on this topic (as usual they do one of the best jobs covering the issue so I hope you take the time to read it in it’s entirety). LaTourette’s quote speaks to some of the rhetoric some legislators and Administration peeps are espousing:
“What’s offensive is some of the rhetoric,” said Rep. Steven C. LaTourette (R-Ohio), who voted for the measure. “They say it rewards speculators. No, it doesn’t. It’s limited to homeowners. They say it’s a $300 billion bailout. No, it’s not. It costs $1.7 billion….. “Would I have written the bill the way Chairman Frank did? No, but we’re not in charge anymore,” LaTourette said. The housing mess “calls for some bold action. People are expecting us to do something.”
There are still many people we see in danger of being what we call upside down in their mortgages, meaning they can’t sell their homes for enough money to cover their payments, and they can’t make their payments. This Bill is aimed at the heart of this group of people.
Peace Out - 3C
4 responses so far ↓
1 Foreclosure » House Passes Foreclosure/Housing Aid Bill // May 10, 2008 at 1:06 am
[...] LinuxInsider: Linux News & Information from Around the World wrote an interesting post today on House Passes Foreclosure/Housing Aid BillHere’s a quick excerpt…for the day and it’s almost Saturday (!) I had to get this posted. The House passed the foreclosure assistance Bill, with the support of… [...]
2 Henry Reardon // May 12, 2008 at 10:09 pm
It’s unfortunate that this legislation passed, and even more unfortunate that LaTourette voted in favor.
Since this bill is aimed at those homes falling fastest and farthest, it is akin to “catching a falling knife”. The reason those properties are falling so far in valuation is because those are the properties that *increased the most* during the boom years. What goes up must go down until a natural state of equilibrium in the market is found.
In essence, the idea that this bill will cost between $1.7 and $3.0 billion is laughable (yes, and the S&L bailout was only going to cost us several hundred million, too…) as the homes this bill is targeting are probably less than half way to bottom right now.
So tell me what you do when your $500,000 home has fallen to $400,000 and you write a new loan with FHA…..and the value continues to fall?
Point being, government intervention at this stage of the game only works to artificially support the market, which will do nothing but ultimately prolong the downturn. The best thing to do at this point is to let the junk be worked out of the system so we return to equilibrium much quicker.
Being real estate folks, I’m sure you’re all familiar with the lesson of Japan’s “Lost Decade”, when their asset bubble burst in 1989. Instead of letting prices deflate and poorly run financial institutions fail Japan famously propped them all up, leading to ten years of “zombie banks” (existing, but not able to write new loans and surviving only with government subsidies), painfully slow growth and property devaluations.
Every economist worth his or her spit recognized then and eulogizes now how Japan should have simply allowed the market to correct. Painful, yes, but it would have shrunk the deflation by 7 years.
There ain’t no such thing as a free lunch, and I’ll guarantee you all that the final cost ends up being significantly higher should the bill become law. The end result will also be the same: a fraction of those 500,000 homeowners will be helped, property values will continue to decline and foreclosures will continue until equilibrium is found.
3 Carole Cohen // May 13, 2008 at 8:49 pm
Henry, the flaw I see in your argument, is that it doesn’t speak to the issue of the highly inflated bad appraisal properties affected with preatory lending. The regular market people, in my opinion, can probably work to keep their homes if they get lower interest rates…at least enough of them can. And the people who had stars in their eyes and believed predatory lenders that they should get a loan and buy a home, well, some of them might be able to keep their homes too. I just don’t see this falsely correcting the market. No matter how many homes ‘get saved’ it will still be another year before we see much of a change in direction.
Part of the issue is that people need help but even when it’s available they still fail to seek and use it. That is the baffling part.
4 Donte // Jun 2, 2008 at 9:31 am
I think the housing market is taking a hit due to the rise in foreclosures and lenders slashing prices on their bank owned properties.
I am not sure how true this is but i heard Ohio was one of the leaders in the highest foreclosure rates. If that is true, the values will continue to drop, something needs to be done, and the bill might be the thing that needs to be done.
Although i am in NC, i understand how foreclosures are affecting the nation as a whole.
Look forward to reading more of your blog post.
Donte from NC
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