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

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.

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.