We have been accused of being too hard on Barack Obama’s administration lately. I would not disagree. His rapid growth in the national debt and failures in managing the economy are scaring the heck out of me and it is hard not to show my emotions on this site.
But now even Democrats are getting scared. Hear what Senate Banking Chairman Chris Dodd said this weekend.
“Everybody understands that getting out of this broader crisis requires that we stabilize our housing market and stem the tide of foreclosures,” Senate Banking Chairman Chris Dodd (D-Conn.) said in a hearing Thursday. But in unusually harsh words for a Democrat, Dodd said that the Obama administration’s progress in stopping foreclosures has been “disgraceful” so far.
Now that is not a Republican or even a right leaning Democrat, Dodd is about as far left as you can be. Remember, he is the guy who with Barney Frank defended Freddie Mac and Fannie Mae to the bitter end.
Now everyone in Washington is beginning to panic over the failures of the present administration to fix the foreclosure problem. If they had left things alone for a while it would be mostly sorted out by now, but all these false trails of hope that are being dashed is leaving the market in no mans land.
Don’t believe me? Read this from Politico.com .
Administration officials blame the mortgage servicers charged with carrying out the mortgage modifications and refinancing under the federal program. Many of their Democratic allies on Capitol Hill back them up, but others are criticizing the White House for fumbling the execution. Whatever the reason, the program hasn’t stopped the rising tide of foreclosures: Experts predict that at least another 2 million homes will be lost this year, and the administration’s plan has so far reached only about 160,000 of the 3 million to 4 million homes it was supposed to protect over the next three years.
That’s bad news for the economy — and bad news for the Democrats.
The Democrats’ political and policy fortunes rest on their ability to persuade voters that they’re fixing the economy. But experts say that rising foreclosures will only exacerbate the nation’s economic woes, pushing down home prices, slashing state and local tax revenues and imperiling consumer confidence. POLITICO.com.
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It takes time, and I am sure that he is going to do something soon. However, I really wish he would back off of the healthcare issue until a couple of years down the road, this is going to be where he loses all of his momentum. Though, this is also the end of the honeymoon period where everyone is going to be more overly critical of him.
-Tyler
If someone can pay rent, that rent can be considered part of a mortgage payment. The government is providing $8,000 for first time buyers, so why can’t the government pay part of the payment and have the borrower repay the government in the future. Here is an example of how it could work.
• Mr. and Mrs. ZZZZZ have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest).
• The ZZZZ’s lose their job and can only pay $470, so the government pays the difference of $700
• So the ZZZZ’s remain homeowners and work through their problem. It takes the ZZZZ’s 10 months to get back on their feet, the government paid out $7,000 and now the ZZZZ’s owe the government.
• But the government says okay, you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.
What the government has done is to provide assistance to the property owner (just like the bailout plans for the Financial Industry and Automotive Industry) and requires them to pay back the obligation starting in seven years. This is not a freebie, but short term assistance. Franklin Roosevelt called it Lend Lease.
This program is not perfect, but it can assist a lot of people who want to own homes. Most importantly, it is channeled directly to the property owner, not a large corporation that has other motives besides keeping the property owner solvent. A significant benefit of this program is that payments to financial institutions will resume and cash flow will get back to normal levels, thus credit availability should improve.
There needs to be conditions such as confirming gross income via income tax statements; confirming employment and confirming current payroll. The only group of individuals who would be excluded are those who own more than one property (there should be no break to the investor who treated real estate as a business) and cases where mortgage fraud exists in the form of straw buyers and invalid sales (properties that sold more than three times within five years and the value change was greater than 150%).
• This total assistance would be capped at $50,000 and could run for 24 to 36 months
• In a given year up to $25,000 could be provided.
• The government would be releasing the funds over 12 months, thus the federal outlay would be limited.
• The total cost of $10 million loans receiving assistance would be $250 billion per year or $500 billion in total.
• This is much cheaper than the TARP bailout and part of this can be funded with the current $70 billion in TARP repayments.
The greatest difficulty in implementing this program is processing and accounting. Loan Servicing companies would need to add staff (if one servicer can process 50 applications a week, 4,000 servicers would need to be hired, plus additional support staff) Wow, as many as 10,000 new jobs would be created. Add to this job creation the fact that several million homes do not go into foreclosure and more jobs are not lost due to desperate situations.
Yes it is possible and yes it can work.
The reason it can work is because real estate goes through cycles. If people are forced to sell at liquidation prices, everyone loses. Give property owners a chance to get back on their feet, get back to work and the whole economy starts to turn around.
As stated earlier, this is not perfect and many will complain about the injustice. But think about the injustice of the corporate bailouts, the injustice that first time home buyers get a break, the injustice that shareholders come before the individuals who created value in the companies by buying products. One can go on and on, or we can try.
We only fail if we do not try.
To blame the White House for the mortgage foreclosure plan failing is barking up the wrong tree. We ought to look at Wall Street real hard. That’s where the core of the problem was hatched and that’s where the solution should come from. With all the bailout money and incentives Wall Street has been given, it still won’t play ball. What happened to the word responsibility.
To say the current administration is failing to fix the current problems seems shortsighted. If it was so easy to fixe why didn't Bush fix it during his term. Nothing against Bush, just if it were easy to fix, it would already have been fixed. The problem took a fairly long time to come and is going to take a long time to correct, in the mean time I just keep in mind…Survival of the fittest!!
A fellow in my state just got 10 years in federal prison for co-mingling funds and stealing some…OK a lot!
but compared to what Wall Street has done with their high stakes 3 card Monty game and to think that we paid them to get them out of their troubles?
It really isn't that hard to fix. Just go back to the rules and regulations that worked for decades. Before the sub-prime, everyone qualifies lie that created this mess.
Great Title!!!
Its sounds scary and I am little bit nervous to going inspections for the site for my construction, we have to do something for the foreclosure to fix the problems and issues with real estate business. . .