Feds Bail Out, Install New Course of Shingles to Prevent Trickle-Down
A recent spin around the blog-o-sphere landed me this unpleasant fact, courtesy of Stacy Meyers at Boston.com: apparently 684,000 people over 50 are in trouble with their mortgage, and over 50,000 already lost their homes. Now, those seniors and near-seniors paid taxes their entire lives, they are still paying taxes, and they will even pay some taxes after they shuffled off their mortal coils — I think it’s safe to say that they’re paying for the recent bailout of Fannie Mae and Freddie Mac just like the rest of us.
So what are our new government-owned mortgage behemoths going to do for those taxpayers?
Is it bubkiss or budkiss? Anyway, I know how to spell zilch.
It’s lucky Social Security is in such good shape after all of the hoopla over that issue in the last — is it 2 or 3 presidential elections? What happened with that again?
According to Toni Straka at The Prudent Investor, the bailout doubled the public debt of this country. But now we — the taxpayers — own all of those mortgages, and so the power to change the terms of the bad loans that are at the heart of this whole mess is in our hands, right? This is going to be good for the average citizen in the long run, right? I mean, we’re going to see some real benefit from this weird and scary (and probably necessary — Greenspan thinks so, anyway) corporate welfare — right? Right? Um…guys?
We should have had regulation of the mortgage mammoths just as Greenspan warned in 2004, but now we have control. So what are we going to do?
By “we” I guess I’m talking about the assorted clowns, goons, and evil, greedy X-Files types who got us into this mess, and that keeps me up at night.
But let’s assume “we” really want to put the real estate market — and the country — back on the rails. What should we expect to get out of this?
The answer is simple: we need to stop the foreclosure process and provide debt relief to the people who need it most. We desperately need to keep that inventory off the market, and we need to keep those homeowners in the market. Demand for houses isn’t really low — it’s just stupid to think people don’t want to own their own homes — but the supply of qualified buyers is being gutted in 6 different ways by the worst fiscal mismanagement most of us have seen in our lifetimes.
Now, you hold your breath until January…or January 2013 if we elect more-of-the-same….
Here are a few things we should see right @$#%*&! now:
- Forgiveness of any and all punitive debt attached to first mortgages. By “punitive debt” I mean default interest rates, late charges, and any other little treats the credit and collections folks have written into these ailing notes. It isn’t real money, and now there are no investors to crow and peddle influence against doing the right thing for everyone. So do it — give these people a reasonable chance to keep their homes, and welcome them back into the fold.
- Curb the collections industry. Nobody likes those guys anyway. We need legislation that defines a lot of the industry’s practices for what they are: harassment and fraud.
- Re-reform bankruptcy laws. The bankruptcy “reform” laws signed by president Bush early in his tenure look pretty sinister in retrospect. I don’t pretend to know all of the ins and outs, but we need to make it easier for people to shed bad debt and get a second start — we depend on the ability of individual consumers to recover, and writing off non-mortgage debt is going to hurt — holy cow! — the very same financial institutions that created this crisis in the first place. Call it a free-market simulation….
- Refinance ailing mortgages. If you offer people another poke in the eye, they’ll just lose all hope and resign themselves to losing their homes. But if you offer to refinance their ARM (or whatever) at a decent rate and payment — even if it’s over 40 years — you create incentive for them to keep their homes.
- Put a leash on the credit reporting bureaus. Say Mr. and Mrs. Gunderson are 2 months behind on their mortgage, and desperately trying to refinance an ARM. The lender is going to use their tanking credit score to raise the interest rate on the new loan — effectively offering them another deal with the devil. Again, if there’s no incentive to avoiding foreclosure, people are going to let it happen.
And You Were Worried ABout Risk In Real Estate? (Arrrrrr…)
