Last year, we were less than impressed with Bush’s tightly bounded but widely touted plan to use the FHA, a traditional source of financing to low and middle income borrowers, to help salvage homeowners at risk of begin dispossessed. Note we have doubts about “rescue debtor” operations. Iin many cases, these borrowers had little to no equity in their home, which begs the question of why it is so awful for them to lose their home. Indignity, yes, tragedy, no.
But a cynical plan to do nothing while pretending to offer relief is even worse than standing pat. It gives homeowners and possibly mortgage investors false hope and forestalls discussion of the tough choices that need to be made (the residential housing market is simply too large for the Feds to rescue), But then again, if your aim is merely to leave this problem in the lap of the incoming regime, a Potemkin program like this is exactly the sort of thing you want.
Better yet, the FHA program appears to be falling well short of its modest goals. The Bushies said it would aid 80,000 delinquent borrowers in 2008. So far this year, the total in that category getting help in 2,000.
From the New York Times:
Fewer than 2,000 homeowners at risk of foreclosure have been helped by a Federal Housing Administration program that President Bush promised would help homeowners who had fallen behind on their mortgage payments, federal housing statistics show.
F.H.A. officials have asserted in recent weeks that more than 150,000 people have benefited from the program, which was intended to help troubled homeowners refinance into stable, government-issued loans. But the vast majority of participants have been homeowners who have made their mortgage payments on time, not the borrowers in crisis who were the targets of the president’s plan, the statistics show…..
More than 400,000 mortgages will be refinanced through F.H.A. Secure this year, officials say. Of those, only about 4,000 will be held by homeowners who have fallen behind on their payments, the statistics show.
“F.H.A. Secure, while a good idea, is not addressing the magnitude of the problem,” Senator Christopher J. Dodd, the Connecticut Democrat who is the chairman of the Banking Committee, said at a hearing this month. He is calling for legislation that would help many more troubled borrowers.
Scott Stern of Lenders One, an alliance of mortgage bankers based in St. Louis, called the program’s record with the neediest homeowners “a tragedy.”
“F.H.A. is helping borrowers who aren’t currently in trouble and that is fine,” Mr. Stern said. “But there is a specific subset of borrowers right now who are in trouble. The program needs to be helping people who need the help immediately.”
Housing officials say they have worked hard to reach such borrowers. In August, the program was tailored toward low-income homeowners who were falling behind because of interest rate increases on their adjustable-rate mortgages. The officials say that interest rate cuts by the Federal Reserve reduced the number of such people….
The F.H.A. still requires borrowers hoping to refinance to have made 10 on-time payments in the 12 months before they went into default. That will block many borrowers, said John Taylor, president of the National Community Reinvestment Coalition, which helps people in underserved communities get credit.
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But a cynical plan to do nothing while pretending to offer relief is even worse than standing pat.
Not necessarily politically, assuming Dummkopf voters don’t look too carefully at the details of the plan.
“…, while a good idea, is not addressing the magnitude of the problem,” Senator Christopher J. Dodd.
Sounds like he is describing the Banking Committee hearings on the Fed’s conduct regarding Bear Stearn’s. Oh wait, he can’t be describing those, he chairs the committee and ran the hearings.
I’m sure the 2,000 households helped deserved it and 99% of the rest do not.
Natural consequences are the best education in life. We’re always talking about how we want to increase education in America – this is a great way! A tough lesson learned on reading AND understanding a contract before signing it, as well as the lesson on the benefits of living within your means, having a budget, and having a contigency plan. Seems to me that the tough lessons being learned, if embraced, can be passed on to their children and the next generation can choose to not repeat the mistakes of this one.
Why exactly do you have a problem with this???
Oh please Gamma. Spare us the Free Market Fairy Tales and the Ethics Lessons from the school of William Bennett. The vast majority of defaulting homeowners are not lazy, feckless bums who “need to be taught a lesson”. (and in what school, anyway? the Marquis De Sade’s?) The majority of the defaulters are working and middle class people who dealt as best they could with a situation they had no hand in creating: the explosion of housing and rental costs, relative to their unexplosive, stagnant income. This may shock and amaze you, Gamma, but many people in the U.S.–as in, perhaps, a majority–really struggle to make their pay check cover their family’s most basic needs–food, medical care, and housing. The reason behind this current crisis is the gross income disparity between the ultra-rich and everyone else. People didn’t go into these dubious loans because they were greedy, but because there was no other way to buy even the cheapest home. Here in California, the cheapest homes are still enormously expensive relative to local wages. Either wages need to go up, or housing needs to be subsidized and made more affordable. Stop blaming the victims and putting silly moral fables into global financial machinations.
There is systematic risk to the market in letting large numbers of homeowners get squeezed “too much” by lenders. The risk is that there are sufficient losers from a deregulated financial system for the public to mobilize with an extremely harsh regulatory regime or bankruptcy reforms that make debtor relief in bankruptcy far more accessible and beneficial than prior to the 2005 pro-lender reforms (e.g., repealing them and allowing workouts of mortgage debt on the debtor’s primary residence).
And now Bush is blaming… Congress.
http://online.wsj.com/public/article/SB117509417086351883tBdTpQaRGoPI92TvmAzP3FQazU8_20080327.html
What happened to the “We don’t want to blame anybody” they were trotting out just a month ago?
They’re breaking their media rule, make sure your hypocritical assertions are spaced far enough apart so people forget them (Nation building.. Mission Accomplished… small government… cut spending… Compassionate Conservatism)
Now it’s all Nancy Pelosi’s fault (It couldn’t have anything to do with Reagan replacing Volcker at the Fed with that consultant with the mystery PhD thesis, Greenspan… naw…)
Far be it for any of us to withstand the power of greed; that is why we have laws and are supposed to have law enforcement.
If bank robbers were never caught the moral obstacles would be tossed aside in a heart beat.
If our financial markets and country is to survive we need indictments, convictions and disgorgement. The issue is rampant fraud. PERIOD.
The value of our currency and homes now have a huge * or a ? beside them.
Credit markets are freezing up and this problem will not go away overnight.
Spitzer was on to the deal when he was silenced.
http://www.youtube.com/watch?v=WIC3dP5njVA
Here’s what Bush said:
“One of the things we’ve done on home ownership is the Hope Now Alliance which hopefully makes people less anxious; hopefully it helps; it’s kind of brought some, not only concern but action into the market place. I was told this morning that Hope Now has affected about 1.4 million homeowners.”