Federal Aid for Homeowners at Risk

Boiling the Frog

On Thursday the April 12th, the National Association of Realtors released a forecast that the median price of US homes will decline for the first time since 1968 as the housing slump worsens.

Coincidentally, (yeah, right), Senator Charles Shumer, (D-NY), Chairman of the Joint Economic Committee (JEC) released a report in support of the Realtors position placing more than a fair share of blame on predatory lending practices in the sub-prime mortgage market and recommending several policies to address the problem.

Among other things the JEC claims that:

“It pays to prevent foreclosures in these high-risk cities — every new home foreclosure can cost stakeholders up to $80,000, when adding up the costs to homeowners, lenders, neighbors, and local governments.”

The JEC further argues that preventing foreclosures is cost effective and recommends to:

“Increase Federal Support for Local Foreclosure Prevention Programs. In the short-term, local community-based non-profits may be best positioned to implement foreclosure prevention programs. The federal government can assist established community-based organizations to aid families facing foreclosure. Estimates suggest that foreclosure prevention costs approximately $3,300 per household, substantially less than the $80,000 in estimated costs of foreclosure.”

There you have it. A proposal to give $3,300 to everyone that is behind on their mortgage, to save “stakeholders” $80,000! A stellar return indeed!

This is what happens when home “ownership” reaches an all-time high thanks to loose credit, unscrupulous lending and blind borrowing, and ALL AT THE BEHEST OF THE GOVERNMENT!

You’ve heard the “boil the frog” story. Put a frog in a pan of water and slowly turn up the heat. Because he’s cold blooded, the warmth is welcome. He could jump out at anytime, but the temperature is rising so slowly that by the time he realizes what’s happening, it’s too late.

How about “boil the taxpayer” (yet again)?

On Monday, April 30, the Governor of Massachusetts ordered state banking regulators to seek delays of up to two months in foreclosure proceedings against homeowners who have filed complaints with the Division of Banks. I think it’s safe to say that the Division of Banks will now be backlogged with “complaints”. In Colorado, the state is considering legislation to tighten lending rules in a state that has had the highest foreclosure rate per household in the nation. Last year there were 28,000 foreclosures with 19,000 in the Denver area.

The burner has been turned from off to low.

And to top it all off, GM announced on May 3rd that first quarter profit plunged 90% to $62 million, primarily due to mortgage losses at GMAC. GMAC’s residential capital unit lost $902 million in the first quarter compared to year earlier profit of $201 million, a decline of over $1 billion!

It appears that Mr. Shumer and the other JEC members not only want to turn up the heat, but also wish to reward those who have purchased homes they should not have under terms they couldn’t afford, at the expense of those of us that have made prudent decisions. Never mind the votes at stake in the “hard hit” area of New England.

Chuck Angier lives in Virginia and can be reached at: cangier@pmtnet.net. Read other articles by Chuck, or visit Chuck's website.

One comment on this article so far ...

Comments RSS feed

  1. Constance Porto said on August 31st, 2007 at 6:01am #

    In May of 2006 I purchased a home in Hampton Bays, NY. I already owned a home in Center Moriches, NY and had it on the market. It is now August of 2007 and I still haven’t sold the home in Center Moriches which went from being appraised at $625,000 to being dropped in price now to $509,000 and is still not sold. I took out a second on that home to purchase the new home. I refinanced the new home to pay my bills while trying to sell the old home. I now am financed to the hilt – taking out money from credit cards – I am in a financial disaster. To make matters worse, my husband who is in construction is making dramatically less because of the real estate market. I don’t know where to turn. We are in danger of losing everything.