Housing bailout won’t do much to stop home price declines
Bailout News, The Economy, Real Estate July 17th, 2008
Although I oppose the housing bill currently being discussed in Congress, I still believe that it won’t help much to stop the inevitable decline in home prices and other people agree with me. According to MSNBC:
After a year of debate, Congress appears close to passing a bill intended to stem the rising tide of home foreclosures and stabilize the shaky housing market.
But even if the bill wins final passage — far from a certainty — the most optimistic forecasts suggest it would help only about 400,000 of the estimated 3 million homeowners who will likely lose their homes in the next year.
One major hurdle to passage of the bill is a proposed $4 billion in community development grants to help agencies in hard hit areas to buy and refurbish foreclosed homes, renting them out or reselling them.
The debate over the provision has become something of a showdown. President Bush has threatened to veto the bill if it includes the community grants, while House supporters have vowed to keep it in the final bill, which is expected to come to a vote early next week.
Opponents say using tax dollars to buy foreclosed homes amounts to a bailout for lenders; proponents argue that the funds would create new jobs and help stem the slide in home price where foreclosure rates are highest.
The centerpiece of the proposed foreclosure relief effort is $300 billion in federal loan guarantees to help homeowners refinance into mortgages with better terms. But attorneys, housing counselors and others working with strapped homeowners say the proposal falls short because it leaves the decision to modify a loan up to the lender or loan servicing company.
That means the housing bill will have “little or no impact on the number of foreclosures,” according to O. Max Gardner III, a Shelby, N.C. bankruptcy attorney who works with homeowners who are trying to modify their mortgages.
“I just don’t think the bill addresses the core problem,” he said. “You have so many servicers representing so many different interests with each (mortgage pool) to some extent having different guidelines on loan modifications.”
“The crisis is not getting better, the crisis is getting more severe,” said Susan Keating, the president of the National Foundation for Credit Counseling, which works with local agencies helping cash-strapped families. “And the tentacles of the problems are much more far-reaching than any of us would have considered 18 months ago.”
While the initial rounds of mortgage defaults and foreclosures were concentrated on the lower end of the economic ladder, the problem is now hitting families with higher incomes. Gardner says he’s seeing a big increase in bankruptcy filings from wealthier clients.
July 28th, 2008 at 10:29 am
Could you enlighten me on how long the impact of the housing crisis is likely to be felt,& when one could expect a reversal and an improving trend in key indicators like the ISM index, and the non-farm payrolls?
Thanks very much.
July 28th, 2008 at 10:35 am
Franco, as realtors say: “all real estate is local”
we are not going to have a national housing depression for much longer, maybe another year but no longer than that. However, areas like California and Florida will suffer for much longer because home prices are still too high there.