Politicians get elected on their ability to “help” people – i.e. pass out pork (other people’s money). So the more goodies they can hand out whether it’s through farm subsidies, new construction, or mortgage assistance the more likely they are to get re-elected. Yes, even the so-called fiscally conservative Republicans know this.
Another maxim in politics is that “perception is reality” so whether or not the whole “housing crisis” is really a crisis or not, folks watching the nightly news, or borrowers who have felt the pinch from their adjusting mortgages, or home owners who have watched several homes in their neighborhood go into foreclosure, most feel that there is indeed a crisis afoot.
Yet back in June, the Mortgage Bankers Association (MBA) released data from the 1st Quarter of this year that showed overall, mortgage delinquencies decreased. Wait a minute? What’s that? Delinquencies decreased? How can that be? We’re in the midst of a crisis that only the government can cure!!! Aren’t we?
According to Dr. Douglas Duncan, Chief Economist for the MBA, “The percentage of loans in foreclosure would be well below the average of the last ten years were it not for Ohio, Michigan and Indiana…” And if it weren’t for California, Florida, Nevada and Arizona “foreclosure starts would have declined.” Further, “24 states saw a decline in foreclosure starts, while the rest of the states saw negligible increases…” The hell??? From the way the media and politicians talk I figured everybody was facing foreclosure.
The MBA also claims that their sources indicate the foreclosures in Florida, Nevada, California and Arizona are “heavily influenced by speculators who are walking away from properties…” In other words speculators bought up a bunch of properties using adjustable ARM’s with super low interest rates, and gambled that they could sell the homes at a profit before the ARM’s flexed. Uhhh whoops.
So now we have the government (i.e. hard working taxpayers) jumping in to help bail out folks who gambled on the housing market and lost. As Jonathan Hoenig points out in his Smart Money column, financial traders are (typically) accustomed to losing money when they make poor financial decisions and don’t expect the government to bail them out. Unfortunately this seems to be changing with the government proposed “help.”
Speculators who lost money on a bad bet or your average homeowner who took a gamble on a home that they thought/hoped they could afford but in the end could not, may now be (forcibly) helped out of their bad investment decisions by others. Not a good sign.
Is it really fair that you, Mr. and Mrs. Average Home Owner, who work hard at your jobs, and who only bought a home you knew you could afford, within your given budget, be asked to bail out those who over invested or over spent?
Because I assure you, when President Bush and Mrs. Clinton insist they’re here to help it’s actually you the taxpayer/homeowner who are helping. (There is no money tree in the backyard at the White House.)
I truly feel bad for people who may end up losing their homes or decide to declare bankruptcy. I’ve met some very good people who simply made a mistake and I wish they hadn’t. And as a real estate agent it certainly affects my business when people aren’t buying and I can’t get my listings sold.
I’m also an advocate of FHA loans – they help people who have the income but not necessarily the down payment and/or credit scores to get into a standard mortgage – those who take out these loans also pay mortgage insurance on them, in case they default. Foreclosure rates for FHA loans in the 1st Quarter of this year ran around 2%, whereas foreclosure rates for subprime ARM loans were more than 6%.
Ultimately however, I am a taxpayer and a firm believer in small government, so while I can appreciate “modernizing” or streamlining the FHA process I certainly don’t want to see a large scale taxpayer bailout of a “crisis” that isn’t as much of a crisis, but more a prime opportunity for politicians of all stripes to take the opportunity to snatch up extra votes by proclaiming they’re from the government and they’re here to help. Yipes. No thanks.
