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(photo: annazhoujj82, flickr)
The lead Washington Post editorial noted (and excused) the Fed’s complete failure to understand the dangers posed by the housing bubble (the economy is soooo complicated) and then somehow used this failure as an argument against its housing proposals. The Fed’s main housing proposals were that Fannie and Freddie should make it easier for underwater homeowners to refinance and also that they should look to convert some of their foreclosed properties to rental units. The Fed also suggested that it might be advantageous to allow foreclosed homeowners to stay in their home as renters. (Yes, that one is my right to rent plan.)
The Post doesn’t like the plans because the government could lose money on the deals. They also say that they may not fix the housing market.
Let’s take these in turn. In answer to the first, the question is how much money does the government stand to lose by allowing homeowners who are already underwater to refinance at lower rates. Remember, we are already on the hook for the loans. The deal is simply that homeowners will now be paying lower interest to holders of mortgage backed securities, or in cases where Fannie and Freddie held the loans directly, to the government. The downside risk to the government seems pretty small and, as the Fed noted, if it reduces the default rate, then it could be a net gainer. Of all the ways in which we can conceivably help homeowners, this one should top the list as no-brainer.
The question about fixing the housing market depends on what we mean by “fixing?” There was a housing bubble. It burst. Does the Post think that we will get house prices back to their bubble-inflated levels? That is probably not possible and certainly not desirable. If the point is to get homes occupied and to allow people who are no longer homeowners to find good rental housing, then again the Fed’s proposals seem like no-brainers.
The Fed deserves tons of ridicule; letting the housing bubble grow to such dangerous levels was an act of ungodly stupidity. But its latest proposals on housing are definitely a step in the right direction.
14 Comments
Oh come on. I can’t believe that you are falling for this. This “right to rent” stuff is just the FED protecting the banks who hold mortgages of over priced expensive real estate. Another attempt at keeping the bubble from completely deflating and really exposing what crap the banks are holding.
Just another scam wrapped up in a con job.
NOthing you said describes the rent proposal Dean Baker has recommended. It’s designed to protect people who would otherwise be forced out of their homes. Follow the links.
“The Fed also suggested that it might be advantageous to allow foreclosed homeowners to stay in their home as renters”
Why not just cramdown their mortgages to the what the present value of the house is worth and reducing the mortgage? This would let people stay in their houses also, and probably be as effective as the rental scheme.
The upside of of doing this would be that it would show how really broke the banks since they would actually have to mark the assets down big time (like they should be).
This would expose how the TBTF banks are actually insolvent. Then we could start selling the good assets to smaller solvent banks, being very careful not to make any banks into the TBTF banks.
The FED will get stuck with the bad assets, no matter what happens, but at least this way we get rid of the TBTF banks, and that’s a very good thing.
Some markets were both so overinflated and so riddled with fraudulent, unaffordable loans (the two tend to coincide) that even if loan values were knocked back to the current market price, the present occupant could not afford the payments at an acceptable risk level. It could take many more months or even several years for such markets to deflate, but meanwhile the kind of trapped borrowers I just described would be good candidates for a right to rent program.
To say they were stupid by not knowing is blatantly false. The housing crash of the 80′s was small compared to this one that wiped out the global economy. They knew what they were doing and how to do it. They knew how to profit on the rise and the fall and they knew they could stick us with the losses.
Dean please do not give that to them. So the FED becomes a landlord. They still have us holding the paper.
What has happened is rentals are increasingly difficult to find and are rising in cost making more households homeless. In addition people are just not paying the mortgage and staying.
And the securitized debt MBS is rotting assetts for funds and sovereigns all over Europe. Again they knew what they were doing if I was able to see it and I knew years before the crash.
If it doesn’t benefit the big banks it just doesn’t make the Fed’s radar screen. At heart the Fed’s proposal is designed to protect the cash flow from homeowners to banksters at the expense of taxpayers. Fannie & Freddie have already cost the taxpayers $170 billion and that’s going to go up rapidly if the Fed gets its way on this.
And can we stop the propoganda about “forcing people from their homes”. People who get foreclosed just move to a different address, hopefully a rental that’s more affordable. Come on, do you think the 120 million people living in apartments in this country are all homeless?
The editorial said just about nothing http://www.washingtonpost.com/opinions/can-the-government-fix-housing/2012/01/13/gIQALAXMzP_story.html
Just said read the Fed ideas – allow refi with fewer restrictions and speed up the conversion to rental (the foreclosed upon still have a place to stay) program. They are both modest, in the right direction, ideas.
The WP caution to Congress to look with skepticism on both but treat them with respect is as useful as tits on a bull.
“Does the Post think that we will get house prices back to their bubble-inflated levels?” That’s EXACTLY how the Post thinks, just like the DOW!
Gmac is a criminal enterprise. They violated tila and respa laws that forced foreclosure when if they had simply worked with me…(I am 9 years later in the same loan ONLY because I could make the payments but for a crises…surviving despite all their illegal shenanigans!!)
AND you want them to be my landlord. I want them prosecuted for their crimes. They violated the law. Millions lost their homes…they have lost their right to be landlord or to do business. (I know this won’t happen…but any solutions that don’t require some kind of accountability. Is wrong.) We need to get this reality to the surface, the country needs to understand clearly and firmly what REALLY happened. We need to know what’s in the books, we need a REAL investigation. If you over draw your check book over and over again…just throwing extra money in the pot might keep you above board for awhile, but you don’t balance the books and find the cause you have only postponed the next disaster. We need to know the truth about what happened. The actual crimes are only now trickling out.
Can you imagine this criminal enterprise as landlord over these poor families who have already been stolen from. You don’t get it…they take your money, like a loan shark. They take all you have, the stress, the games. They yell at you when you call. They play games, don’t answer calls. They are a criminal enterprise. I have dealt with these banks on a personal level. I wouldn’t wish this on anyone. There has to be a better option. Not until the illegal behaviors stop and the top tiers of these criminal organization are clean would it be safe for a family to let the have even more control. Ugh these are criminals. They lie, they steal, they force fees, they are still doing these things.
You’re still being forced from your home during foreclosure, even if you move 2 miles away to a rental. Your home was the house you just lost, and believe me that’s a strong tie. Also, a not-insignificant number of families foreclosed on do become homeless–they were foreclosed because they are unemployed and can’t pay their mortgage or scrape up the security-deposit-plus rental on an apartment.
This doesn’t mean they won’t end up homeless in the end. NO part of me trusts this process. These are the same people suckering you into a new house payment after filling out all the paper work to refinance your mortgage and then…voila…you are in foreclosure and losing your home because you paid the lowered amount and it now means you are behind in your payments!! It’s just one more string along to fleece the poor. These behaviors continue. As long as no one is stopping them or holding them accountable for cheating people, they will just use this as another way to get more money and eventually will put these people out. There will be fees for not mowing your lawn. There will be horrible late fees, there will be new ways for them to take from people who are trapped.
We have to get to the bottom of the illegal behavior.
We don’t know this. We can’t as yet, get these banks to get rid of the fees. PERIOD. We don’t know what the true value behind these loans are. This is why there must be a bottom line, and investigation. You are assuming you know these values…I am guessing that these loans have so many fees in them, that this is why the families can’t afford the payments. As of yet, the banks are refusing to get rid of these fees. Why? Why do you suppose this is? If you question this…just do a google search on mortgage fraud and fees. You will find one story after another of illegal behavior by these banks related to the fees. These things continue to happen currently. There is something else wrong…that has yet to be uncovered. We have to get to the truth.
I’ll just keep asking:
How many times do they expect us to pay for those mortgages?
Just leave the people in the houses DAMNIT! The economy will be better off that way.