Posted by
Bill Crawford on Sunday, April 18, 2010 10:01:17 PM
I'm so tired of this subject, but it won't go away. There are two large garbage trails from the end of the housing bubble. Nobody is seriously addressing either one, and it is driving me puke crazy.
The second one is by far the more intractable issue. Developers that were in love with new housing for investment value circa 2007 are now sitting on homes and propoerties they can't sell. Either the market value won't make up for the money they put in, there are no buyers, or they are sitting in communities that won't allow them to become rental property. This is going to be an issue that will not go away soon, and to be honest, I have no solutions. Anybody have any ideas?
The simpler problem is the biggest factor behind the explosion of foreclosures this year- especially in the war zone states, California, Arizona, Nevada and Florida. That would be the "underwater" mortgages, where the present assessment value was below the mortgage amount.
After Lehman Brothers bought the farm in September 2008, Bush and Treasury Sec Paulson brought in the usual suspects (including the eighteen month junior Senator from Chicago, tacitly representing his party at that point) to negotiate the targets of the new TARP program.
The idea germinated there was to take about $750 bil and target the core of the problem: the bad mortgage assets on the books of all the banks. It was a wonderful idea, but nobody could figure out exactly how to implement it, and here we are.
I have an idea: if your mortgage is underwater, apply for a new one at the value of your latest tax assessment. Use the TARP money to pay off the difference with the lender. If you have the income and assets to qualify for a new mortgage, you get a new start. Then you can sell and move out if you need to.
I can't figure out why something like this hasn't been tried yet. We're spending the money by the truckload anyway- this first truckload was agreed upon because it was supposed to be targeted to the heart of the problem. Six months later, it was being used to bail out state and local governments (mostly through grant applications) because they couldn't print money to weather the recession like Washington.
I know nobody is near the heart of the problem, because if they were, the Community Reinvestment Act would be an expletive in mixed company. And Senator Dodd and Rep. Barney Frank would not only be without elective office, but they would be spayed for caution's sake.