Here is a nice story about how sometimes what we do not know we have stored in our attic might just someday save our hind ends! (hint to wife..take note there is a reason for me to save the things I have stocked away-besides just avoiding trips to the store late at night to finish a school project!).
I hope in this economy this works out for this family. Notice they have not actually auctioned off the comic but I am assuming they stopped packing?
How are the five states that were given $1.5 billion in funds from the US Treasury planning to use them to reduce the impact of foreclosures? The states are still trying to figure that out but most of the solutions I am reading seem a little disappointing, and frankly, more of the same wealth transfer mentality that now seems to be considered acceptable.
A little background. The states that will receive money (and the amount they will get) under the Treasury Department’s Fund for Hardest Hit Housing Markets are California ($700 million), Arizona ($125 million), Florida ($418 million), Nevada ($103 million), and Michigan ($154.5 million). These are all states where home prices have declined by at least 20 percent.
The guidelines issued with the extension of these funds basically require the states to present proposls to Treasury to creatively utilize these funds to lessen the impact of foreclosures. The program is designed so housing agencies will be the main point for distribution of these funds and responsible for the ideas to be approved by Treasury. The agencies were given just six weeks to prepare their proposals. Subsequently, a lack of creativity appears to be the hallmark of the Ideas published so far in California and Florida. Examples include:
Allowing unemployed homeowners a one year hiatus from making a mortgage payment
Paying down the balance of mortgages considered over the value of the property.
Interestingly enough, some academics are actually frowining on these approaches.
“The solution we all know that has to be done – and this sounds harsh – the borrowers have to be allowed to move through foreclosure and the houses have to be put on the market so we can get to the bottom of this mess,” said Anthony Sanders, a real estate professor at George Mason University who has testified before Congress on the foreclosure crisis.
Sanders called the $1.5 billion both too little and too much – too little, because the housing crisis has hit so many homeowners that $1.5 billion is tiny compared to the need, and too much because it targets homeowners who really can’t afford to be in their home anyway.
He pointed to the more that 70 percent of homeowners who went back into default after government mortgage relief efforts.
He also criticized letting state housing finance agencies, which are designed to help low- and middle-income borrowers, decide how to spend the money.
“To think that state agencies, who are not very good at this, are going to come up with an innovation is just kind of wishful thinking.”
So, what is the right approach? Depends on your market orientation. I have spent the last 15 years of my life working within this industry and there is one constant characteristic I have seen when it comes to people defaulting on their mortgages. It is rather simple…something major has occurred to the homeowner that they can’t fix. Divorce, disability, death and unemployment. Those are the big ones. The other major issue in places like California and Florida is a large number of these homes are not owned by owner occupants. The people residing in the home are tenants and the owners are far away and milking the situation for as long as they can.
So, who do you agree with? The government throwing another $1.5 billion at the problem or as the professor suggests, letting the free market work this out?
Just an excellent article today from Reuters on how one family in Hampton Bays New York has been affected by the whole securitization of the mortgage industry. Take a few minutes and read this. You will understand a lot more about the reasons problem mortgages can’t be easily modified and have your heart torn by this family’s problems. It is what bothers all of us in this industry. The family probably took advantage of a huge appraisal, caught up in the sudden increases in home values, to pay medical bills. It has all come back to haunt them as their interest rate has gone up. An example of a family that should never have been able to borrow as much money as they did, and how because mortgages are not just from your local bank anymore, there is no easy solution.
As I have been saying for some time, as much as it hurts, the best thing now is to get this housing market to its bottom and start the recovery in the economy. Housing always leads economic recoveries and it will this time. The more efforts to fix the foreclosure issue (which can’t be fixed) the longer the economy will struggle.
The sad truth in my position can be understood in reading this article.
