Archives - Business: Page 16
Author: paul carson (Tue Mar 20, 2007 5:23 pm)
Title: BUSINESS
So far, the housing bust has been mainly about subprime lenders going broke, bankers and investors trying to avoid the fallout, and regulators rousing — too late, apparently — from hibernation. The story yet to unfold involves the millions of American families who are in danger of losing their homes.
Last December, the nonpartisan Center for Responsible Lending estimated that 1.7 million homeowners were in harm’s way. Fresh evidence of a meltdown — from the Mortgage Bankers Association — suggests that estimate may be too low. The association reported this week that the share of mortgages entering the foreclosure process in the last quarter of 2006 was at its highest level since the group began keeping track 37 years ago. Borrowers with subprime loans have been hardest hit, but all major loan types have been affected, as the housing market weakens amid upward adjustments in monthly payments on many mortgages.
The personal tragedy is only the start. Borrowers presently faced with losing their homes stand to lose $164 billion of wealth in the process. Whole communities pay the price. Foreclosures tend to cluster in neighborhoods, leading to sharp declines in property values, business investment and tax revenues.
Responding to the mortgage bankers’ grim report, Senator Christopher Dodd, chairman of the Banking Committee and a presidential hopeful, broached the possibility of federal help for struggling homeowners. The most plausible relief measures — detailed in a new report by the Center for American Progress, a liberal research and advocacy group — involve federal boosts to existing state and local programs. Those include counseling to help strapped families plan for rising monthly payments and renegotiate their loans, legal aid and short-term loans for eligible borrowers. One study shows that a federal grant of $25 million could replicate proven local programs in other areas now experiencing spikes in foreclosures.
Mr. Dodd and his fellow lawmakers could be particularly effective at this stage in framing the case for federal help. Relief would be a cost-effective, humane response to homeowners trapped by complex, unmanageable — and, in a growing number of cases, seemingly predatory — loans. Time and resources to renegotiate those loans or sell an unaffordable property could save many families and communities from calamity
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grow and be kind
What did people think was going to happen? One thing that is clear about historical trends is that no one ever learns from them. This is exactly what happened in the late 90's when the dot com bubble burst. People were literally buying stock in companies that didn't exist. And now, when some experts suggest a possible housing bubble, again no one listens. The families that are going to suffer from this situation are ones who got themselves into bad mortgages. For most homeowners, the interest rates are not going to increase to the point where current adjustable mortgages are outrageous. So their property values are going to decrease drastically, who cares? They should have considered that possibility when they paid thousands more than the home was worth in the first place. Now they are stuck in a dpreciating house, and no one is going to buy it for what they paid. It's time for everyone to sit on their hands and live their lives. Americans are moving from home to home just because values have been on the rise. Well now it's time for things to come back down to earth.