Problems with Housing Loan Modifications Being Proposed
February 18th, 2009
We would all agree that the housing industry is vital for America not just as source of employment, but to every family that owns a home.
For decades most of the country followed the trend for housing prices rising on average at the rate of inflation plus roughly 1%. This allowed many millions of American families to live, raise their families and secure their retirement.
Somewhere along the way, certain areas of the country saw housing prices artificially shoot way beyond this long term trend. California, Florida, and Arizona in particular saw prices increase by double digits, sometimes as much as 20% a year. This made housing unaffordable to many, but also left other people already owning homes feeling much richer. Once speculation took over from reality an euphoria came over some local markets. That is quite common in the stock market, like with the dot.com boom. The eventual result is the bubble bursts and prices come down to earth. After bubbles burst prices often temporarily move below where they would have been otherwise.
Attempts to “solve” the problem of speculation gone bad in the real estate market face a lot of obstacles:
-Investors own many of the properties going into default, and they will not be allowed to join any proposed bailouts.
-The plan is to bailout those behind on their mortgages, but many of these folks are unfortunately also behind on second mortgage, tax, and insurance payments too.
-Even reduced loan amounts will not be enough for those that have lost their job or were not close to accurate in what they had initially shown as their income. Speaking of which, apparently some loan officers advised people to overstate their income to get a bigger loan than they could really afford. Why aren’t these loan offices liable or even being prosecuted?
Time heals. That is true in the case of housing prices as well. My concern is in trying to help victims, the government may unintentionally delay the recovery in prices by stretching this bad situation out. Perhaps the focus should be on transition instead of propping up unsustainable prices.
Sincerely,
Todd Lipscomb
Founder of MadeinUSAForever.com (http://madeinusaforever.com/) your source for products made by Americans
Wednesday, February 18th, 2009 at 11:59 pmand is filed under Uncategorized.
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