RE: "I frankly doubt if we'd be where we are if the foreclosing financial institutions attempted to work out something"
The media has gone to a lot of trouble to create the impression that people want to keep homes they are upside down in debt on. It's not true.
Imagine you're in one of the markets that have lost over 30% of home values since they were purchased a year ago with zero down. Take a $300K home for example. At 6% your payment on interest alone is $1,500 per month on a house that is now worth $210K. If you sold it, you would net around $190K after closing costs.
If you can walk across the street and rent a comparable home for $1,000 per month, what possible incentive would you have to keep the existing home?
This is the primary reason for all the foreclosures. It just plain doesn't make economic sense to keep a home under these conditions. The problem is aggravated further when the loans have balloons built in that radically increase the payments, and goes off the charts when 500,000 workers are laid off every week.
There isn't any way to fix it, and no amount of government bandaids will make it all better. The proper solution is to let those investors holding the bad paper take their lumps. Somewhere along the line they take possession of the foreclosed property at a substantial loss and can either use it to generate rental income, or sell it to someone else who can.
Now, if the government were to purchase these properties at a deep discount, AFTER THE INVESTORS HAVE TAKEN THEIR LUMPS, that might make sense. The properties could be used to generate rental income, which would produce an immediate return on taxpayer dollars invested. The homes could be held almost indefinitely, and by keeping them off the market, it would allow the rest of the market to recover.
If something along those lines is what you had in mind, I agree it would make sense. It still wouldn't be a quick fix, but it would probably shorten the time needed for recovery.
Unfortunately, anything along those lines isn't even close to being on the table. The sole concern of government at this point is to protect its rich patrons from investment losses - all at the expense of taxpayers. Any program to bail out investors will ensure the problem will continue to spiral out of control. |
