There’s been a lot of housing market activity in both the public and private sector recently.
- Modifications to the HAMP and FHA programs to address loan modification failings and more negative equity
- Launch of the HAFA program to promote foreclosure alternatives including short sales and deeds-in-lieu of foreclosure
- Modifications to Bank of America’s National Home Ownership Program to extend coverage
- Citigroup, JPMorgan Chase, Wells Fargo and Bank of America joining the 2MP program to address loan modifications for second mortgages
- Bank of America offering to forgive up to 30% of the principal in underwater mortgages
- The end of Federal Reserve purchase of mortgage-backed securities
- The coming end of tax credits for home buyers
When it comes to foreclosures, the latest news makes it seem as if the government and lenders are finally getting serious about the core problem, negative equity. As we’ve discussed here before, it is only through the elimination of negative equity that homeowners will escape their prison’s of debt, allowing them to once again participate in our consumer driven economy.
Unfortunately I don’t expect dramatic results from any of these programs because of another core problem. Our financial institutions can’t afford to forgive all the debt necessary to eliminate negative equity and remain solvent, and neither can the FDIC or, with this ballooning deficit, the federal government itself.
Instead, I believe these programs will run into the same delays, oversights, and design failings that doomed their predecessors. Perhaps that is the point. These announcements provide Wall St and politicians political cover, while buying time.
These failings combined with the Fed’s exit from purchasing Mortgage Backed Securities and the coming end of the homebuyer tax credits is leading some to predict the worst for housing in the coming months.
While I believe we are far from the return of a truly healthy housing market, supported by reasonable equity levels and manageable debt, I don’t personally think housing we’ll see a dramatic double-dip, especially in those areas that have already seen a significant correction.
My reasoning is simple. If there is anything we’ve learned over the last couple of years, it’s that our elected officials, and their appointees at the FDIC, Federal Reserve, etc, will do whatever it takes to limit foreclosures and stimulate housing.
“My reasoning is simple. If there is anything we’ve learned over the last couple of years, it’s that our elected officials, and their appointees at the FDIC, Federal Reserve, etc, will do whatever it takes to limit foreclosures and stimulate housing.”
A flaw in your reasoning is that these elected officials are competent in what they do. For instance, California’s recent foreclosure tax break bill will just encourage more foreclosures, no? It looks compassionate, but could actually increase foreclosures, now that potential forclosees won’t be staring at a huge tax bill. Politicians are clueless, and when they try to “help,” more often than not they make matters worse.
I’m no expert, but I don’t see how higher rates pricing people out of mortgages and the tax credit ending, not leading to lower prices, plus the Fed ceasing its mortgage program, and the aforementioned CA tax break for forgiven debt not leading to more foreclosures.
At the same time CA legislators are providing the tax relief from foreclosure debt that you mention, they are also passing new legislation to slow foreclosure (SB1275). Competence doesn’t really matter as much as intent. And the intent is clearly to slow foreclosures, whatever it takes.
A lack of legislative and regulatory competence, not to mention greed, is what created this mess to begin with. I’m afraid that our elected officials predictably overlook the inevietable unintentioned consequences that follows pretty much every action they take. I don’t care about their intenitons… I want some comepetence, please, going forward from our elected officials and their appontees.
We are getting frustrated with the banks saying they want to clear up the backlog of foreclosures, yet they keep dragging their feet and making counter offers which are to high. We will not work with Bank of America any longer. We have dropped 10 shortsales because we are not going to waste our time with them. Litton is getting pushy too.
My feeling is that we are headed for a double dip and maybe a depression which is outside of the housing market but will effect the housing market. There are cities and some states which are approaching bankruptcy. The Eruro nations are having problems with Greece and five other countries.
Goldman Sachs insures their securities with AIG then bets against their own securities then sells them to unsuspecting buyers. Congress stands by and states they want to do something but does nothing. Morgan Stanley did the same thing. Why did they let Lehman go under when they were the least likely culprit in the game.
We only have one way to go in this downward spiral until somebody gets honesty and integrity and that is further down. For some reason people do not see this is a global economy and will involve all of the industrial nations in this downfall. Unless something is done about fiscal responsibility we are head for a world wide deppresion.