Updated: 04/07/08 6:35 AM -
The package of offers, allowances, bonds and advice that was marching
through the Senate the other day is designed to help the very troubled
housing sector of the troubled American economy.
But people don't live in sectors. They live in houses. And a great
many of those houses are mortgaged well past their hilt and demanding,
now or in the near future, monthly payments that their residents
cannot afford and that the true market value of the houses does not
justify.
But, eager to prove that they were doing something, leaders of both
parties in the Senate hammered together a deal that included tax
breaks for builders, tax breaks for people who buy new or repossessed
homes, money for local governments to buy foreclosed homes and a means
for state and local government to borrow money that can, in turn, be
used by households in danger of defaulting on their mortgages to
refinance the debt at a more affordable rate.
In other words, it is a package of aid designed to help overextended
lenders and overinventoried home builders first, communities facing a
rash of empty houses second and people who may be thrown out into the
street last.
Proposals that would more directly assist distressed households in
refinancing existing subprime or variable rate mortgages were left out
of the deal because banks were against it. Apparently those banks
would rather go through the long and, usually, less profitable process
of foreclosing than work with a system that would allow bankruptcy
courts to restructure deals that have proven unworkable.
One provision of the deal should be of more direct benefit to some
mortgage-payers. That's the one that takes the old device of allowing
state and local housing authorities to sell tax-exempt bonds -- $10
billion nationwide -- to raise cash for low-interest home loans. A
process that had been restricted to first-time home buyers would be
made available to homeowners in foreclosure as well.
Useful, but a process that requires action by state and local
governments across the country in order to help anyone.
Of course, there are arguments against doing any more, or anything at
all, to bail out over-leveraged borrowers and their overly optimistic
lenders. The primary one is that the market should be allowed to work
through this "rough patch," as President Bush calls it.
The imminently reasonable, if somewhat cruel, thinking is that as
foreclosured and unsold inventory grows, home prices will fall and
many people who couldn't qualify for a regular, affordable mortgage
last year will be in the market for a good home, at a reasonable
interest rate, next year.
That works for people who want to buy a home. But it won't work for
people who already own a home, a home that is not only their abode but
also their only significant asset.
With any luck at all, all sectors of the economy have learned that
plans assuming that the value of homes -- or anything else -- will
always rise are doomed to very messy failure. But a way to ease the
crash of this failure, for homeowners who erred and those who live
next door to them, is still something that needs to be found.
|
