Affordable housing

The news on Tuesday that sales of existing homes fell a record 27% in July spooked the Dow to decline by a mere 133 points. I guess all of those short term tax credits and fancy programs initiated by the Obama administration to prop up prices has been essentially a big waste of tax dollars. Oh well. Another lesson in hubris, I suppose. The funny thing is that as prices go down, the more affordable housing becomes for more people which is what our government has been telling us they want and why they have spent a treasure in tax dollars to create. It turns out that if you just leave the market alone, it will sort out affordability on its own. Amazing.

The Toxic Twins keep on sucking taxpayer funds

Two of the main causes of the housing boom and bust, Fannie Mae and Freddie Mac, continue to weigh heavily on taxpayers. Here is an abstract from the Boston Globe:

Fannie Mae has again asked taxpayers for more money — this time $8.4 billion — after reporting another steep loss for the first quarter. The taxpayer bill for rescuing Fannie and its sibling Freddie Mac has grown to $145 billion — and the final tally could be much higher.

The rescue of Fannie and Freddie is turning out to be one of the most expensive aftereffects of the financial meltdown, and Fannie Mae’s first-quarter financial report yesterday made it clear there is no end in sight.

“The losses are not going to stop soon,’’ said Anthony Sanders, a finance professor at George Mason University, who warns the housing market is likely to drop sharply again this year.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Fannie and Freddie, lifting an earlier cap of $400 billion. And with the housing market still on shaky ground, Obama administration officials say it is still too early to draft any proposals to reform the two companies or the broader housing finance system.

Republicans, on the other hand, argue that the sweeping financial overhaul before Congress is incomplete without a plan for Fannie and Freddie. They propose amending the legislation to transform Fannie and Freddie into private companies with no government subsidies or shut them down completely.

The legislation “touches nearly every corner of the economy,’’ Alabama Senator Richard Shelby said in the GOP weekly radio and Internet address over the weekend. “But these major contributors to the crisis are left unscathed,’’ he said, singling out Fannie Mae and Freddie Mac.

Democrats call such arguments a diversion. They say Congress already gave the government far more power over Fannie and Freddie nearly two years ago when lawmakers passed a bill that set the stage for a government takeover over of the companies in September 2008.

Fannie and Freddie operate “in a manner entirely different than they had been during the crisis period, precisely because Democrats acted — in collaboration with the Bush administration,’’ Representative Barney Frank, Democrat from Newton, Mass., wrote last week in a memo to White House chief of staff Rahm Emanuel. Their losses “occurred before we took the first step towards reforming them . . . nothing we could do today will diminish those losses.’’

Comment: I find it extraordinary that Democrats still want to run interference for these two entities. When Fannie and Freddie were nationalized, I knew that they would continue to be used as a political tool for the current administration. BTW, all of their debt is "off the books." So, most Americans are not aware of the $5.5 trillion liability looming in the shadows. Can anybody say--Greece?

Here is another news link on Fannie Mae and it's massive debt.

The cost of "flimsy" lending

From the L.A. Times:

Though signs of recovery in the housing market are emerging, thousands of people throughout the Southland are still in a precarious position on the brink of foreclosure, struggling with monthly bills and mortgage payments.

Duchemin and Ashraf are an extreme example because they've gone through foreclosures on two homes and are in danger of losing a third. They aren't alone: Flimsy lending practices mean that thousands of other borrowers face the prospect of repeated foreclosures, mortgage and foreclosure experts said.

The problem is especially visible in areas that attracted speculative buyers during the boom. In Maricopa County in Arizona, which includes Phoenix, at least 283 individuals have received a foreclosure notice on two or more properties since 2006, according to data provided by RealtyTrac Inc.

Multiple foreclosures are "probably more common in this decade than they've ever been because everyone was running to get into the real estate investing business," said Rick Sharga, a senior vice president at RealtyTrac.

Clark County in Nevada, another area that attracted house flippers, had at least 179 buyers who were foreclosed on more than once over the same period, the data show...

Because people thought the price of real estate would keep climbing, O'Toole said, they figured that the more homes they bought, the more they'd earn eventually.

"In a lot of cases, you had folks in this gold rush mentality: 'Real estate is going up, the more houses I buy, the more money I'll make.' "

The article mentions "flimsy lending practices" but doesn't explain how the lending industry came to offer easy credit in which speculation was encouraged. Instead, it builds sympathy for the Duchemin's without really looking into the big picture, like the politicization of the mortgage lending industry in which lenders were coaxed into providing credit to borrowers it would never have under normal circumstances. Why anyone would lend the Duchemin's funds for three homes is beyond me. Also, notice how the article never mentions the Duchemin's bad decision to "buy" three houses?

Let them fall

While defaults on homes rise (people are now just walking away from mortgages they can't afford), the Obama administration continues to burn through billions of taxpayer dollars to prevent the unavoidable. I say that if the government wants "affordable" housing as they have been telling us for decades, then let housing prices fall and stop blowing through tax payer funds in an attempt to buy votes by looking compassionate. Does anybody else notice that being "compassionate" with other peoples' money is far too easy for politicians?

Let the bad investments die already

From the Mercury News:

LAS VEGAS — President Obama unveiled a $1.5 billion program to aid the states hardest hit by the foreclosure crisis, a small but targeted effort to address a housing problem that continues to resist government solutions.

The program, which administration officials called an "innovation fund," is modest in size and reach and comes as the administration's chief foreclosure-prevention program faces criticism for not doing more to help borrowers.

Speaking to the Las Vegas Chamber of Commerce, Obama said the program would allow states to find new ways to help struggling homeowners. "That means that here in Nevada, we're going to be able to prevent some foreclosures that otherwise would have happened," he said Friday afternoon. "The goal is to target communities at the center of the crisis and to empower local agencies that know these communities best."

Obama made the same promise at a town hall meeting earlier in the day, telling about 1,700 people in Henderson, a suburb near Las Vegas, that "government has a responsibility to help deal with this problem."

VH: Here we go again. The Federal government riding the white horse over the hill to "help" out distressed homeowners. So instead of letting these bad investments go quickly to bankruptcy and clearing out the housing market, we have a vain attempt to prop up a market that shows very little signs of improvement. I don't see how this helps people who, after this small injection of public funds, will most likely lose their homes because they can't find a job or the value of their homes are much lower than what they are shelling out each month in mortgage payments. The irony in all this is that it was the Federal government that led all of these poor people down this path of destruction by implementing all sorts of "affordable housing" incentives. If the Feds want affordable housing now and they want a quick recovery of the housing market, why not let prices drop to their equilibrium? Instead, we get more public funds thrown at lost causes.

No Consequences

Since it was our government working through an aggressive "affordable housing" campaign that was mainly responsible for the housing bubble and it’s subsequent collapse, and which then led to the financial storm that followed, why does anyone really believe that any legislation that comes out of Congress will address any "lack" of oversight of the financial sector? This legislation is obviously “red meat” for citizens fed the liberal narrative (Thank you, MSM!) that the entire collapse was due to "greed" and "lack of regulation." Where is the movement to remove Barney Frank and Chris Dodd from their powerful committee posts? Afterall, those two were right in the thicket of this whole national nightmare.

Thomas Sowell - The Housing Boom and Bust

Comment: When some conservatives noted that the Community Reinvestment Act had some factor in the housing collapse, liberal commentators responded by saying that the CRA program and those that participated in it had very little default rates. While this is true, the point that is missed by liberal critics is that the CRA created a culture outside of the CRA program where "affordable" housing activists via progressive politicians effectively influenced financial regulators into pressuring banks to make more loans to less-than-creditworthy borrowers than they would normally be willing to risk. The political epitome of this is Mr. Barney Frank. He constantly pushed public policy to address a "housing affordibilty problem." The results of his work is the housing bubble and collapse.

Thomas Sowell - Housing Boom and Bust

Thomas Sowell is a national treasure.

HT: Liberty Pen