Like Trying to Stop the Tide...

[GRG55]

Obama unveils new fund to address housing woes

HENDERSON, Nevada (Reuters) - President Barack Obama used a campaign push for Senate Majority Leader Harry Reid on Friday to announce a new fund to support homeowners in five states hit hardest by the U.S. housing crisis.

Housing was at the center of the financial crisis that threw the U.S. economy into deep recession in late 2007. While signs of stabilization are appearing, home foreclosures are still rising in much of the country.

Obama said he was designating $1.5 billion from the Troubled Asset Relief Program to fund programs at local housing finance agencies in California, Florida, Nevada, Arizona and Michigan, which have seen home prices decline more than 20 percent from their peaks.

"This fund's going to help out-of-work homeowners avoid preventable foreclosures," Obama told a town hall-style meeting near Las Vegas. "It will help homeowners who owe more than their homes are worth find a way to pay their mortgages that works for both the borrowers and the lenders alike."

Nevada is still struggling from the housing market crash, and Obama's choice to make the announcement there was no accident.

The president is trying to boost Reid, a Nevada Democrat who trails potential Republican opponents by double digits in opinion polls before November elections that could change the balance of power in Congress...

[GRG55]

Re: Like Trying to Stop the Tide...

Obama unveils new fund to address housing woes

HENDERSON, Nevada (Reuters) - President Barack Obama used a campaign push for Senate Majority Leader Harry Reid on Friday to announce a new fund to support homeowners in five states hit hardest by the U.S. housing crisis.

Housing was at the center of the financial crisis that threw the U.S. economy into deep recession in late 2007. While signs of stabilization are appearing, home foreclosures are still rising in much of the country.

Obama said he was designating $1.5 billion from the Troubled Asset Relief Program to fund programs at local housing finance agencies in California, Florida, Nevada, Arizona and Michigan, which have seen home prices decline more than 20 percent from their peaks.

"This fund's going to help out-of-work homeowners avoid preventable foreclosures," Obama told a town hall-style meeting near Las Vegas. "It will help homeowners who owe more than their homes are worth find a way to pay their mortgages that works for both the borrowers and the lenders alike."

Nevada is still struggling from the housing market crash, and Obama's choice to make the announcement there was no accident.

The president is trying to boost Reid, a Nevada Democrat who trails potential Republican opponents by double digits in opinion polls before November elections that could change the balance of power in Congress...

You just have to love these government "assistance" programs. There is absolutely no way to argue that these programs will not shape behaviour...and, in the long term, not necessarily in a constructive way. Moral hazard writ large...

From Bruce Krasting's blog:

Friday, March 26, 2010

A New Wave of Defaults?

I have been working with a young couple for a year now. They have been up against it. They look pretty typical. They bought an apartment with a first mortgage and low down payment. Then they made improvements with a HELOC. He lost his good job and now works for less. She works long hours and they have a kid.

They are underwater on the 1st mortgage so the HELOC is worthless. Their monthly cash flow including debt service has been negative for a long time. They have been paying the mortgage(s) by drawing down more on the HELOC.

I advised them a year ago to stop the madness. They tried to contact their lenders for assistance but were told they did not qualify for a re-financing, as they were current on their mortgage...

...The “entrance fee” to getting the debt relief they need is to not pay any longer. The cost will be a tarnished credit. They no longer care.

Does this story mean anything in the Macro Big Picture of defaults? I am certain that it does. A rising trend is about to become a rogue wave.

[BiscayneSunrise]

Re: Like Trying to Stop the Tide...

You just have to love these government "assistance" programs. There is absolutely no way to argue that these programs will not shape behaviour...and, in the long term, not necessarily in a constructive way. Moral hazard writ large...


...The “entrance fee” to getting the debt relief they need is to not pay any longer. The cost will be a tarnished credit. They no longer care.







[/INDENT][/INDENT]

Lots of stories around town about people who I would consider upper middle class walking away from their obligations; not just homeowners but also landlords of upside down properties and even some tenants have stopped paying when their landlords are being foreclosed.

The moral metaphor is that it is OK to steal bread to feed your starving family. Many people out there figure they are on the verge of starving financially if they keep up their payments so it is ethical to do so. I'm not approving it but that is how desperate the situation has become and how little hope people hold out for a real estate turnaround.

Conversely, there are still some speculators who have properties listed in my neighborhood at the old 2005 highs. These houses are sitting empty and the investor/owner is somehow figuring that if he holds out, the market will turn and he will get his 2005 price. Now, THAT is the audacity of hope.