by Damozel | ...not that that's a bad thing. Quite the reverse, in fact. Especially since I am so sure that no Republican or a rugged-individualist Libertarian type would EVER accept a government hand-out to keep from losing the family home. What price individual responsibility then?
For everyone else there's this:
Though communities across the country have been affected by the crisis, Arizona has been hit particularly hard -- in 2008, only two states had more foreclosures.
And President Obama is there today, in Phoenix, to unveil his "Homeowner Affordability and Stability Plan," which will help bring relief to homeowners and bring some order to the housing market. (The White House Blog)
ABC News has the story on just how bad things have become in some places (including, but not limited to, Arizona).
According to The Swamp, Obama will point out that this is "a crisis unlike any we've ever known."
"The American Dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of families and neighborhoods.
"It is a crisis that strikes at the heart of the middle class: the homes in which we invest our savings, build our lives, raise our families, and plant roots in our communities,'' the president plans to say....
"In the end, all of us are paying a price for this home mortgage crisis,'' he will say. "And all of us will pay an even steeper price if we allow this crisis to deepen - a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit." (The Swamp)
Will I really benefit? Really? As one of those who never dreamed of or cared about owning my own home, I'll take his word for it. I would certainly rather see TARP funds -- a/k/a my tax dollars -- used to help ordinary families keep their houses than, say, help investment bankers and financiers pay themselves 8 million dollar bonuses.
But if I don't benefit, then I'm naturally interested in knowing who will. Philip Klein says:
The New York Times calls the plan "more ambitious than expected" and provides some more specifics.
The plan, which is more ambitious than expected, would spend $75 billion to help keep as many as four million families in their homes, and would help as many as five million more refinance their mortgages to take advantage of lower interest rates...
The Treasury Department would also buy $200 billion more preferred shares in Fannie Mae and Freddie Mac. The money would flow from funds authorized under the 2008 Housing and Economic Recovery Act, and would not come from the $700 billion financial bailout.
The plan would seek to entice lenders into lowering rates, and would offer homeowners a chance to shave thousands of dollars off their mortgages. The government would offer homeowners principal reductions of $1,000 a year for five years if they stayed current on their payments, and would give $500 to loan servicers if they modified loans before borrowers fell behind in their payments.
The aim is to preserve communities from being "pulled over the edge" along with the defaulting homeowners. (NYT)
The LA Times has some of the back story of the "save the homeowner" movement and some of the questions that it raises.
Speaking as a renter who pays full value for keeping a roof over her head (hey, I would like a bailout for something sometime), I must say I have little sympathy in one sense with the moans of homeowners stuck with negative equity as a result of a gamble that the value of homes would always go up, up, up. One reason I'm living in an apartment is that I recognized that this myth was a myth.
On the other hand, I have a lot of sympathy with the homeless. I'd rather not add to their numbers. I'm sure there are other direct benefits to me --- of the trickle down sort. Fewer people competing for rental housing, etc. etc.
Anyway, here's more on why the government had to step in.
Congress tackled that problem last summer by passing a law known as Hope for Homeowners. Under that plan, the government would guarantee new mortgages for worthy borrowers if lenders would agree to write down the principal. But the program has had few takers so far.
One way of forcing lenders to reduce principal is by changing bankruptcy law. Currently, bankruptcy law permits judges to lower the principal for any consumer loan except a mortgage.
Obama has expressed support for the idea, which would require Congress to pass new legislation to amend the bankruptcy code.
There you go. Help -- if (1) you made a bad investment in buying a home and (2) are a fellow Democrat who believes that part of the function of the community is to save the community from "sliding over the edge" -- is on the way! Republicans and Libertarians will doubtless refuse to accept their share and demand tax cuts instead, because middle class Republicans and Libertarians can't do basic math.
Memeorandum has more here.
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