Housing Market Recovery by decelerating Foreclosures

January 18, 2010

By Padmini Arhant

As stated earlier, the key to the economic recovery is to revive the job market, the housing market and passing the health care legislation. Both job and housing market is entirely dependent upon the consolidated commitments from the public and the private sector.

The public sector represented by the government has the right agenda with the President’s proposal to levy tax on the financial institutions responsible for the financial crisis. However, the collected tax and fees from the finance industry is rumored to be accumulated in the stimulus pool against the Republican supporters’ demand that the proceeds be applied to the national deficit reduction.

Another contentious issue is the industry retaliation to the tax levy trickling down to the end consumer. It’s reported earlier that the industry has vowed to pass on the charges to the customer with an alternative threat to move jobs overseas.

Banking sector’s response of this nature is not unusual and prompts a swift termination of such protocol through regulations blocking the antagonistic traditions that brought the economy on the brink of collapse. Otherwise, taxes and fees should be imposed on the bonuses and stock options claimed by the executives and the senior management.

It’s important to enlighten those individuals fixated on reducing the national deficit when the economy is struggling to emerge from the deep recession. Further, the national deficit is a matter of great concern regardless of political allegiance as the debt mitigation burden is on the immediate and the future generation.

Minimizing deficit by merely returning the revenues and sources of income while, ignoring the cited economic woes is analogous to an attempt to contain the flood with an imaginary barrier.

Expansion in economic growth would directly contribute to the deficit contraction and there is an urgency to divert attention towards the two components i.e. the job and the housing market.

An element of truth noted in the funds being allocated to the potential banks’ bailout per disclosure by the current Treasury Secretary Timothy Geithner on the $75 billion housing market stimulus package.

The frustration in this respect is mutual and shared between the Tea Party movement and the Progressives in a bizarre convergence. It’s indeed a relief to view the polarized factions possessing some commonality, proving that a consensus can be arrived on national issues.

Taxpayers can no longer afford to bailout industries who betray them upon being bailed out and fail to fulfill their end of the bargain, i.e. to create and protect jobs that would lead to the economic revival.

Reverting to the tasks ahead for the public and the private sector, the effective strategies are:

Congress should reinstate the repealed Glass Steagall Act that prohibits the finance industry from indulging in speculative trading and instead focus on equity building, deposit security and bar insurance undertakings with high-risk collaterals.

The stand-alone Consumer Financial Protection agency as part of the rigorous financial regulation is a requirement to address the waywardly conduct demonstrated by the financial sector.

President Obama’s proposal in the creation of an agency to safeguard the consumer interests against abuses in mortgages, credit cards and other form of lending is precisely the remedy for the ethically deteriorating banking sector.

Abandoning the measure is a green signal for the repeat episode. Any legislators opposing the proposal are clearly against their constituents and the national interest.

In another related issue, stripping the Federal Reserve of all regulatory responsibilities is based on the dismal performance by the Federal Reserve authorities in the past two decades predominantly due to excessive power entrusted to the single most Federal institution.

On the contrary, the Administration’s position to expand the Fed’s role is a move in the reverse direction considering the status quo.

A noteworthy factor in the legislative affairs is, whenever a suggestion or a legislative proposal is made to reform any industry from the democratic side, the Republican representatives in the House and the Senate have unanimously rejected with a rare exception of one or two daring members casting their vote by bowing to the conscientious call of duty.

The partisanship and double standards was prevalent during the Clinton Presidency but even conspicuous throughout the Obama presidency.

The point in reference is available in the recent Financial Reform bill favoring the stand-alone consumer financial protection agency introduced by the Democratic Senator Chris Dodd and initiated by President Obama.

In contrast, the legislation with a similar agenda from the Republican aisle is overwhelmingly approved not only by the Republican minority but also with the cooperation from the democratic side.

A classic example being the year-end legislative amendment to the financial reform bill put forth by the Republican House of Representative Ron Paul –

The House Financial Services Committee approved Rep. Ron Paul’s measure by 43-26, calling for drastic expansion of the government’s power to audit the Federal Reserve.

The irony being, the ideological opposition consistently against the democrats sponsored government action characterized as ‘take over’ in any legislation is somehow complacent to the vast government intervention in this particular case.

Nevertheless, the amendment is a positive step in the financial regulation aimed at achieving transparency and accountability from the Federal Reserve, the long desired goals in the political and economic sphere.

With populace demand, the gridlock in Washington could be prevented by identifying the legislators contesting the party and not the issue. Likewise, those lawmakers obstructing their constituents opportunities for self-benefit through filibuster and unfair deal negotiations in the Senate vote, ought to explain the reason behind violating the constitutional oath.

Proceeding towards the core economic issue, the housing market decline has unequivocally contributed to the liquidity freeze and paralyzed the residential and the commercial real estate trajectory across the nation.

The housing market synopsis from the news report is depressing and conclusively the forecast is dire unless multiple course of action from the combined forces of the finance industry, the Treasury and the Congress is taken to resurrect the dying sector.

Source: Associated Press, January 16, 2010

Mortgage modifications fall well short of U.S. goal

Housing market may face another difficult year, economist says

By Alan Zibel

“Almost a year later, it appears about 750,000 homeowners – a fraction of the 3 million to 4 million originally projected – might complete the application process, predicts Mark Zandi, chief economist at Moody’s Economy.com.

A record 2.8 million households were threatened with foreclosure last year, up more than 20 percent from a year earlier, RealtyTrac reported this week.

The foreclosure listing firm expects another record this year.

Home prices, meanwhile, are down 30 percent nationally from the peak in mid-2006.

“It’s a very serious threat to the housing market, and still one of the most significant risks to the broader recovery,” Zandi said.

The Obama plan aims to help borrowers in financial trouble by making homeowners’ payments more affordable.

But just 66,500 borrowers, or 7 percent of those who signed up, have completed the program as of December, the Treasury Department said Friday.

Another 49,000, or more than 5 percent, have dropped out of the program entirely – either because they missed payments or were found to be ineligible.

Thousands more remain in limbo awaiting an answer.

There’s blame on both sides:

Mortgage companies say they have struggled to get back the necessary paperwork, while homeowners and housing counselors say navigating the bureaucratic maze often seems impossible.”


Resolving the Solvable: By Padmini Arhant

Since the government is the largest employer during the economic recession, it’s reasonable to expect the agencies involved in the housing program to function efficiently. In addition, maximum utilization of technology should enable user-friendly application format.

As for the homeowners and the counselors faltering on the paperwork submission despite simplifying the process presumably with a deadline, serving a written notice with a foreclosure warning should yield the necessary response or action from them.

On the paperwork completion, it’s entirely up to the homeowners to salvage their homes from being foreclosed. There are non-profit workshops and agencies working in many counties apart from the internet sources to assist homeowners with the documentation.

Eligibility is the bone of contention in most national issues from housing to health care.

Perhaps, the program needs a thorough review and necessary threshold adjustments to accommodate the volume that would eventually relieve the homeowners, the mortgage companies and the banks from the debt confinement.

It appears that the stringent rules often cause more harm than good in resolving crisis of great magnitude confronting the nation at the present time.

Given the gloomy economic environment, sometimes leniency or relaxing the rules on an individual basis would help the situation with the homeowners retaining possession of their homes.

Foreclosure is an epidemic and drastically affects everyone involved beginning with the mortgagee, the lender, the county, the city and the nation at large, not to mention the crime emanating as a result of the unfortunate event.

Improvement in home values made possible through customized lending as opposed to generic programs is crucial in dealing with the escalating foreclosures, thereby significantly easing the economic recession.

Thank you.

Padmini Arhant


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