Housing Economic Recovery Act of 2008 No Help For Consumers
Author: Rob K. Blake
Published: July 30, 2008
The Housing Economic Recovery Act of 2008 became law today and I am sad to say it will offer no help to consumers, home owners, or foreclosure victims. As with most political solutions to economic events, the new law has more bark than bite.
In an interview on Bloomberg (see video below), Thomas Atteberry of First Pacific Advisors warns against putting too much faith in lawmakers to solve the housing, credit, and foreclosure problems.
I concur.
No Meaningful Help for Foreclosure Victims
As Mr. Ateberry points out even if FHA manages to refinance 100,000s of foreclosure victims or obtain short term loan modifications, the studies show about 35-45% of these mortgages with still find their way to the auction block. This could be seen as a bad thing in that it elongates the housing crisis. Better we bite the bullet now and get the housing price correction over with sooner rather than just extending it.
No Help For Home Owners
The Housing Economic Recovery Act of 2008 will have no effect on sliding home prices and dropping home purchase numbers. Until the market can get and finance folks who want to buy homes, the slide on both measures will worsen. Current home owners are stuck watching their primary asset fall in value until that time.
The measly $5 Billion given to local governments to spend buying and fixing foreclosed homes in the Housing Economic Recovery Act of 2008 is a spit in the ocean. Fannie Mae and Freddie Mac have over $800 Billion in Alt-A and subprime loans that have yet been classified as “at risk”. With this tidal wave headed our way, $5 Billion looks silly…and it is.
Consumer Get No Help Either
How are consumers supposed to contemplate buying a home when they spend currently 80% of their income now on necessities?
The American consumer has never been this over-extended since oil, gas, food, debt service, and health care costs are spiking by double digits yet their incomes remain the same.
I believe the consumer must have a little wiggle room in the budget before they contemplate home ownership and that can’t happen until inflation of the price of necessities drops. This is the exact wrong time to have commodity price inflation, yet Bernanke, the Congress, or the Administration did nothing with the Housing Economic Recovery Act of 2008 to help on that front.
The Housing Economic Recovery Act of 2008 as if the name alone makes it so.
I wish…
Here’s the video interview…
Good Luck!
UPDATE: As expected the President signed the Housing and Economic Recovery Act of 2008 into law today, July 30, 2008.
Author: Rob K. Blake
Related Articles
Reader Comments
How To Use Our Comment Section:
1. To comment on the article or post: Simply cursor down to the bottom and add your comment in the box, hit "Save". After moderation, your comment will appear next chronologically.
2. To comment on a comment (not on the post) or what is called a "nested" or "threaded" comment: Remember the name of the commentor, hit the "Reply" link in the comment you'd like to reply to. You're taken to the bottom where you can pick the comment name from the "Reply to" drop down list. Then add your comment to the box, hit save. After moderation, your comment will appear "nested" under the selected comment before chronology is considered. Nesting will go down 4 levels.
Great post and interview. You might also want to comment on the changes to Section 121 included in the Act. Homeowners lose the ability to take all of the 121 exclusion if the property was used for “non-qualifying use.”
Very interesting article and interview. I agree that the bill is great for White House publicity, not-so-great in execution. This program is completely voluntary for lenders. They don’t have to participate if they don’t want to. I can see the mom and pop lenders, with smaller books, considering the program for the good of their clients. However Countrywide, Bank of America, and other big players… I would be surprised if they embraced a voluntary program, especially when they already have their own home-retention and loss mitigation programs in place.
Mr. Ateberry is correct in pointing out that this bill does not address the root of the problem. Consumers need to repair their balance sheets. If Bush is going to allocate $300 billion to lower the consumers’ mortgages, he needs to put another billion into mandatory education for these individuals. It will do no good to temporarily lower someone’s mortgage if he or she will continue to spend and collect debt. The foreclosure process is not averted, but only delayed.
Furthermore, what reward is there for consumers who have taken the time to research their income and expenditures – those who pay their mortgages on time? It doesn’t seem quite fair for the American’s who have worked hard to avoid foreclosure on their own. If anything, the passing of this bill may encourage those who were on the fence to go into default.
I’d love to hear additional thoughts! Thanks!
I felt a glimmer of hope when I heard this bill had went through. We are 2 months behind on our mortage as a result of my husband getting laid off from his job he had had for 11 years. Our house has been on the market now for 4 months…we owe 120k more than it’s worth.
I called B of A to see if we could qualify for this program and they told me they weren’t opting to do it and would not negotiate the terms of my loan in any way. I think this bill is getting a lot of peoples hopes up for nothing.
Interesting to read all of the comments that individuals have that may not have been effected by this morgage mess. I have been uemploymed for sometime and this has effected my situation. We are in the process of contacting an attorney to help us with predatory lending. We were always on time with the mortage does anyone realize that we are in a recession and that there are some good individuals that were caught up in this whole mess. I hear the ladies comments about rewarding bad people that have not paid their mortgages but what about the people that have. Sounds like the American Way, always attempting to blame the individuals that are on the lower spectrum of things. I have worked all my life paid taxes, sent kids to college and we have always paid our way. We are caught up in this mess and for once we need help. We are not on welfare we have always paid our bills. Why is it that when people in middle class americans need help,there is no help. we carry the weight of this country in all aspects. But god for bid we need help. Middle class american does not quality for food stamps, asistance with help for college for our kids, we pay their way or borrow money. We are unable to hide our money in swiss bank accounts, evade paying taxes becasue we are so rich, we can avoid paying and instead we get a big fat income tax check back. Do I sound angry yes I am sick and tired of the amrican dream that somehow does not exsist for all of us. Tired of seeing individuals come over from other countries and qualify for things that we can not get. Wathch them send their kids to college and we pay for it as they laught in our faces. I worked in the educational system and watched the individuals come over an qualify for money to go to school as we all middle class individual struggle to send our kids. Watch them purchase homes but yet they live over in England but come over and buy homes in orlando and other resort areas that most of the people we know or our kids can not buy. Yes I am sick and tired and we need change. The mortgage mess is the biggest banking scam. Again Bush signed a bill that will help his buddies our but what about us the consumers.
I was employed by the same co. for 20 yrs. We had a downturn in the economy and I was laid off. My husband has a small IT business that (due to the downturn) is struggling just to make bills each month. He hasn’t had a check in almost 6 months. We are currently living on $1100 per month unemployment. For every decent job, there are thousands of applicants. We do not qualify for welfare, food stamps, etc. Our mortgage is now turned around due to prices falling. We are four months behind in our mortgage. Like the others here, we have always worked hard, paid taxes (more than our share), we paid our kids way thru college. We paid our medical expenses, plus some. Now we find ourselves in EXTREME need and there is no where to turn. Where are we to live? In our car? Until they repo that too? My Gosh, can’t people see that middle class Americans need help? All the lower class get all the help they need, and we qualify for nothing on $1100 per month unemployment? How can that be? I do not know what we are going to do. All five of our kids are grown and out on their own. This should be our coasting years. Instead we find ourselves in worse shape than when we first started out 25 yrs ago.