Congress is pushing toward a bipartisan bailout for homeowners, the NYT says on C1 and The Washington Post has it on D1. The plan, Democrats claim, could help refinance up to 1.5 million adjustable-rate mortgages into fixed thirty-year notes, though the White House says that’s baloney. Who’s right? Who knows?
The NYT says one in ten homeowners owes more on his or her house than it’s worth, something that will only increase, and 4.2 million loans are delinquent or in foreclosure.
At a minimum, the bipartisan package was expected to include up to $200 million to expand counseling programs for homeowners at risk of foreclosure, $10 billion in tax-exempt bonds for local housing authorities to refinance subprime loans, $4 billion in grants for local governments to buy foreclosed properties and a $15,000 tax credit for purchasers of foreclosed homes or newly built homes that have been sitting vacant.
The Post says the two parties’ agreement would stiffen “truth-in-lending” laws for the mortgage industry, something that surely is needed as of yesterday.
The NYT also writes on C1 that the White House’s Hope Now plan is not really working out, and when it does it tends to help lenders more than homeowners.
Hope Now says it is succeeding. The group, which also includes nonprofit organizations that advise people on managing their debts, says it has helped more than a million people avoid foreclosure.
But Hope Now does not disclose details about how the loan modifications and payment plans it ostensibly helps to broker actually help homeowners. Many people merely get the chance to catch up on late payments.
Even Hope Now says it is unsure how effective it is. The group does not break out the number of loan workouts that occur as a result of its efforts and those that might have happened anyway. Some people who work with Hope Now say it has done little to keep the housing crisis from deepening.
“Hope Now is a failure,” said Michael Shea, the executive director of the Acorn Housing Corporation, a large counseling agency that is part of the Hope Now alliance. “It’s industry-dominated.”
The WSJ was less skeptical a month ago when it reported that the program had helped a million people keep their homes. The Times notes that the program employs a grand total of three people and just four percent of people who dial its touted toll-free line actually talk to a human housing counselor.
But we’re not sure how most of this stuff this is going to solve the housing crisis, anyway, as it will only be really over when people think home prices have fallen enough (or their incomes rise enough) to justify buying again. Converting ARMs into low-rate fixed notes is a no-brainer, but why not force the mortgage industry to do that rather than have local housing authorities do it? And a $15,000 tax credit for buying a foreclosed house? It seems to us like much of this is a short-term fix that helps put some more air into the deflating bubble—that still has a major leak.
But hey, if bailouts are good enough for Wall Street, might as well hand them out to everybody! After all, even if all these initiatives are signed into law, they’ll probably still total less than the toxic waste the Fed’s taken off of Bear Stearns’ (JPMorgan’s) hands.
And just you wait, taxpayers ain’t seen nothin’ yet. Here’s the Los Angeles Times:
The bill is aimed at stemming the rising tide of foreclosures, a big factor in the nation’s continuing housing slump. Addressing the longer-term causes and fallout, including reforming the mortgage process and dealing with homeowners who are “underwater” and owe more than their homes are worth, will have to wait for more comprehensive legislation.
U.S. manufacturing activity dropped last month to the lowest level in nearly five years, but the decline was at a slower rate than in February. It’s still in recessionary territory, though.
In economic news, construction spending tumbled 0.3 percent in February, but that was less than the 1 percent drop in January. It was the fifth straight decline and was driven by a 1 percent drop in residential construction spending, but year over year that number is down 19 percent.
The International Monetary Fund cut its prediction for 2008 worldwide economic growth to 3.7 percent, which would be the slowest rate in six years. That’s down from the IMF’s 5.2 percent prediction last summer. It says there’s a one in four chance of global recession, which it defines as 3 percent or less for some reason that’s not explained, and predicted growth of just 0.5 percent in the U.S.