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Eye on Washington
April 3, 2008
Speculators
At a time when many distressed homeowners would like to receive a reassuring message from the government, they
keep hearing on the airwaves that the Bush administration is not going to help "speculators."
Treasury Secretary Henry Paulson always punctuates his speeches with a dissertation that the government has no
obligation to help people who find it futile to make hefty payments on a mortgage when the value of their house
has fallen and continues to slide.
It seems that almost anybody who purchased a home in 2006 and 2007 was just greedy.
Maybe if he were a better orator or had a better speechwriter, the distinction between helping struggling homeowners
and shutting off people who rode the housing boom wouldn't come off as so harsh.
| The Treasury secretary is serving up red meat for the Bush crowd, and the code word 'speculator' seems to fit the menu. |
But the Wall Street baron chosen by President Bush to clean up the subprime mess must appease the president's conservative base, particularly in Congress.
So the Treasury secretary is serving up red meat for the Bush crowd, and the code word "speculator" seems to fit the menu. Thus "speculator" has become a dirty word.
But it's more than red meat; it is dictating the Bush administration's approach to the housing wreck.
Secretary Paulson told Congress to forget about passing a Democratic bill that would create a special Federal Housing Administration fund for refinancing 1 million to 2 million homeowners with underwater mortgages.
Under the proposal sponsored by Rep. Barney Frank, D-Mass., and Sen. Christopher Dodd, D-Conn., lenders would have to write down the mortgage to 85% of the appraised value of the property.
The FHA proposal would give lenders/investors the option of taking a "quick hit or a slow bleed," one pundit said. And it could provide borrowers with an affordable FHA mortgage and a new start.
At first it sounded as if the president opposed this expansion of the FHA program, which, if we remember history, was created during the Great Depression to stabilize the housing market with the introduction of the first 30-year fixed-rate mortgage.
Later we learn HUD is working on a similar proposal. But the administration does not want Congress involved. It wants to use FHA's existing authority and bend it to fit today's circumstances.
| HUD's efforts will likely fall far short of the relief the Democratic plan promises. |
HUD's efforts will likely fall far short of the relief the Democratic plan promises. FHA lenders will probably struggle to qualify needy borrowers and leave many disappointed.
But more importantly, it shows the Bush administration is trying to address the housing crisis in a targeted way that does not overreach and shuts the door on speculators.
This tactic also provides political cover in an election year for Republican lawmakers who want to block or vote against the Democratic proposal. And it only takes a few Republicans in the Senate to block any legislation and keep it away from president's desk.
Comments
Posted: 2008-04-09 15:03:43
by Gale burke
Thanks for the article. I am still wondering who Bush thinks was greedy? Could it have been the lenders? The average home buyer doesn't have a clue about the lending process. I am an escrow closer and saw some of the awful loans made by lenders. I always asked my customers if they knew how these loans worked and were they prepared to pay the additional amount once their loan adjusted? Most Mortgage Brokers told them they need not worry because they probably wouldn't be in the house once that happened. I guess they could see the future, because I always tell people that we never know what the future will hold and they have to be prepared to make those payments, so if they thought they couldn't make the increased payment then they needed to re-think what they were doing. I also used to be a workout officer for a savings and loan so I know first hand the problems and challenges dealing with non-performing assets. The whole lending process needs to be overhauled. If lenders were portfolio lenders do you think all these problems would be here now? Just something to think about.
