Jeff Swiatek of The Indianapolis Star (Indiana)that the wave of foreclosures that seemed to have been forestalled in that city is on the verge of swelling again. The report, specific to the Indianapolis region, is all the more chilling when we recall that Indiana (and Maryland) was (were) not deep into the risky market. Thus the foreclosures that may come have been triggered by other systemic issues beyond speculation or risky mortgages then packaged off to other investors.
The example that opens his story is one of many, many, tens of thousands: The Gonzales family are over 90 days behind payments because he works in construction and his wife’s company (an auto-parts manufacturer) cut jobs. They both produce highly valued products we all depend upon, and yet they both are cut out by the machinations of the financial sector. The advice from the lender? Short sell to avoid foreclosure. Mr. Gonzales’s response? ‘I’m losing my home either way.’ Mr Swiatek’s report reminds us that the problems are not statistical ones but human ones. Hard working and productive people are being stymied by financial institutions who make money by moving it around, not by creating something of intrinsic value.
The political pressures continue to mount, though, and the Obama Administration has recently allowed leaks about steps they are unveiling today about how to deal with, at least ‘to mitigate,’ the problem.
The New York Timesthat the government is seeking to move many underwater mortgages into government-backed refinance packages. This proposal comes not quite a year after to assist homeowners. Unfortunately for everyone, the problems continue, albeit in a slightly different form: the rate of foreclosures is slowing, but delinquent accounts have swelled notably in the last 3 months. These delinquencies are the target for the latest initiative from the administration.
Unlike previous plans, according to the Washington Post, this latest one seeks to encourage banks to accept short-term losses on the loans but not press for short sales (banks’ participation is voluntary, though the Federal Housing Administration believes its $14+ million will serve as a sweet carrot). Most efforts thus far have been to assist the borrowers meet the mortgage payments established when unemployment was under 3% and many believed the housing economy could never have a downswing again. The shift in policy/target is designed to have banks self-reduce their expectations on loan payments, and the government expressly wants to help those who are unemployed or underemployed but who otherwise have good credit histories (and thus should not be seen by the lenders as long-term liabilities). The plan is not fully out for publication (as of this posting), much less enacted, but some important challenges have been posed to the information we have thus far, especially how taxpayers generally might still be left with the bill (which, it seems to us, has been the case ever since (Ex-)President Bush pushed the TARP funds to the investment banks).
A Non-Governmental Organization that is trying to act as a multiplier effect on government efforts is , whose website describes its work as “an alliance between counselors, mortgage companies, investors, and other mortgage market participants. This alliance will maximize outreach efforts to homeowners in distress to help them stay in their homes and will create a unified, coordinated plan to reach and help as many homeowners as possible. The members of this alliance recognize that by working together, they will be more effective than by working independently.
The Department of the Treasury and the U.S. Department of Housing and Urban Development encouraged leaders in the lending industry, investors and non-profits to form this alliance.”
The articles here referenced and linked all have spoken to administrators at HOPE NOW, and the organization seems to want to position itself as the liaison among government monies, distressed homeowners, and nervous lenders. An unenviable position, to be sure. But the HOPE NOW website is full of practical and specific information and advice on how to deal with the facts and figures in each homeowner’s situation – reminding us again that the housing crisis needs all-hands-on-deck and the crisis is having a terrible impact on people, not on statistics.