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Congress has shown
little interest in ensuring the new guarantee prices reflect fundamentals,
making it likely many of the people "helped" under the program will
end up facing foreclosure a second time. However, to make matters worse, they
came up with the idea of financing the plan by taking away a stream of funding
that had been dedicated to help low-income renters.
That's
right; Congress wants to take away money from low-income renters to help
bankers that made bad loans in the housing bubble. As we all know, when the
banks are in trouble, it is not the time to talk about the free market.
The
real painful part of this story is it would be very easy to help the real
victims in this story: the low- and moderate-income homeowners, who were
suckered into buying homes at bubble-inflated prices with bad mortgages.
Congress could just temporarily change the rules on foreclosure to allow
moderate-income homeowners facing foreclosure the option to stay in their home
paying the fair market rent.
This
would provide these families with housing security. At least as important, it
is likely to result in many of these families remaining in their houses as
homeowners, since banks will have a strong incentive to negotiate new terms on
mortgages in order to avoid becoming landlords. And the best part of this story
is that families would benefit from this change the moment Congress passed the
law. There is no need for a new bureaucracy or any taxpayer dollars.
That
is what Congress would do if it was serious about helping families facing
foreclosure. Unfortunately, the banks seem to rank higher in its concerns -
remember, just three years ago, it made the bankruptcy laws more stringent
(applied retroactively), to boost bank profits.
Apparently,
the banks rank so high Congress is even prepared to take money away from
low-income renters to meet their needs. Stealing candy from babies would be a
step up for this crew.
Dean Baker is the co-director of the Center for Economic and Policy
Research (CEPR).