housing – Page 2 – Hank Kalet

Foreclosing on reform

The federal housing bailout bill passed by Congress, which has a promise of a signature from the president, is fine as far as it goes.

The problem, as the progressive economist Dean Baker notes, is that it doesn’t go very far at all.

The bill allows lenders to bring failing mortgages to the Federal Housing Authority (FHA), which will guarantee a new mortgage at 85 percent of the current appraised value of the home. The Congressional Budget Office (CBO) estimates that lenders will bring 400,000 mortgages to the FHA over the next three years. CBO expects that 140,000 of these mortgages will go into foreclosure a second time, leaving a net of 260,000 homeowners who will hang onto their homes as a result of this program.

By contrast, there are likely to be 2.5 million to 3 million foreclosures in both 2008 and 2009. This means that the housing bill will likely help less than five percent of the families facing foreclosure over the next two years, leaving 95 percent of this group out of luck.

That’s 19 of 20 homeowners that will be left out in the cold, while

securing the multimillion-dollar salaries of the top executives of Fannie Mae and Freddie Mac, and protecting their shareholders from facing the full consequences of their bad stock picks, the bill also provided funds for guaranteeing new mortgages for homeowners facing foreclosure.

Baker touts an alternative:

the Saving Family Homes Act, which would allow many of these homeowners to stay in their homes.

The bill, sponsored by U.S. Rep. Raœl Grijalva, works like this:

The bill temporarily alters the rules on foreclosures. It allows homeowners facing foreclosure the option to stay in their home as renters paying the fair market rent. They would be allowed to remain in their home for up to 20 years. The bill would only apply to homes that were purchased for less than the median price in the area. This ensures that it only benefits those most in need of help, rather than millionaires who made bad bets in the housing market.

But most of those in Congress lack the creativity — or, more important, the political courage — to buck the conventional wisdom, which generally sides with the money.

McMahon as the poster boy for housing crisis? Get real

I was watching Good Morning America today when a story on Ed McMahon’s mortgage woes came on. The longtime TV sidekick

is in danger of losing his multimillion-dollar Beverly Hills home to foreclosure. Documents show that McMahon is nearly $644,000 behind in payments on a $4.8 million mortgage loan he got in 2005. Countrywide Home Loans Inc. filed the notice of default on Feb. 28, with the amount owed to “increase until your account becomes current,” according to documents obtained by Celebtv.com.

As of Wednesday afternoon, McMahon’s Mediterranean-styled house was still in the process of foreclosure; the bank hasn’t taken it over yet and no trustee sale date has been set. McMahon and his wife, Pamela, are having “very fruitful discussions” with the lender to resolve the problem, spokesman Howard Bragman said Wednesday.

It’s not a story I normally pay attention to, but the lead-in tease from Diane Sawyer caught my ear:

Further proof of the far reach of the economic downturn — the housing crisis in the tony neighborhood of Beverly Hills? Where a banks is now threatening to foreclose on the mansion of TV veteran Ed McMahon.

A real estate expert quoted by the Associated Press attempts to make the same point:

The former “Star Search” host has found himself in the same situation so many homeowners have recently, said Daren Blomquist, spokesman for RealtyTrac, which follows foreclosure filings. He found that McMahon has taken out several loans on the house over the past few years, including a $300,000 home equity line of credit the same day he took out the $4.8 million loan in November 2005.

“You’re using your house as a piggy bank because there’s so much equity — at least back in 2005 — so you’re able to take money out of it and use that for just spending in any way you see fit,” Blomquist said. “But the problem with that in the long term is that with the housing in this market, you don’t see it continue to go up in property value. Now, you see it going down in many areas … and you still have to pay your mortgage payments. You don’t have the option to take more cash out of the house.”

It certainly is a sad story, but it’s not exactly the same thing as a family in Jamesburg losing a $200,000 Cape Cod because the were conned by some bank into borrowing more than could afford on an adjustable-rate mortgage. McMahon is not likely to end up on the street — in fact, he’s planning to live there as long as he can and is in the process of negotiating a settlement, something that most of those hit by the sub-prime crisis have been unable to do.

House of cards

I have to wonder how long it will be before the national and state housing slump result in massive tax appeals, causing local budgets to spring leakes. And what about the state budget, which is dependent on the economy and already is a mess? Not a pretty picture.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick

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Housing plan nixed

The state Supreme Court has invalidated the most recent housing plan crafted by the state Council on Affordable Housing, saying the new “rules frustrate rather than further, a realistic opportunity for the production of affordable housing.”

Responding to an appeal brought by the Fair Share Housing Center and three other organizations, the court found the state Council on Affordable Housing in 2004 had watered down the towns’ housing obligations through bogus calculations, arbitrary rules and unconstitutional changes. Overall, the court found COAH eliminated 100,000 affordable housing units without adequate reasoning.

This should not have been a surprise to anyone. The state’s approach to the third round — letting towns come up with their own numbers — was rife with conflicts, giving suburban municipalities too much leeway to underestimate their need.

The court’s ruling opens the way for the state Legislature to come up with a more sensible approach, including the elimination of so-called regional contribution agreements that allow towns to pawn off their own obligations on needy urban centers.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick