Wednesday, May 21, 2008

State of the homes in Atlanta

Homeowners here are a little nervous about the downward turn. However, Atlanta has been weathering the storm rather well by comparison to the West Coast or Florida, all except for condos. Though well paying jobs do seem to be growing scarce here.

Congress has done little to turn all of this around. The economic stimulus tax rebate checks will translate into us paying that money back in more taxes or inflation. The money is going to come from somewhere. They just get good political mileage out of this gambit.

Meanwhile, the banks are getting away with murder by being able to turn down offers for homes going into foreclosure, then once the house is foreclosed, the bank allows the buyers to bid up the price. The homeowner loses all their equity, the bank gets restored for the loan by the new buyer, and gets a nice tidy profit for their "troubles". Though it is technically illegal for banks to "broker" property, they are effectively doing so by turning down bona fide offers and allowing the value to bid up.

Meanwhile, the lax regulations for lending practices that has led us down this old and familiar road have not been dealt with by anyone. This lax environment allowed banks to dangle tempting fruits to home buyers by allowing most folks to buy more than they probably should have. While closing the deal, the banks, Realtors, and mortgage brokers downplayed the realities of re-financing when things go badly for the homeowners credit. All them, for the short term returns, earn more buy selling a bigger home than not. Once they are paid, there is no further recourse against any of them. Now the banks want us to bail out their loans? Ha. One of the rare good things Bush has done is threaten to veto congress's attempts to bail out the banks.

The banks know which loans are in danger of foreclosure. Unless they want to hold bad debt, those loans should be allowed to refinance to a 30 year fixed at a reasonable rate for a 725 FICO score, as a standard, and then given 2 or 3 months of grace period to re-stabilize the buyer's payment budgets. All of this should be at no expense to the homeowner. The banks set up this mess, they promoted the products, and they allowed marginal loans to be underwritten. They should eat the losses, or work in good faith to transition these loans into more serviceable accounts. And since their actions have led to an artificial run up in values, they have endangered the financial well being of every home owner.

This would go a great distance towards stabilizing the credit markets, both here and abroad.

The alternatives to this course of action are few. If we stay on the road we are now on, in terms of the Fed and Congress's quick fixes, we will drag the markets further down, and delay recovery.

Hmm. Maybe they want this to happen so we will vote in the new Amero to replace the Dollar, and usher in the North American Union to extinguish the flame of liberty knows as the USA.

No comments:

Post a Comment

The moderator will review and approve your message soon. Thank you for your comment.