Solutions To Repos Crisis Leave Out Poor But Include The Rich
Posted on April 11, 2008
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Charity is beginning with throwing money at bankers and construction lobbies. Literally this is the path Congress has taken in tackling the repos crisis. The priority has been given to the rich and powerful who have been affected by the repos crisis. Scant thought has been spared for the evicted who are looking up to the stars for shelter.
The repos story is dotted with villains but the top ranks go to the house builders and the mortgage industry. The construction lobby went full steam ahead with their development plans sure that property prices can never fall but always rise. But when the bubble burst it was a horrific situation. The real estate market saw a surfeit of properties begging for buyers.
The mortgage industry had its part to play. It aggressively peddled the sub-prime adjustable rate mortgages to the most vulnerable section of the population who did not understand much about financial implications. A rosy picture was presented to the gullible borrower. The running idea was that if the mortgages could not be paid they could always be sold off at a higher price in the rising real estate market. Nobody apprehended the opposite.
During the spring holidays the Congress had to face belligerent constituents who were threatened of losing equity on their houses This goaded Congress to rush through a bill to appease a sizeable powerful section.
The Foreclosure Prevention Act mainly targets to give tax relief to house builders and mortgage industry. The tax payer’s money is being thrown to two segments who are primarily responsible for the foreclosure mess of today.
There are other plans of buying out bad mortgage debts. But basically it is the same rainbow in different colours. The government will provide guarantee to new mortgages that would purchase the present ones facing foreclosures. The value of the new ones will be less than the first mortgage. By it the banks will get more money that if it had been left to the mercy of the market. The bank will suffer loss – but a much lesser loss. In explaining the handouts to the banks it is said that this will enable the residents to continue to stay in the houses that are their homes. The argument holds true in places like Detroit and Cleveland where depression is raging but it is of no use to those suffering from foreclosure risk in places like Los Angeles and Boston.
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