Housing Assistance Bill Definately Needed

[JimofPennsylvan]

The Housing Assistance bills recently passed in the House of Representatives, although not perfect, will provide valuable urgently needed help to the housing problem facing our nation and therefore should be enacted into law quickly. To those Americans that are naysayers, they need to be told that if the nation does nothing on this matter one to two million American families will lose their homes over the next twelve months and not only will that really hurt our nation’s economy but also the welfare and well-being of our nation will be really hurt and only people with foolish judgment would find that acceptable.

If it is possible to improve these bills and have them become law quickly, the following areas are areas where the bills could be improved. [The specific bills I am referring to are:
HR 3221 EAH, HR 3221 EAS (Title VI thru XI) and HR 5818].

1) Do away with the requirement that homeowners who provided false information in acquiring the mortgages that they presently have that are in foreclosure are ineligible for the “FHA converting sub-prime to fixed rate mortgages” program. This restriction one would think would preclude a lot of homeowners from this FHA program, the nation really needs to ask ourselves are we really interested in solving this subprime mortgage problem and avoiding large numbers of Americans losing their homes – if we are than we should do away with this restriction. Moreover, although it is wrong and Congress may want to make it a misdemeanor crime if it already isn’t, it is not like these individuals were involved in stealing other people’s money, they were trying to get a loan to buy a house, a place to live the promise of America, there was no intent to harm, there was no intent to not pay back the money loaned like every other burrower – the circumstances warrant understanding and mercy. Finally, mortgage brokers, lenders and even the government here are culpable on this specific issue because their should be requirements and the requirements enforced that the burrower document his or her income and debts and brokers and lenders must run all readily doable income, debt and credit history checks; the media has uncovered an abundance of instances where brokers and lenders were negligent in checking burrowers income, debts and credit history information – Congress’s high and mighty posturing here should leave a bad taste in ordinary Americans’ mouths.

2) This whole FHA sub-prime rescue program is voluntary on burrowers and lenders. One real issue is are lenders going to take advantage of this program or just try to reduce the burrowers monthly payments and try to milk the mortgage for as much money they can get out of it betting the burrower will not completely default because the burrower doesn’t want to lose the burrower’s home. Why doesn’t this legislation provide for a “qualified pre-approval acceptance” designation into this FHA sub-prime rescue program? Where a drowning burrower who is not getting the okay for this FHA program from the mortgage holder or mortgage service provider can go to the FHA and say these are my circumstances; my debts are this, my income is this here is my documentation, my home has been assessed with a market value of this (by a professional) am I eligible for this FHA program and what is the amount of the mortgage I will receive in this FHA program? Of course this would not be binding on the FHA, the burrower and lender would have to go through the normal approval process for a binding approval. If the burrower receives a qualified pre-approval with a set mortgage amount, that burrower can then go to the mortgage holder or mortgage service provider and say I have been pre-approved for this FHA rescue program at this amount of mortgage, mortgage professionals tell me this is a good amount of money for a mortgage owner to get back on a distressed mortgage would you consider participating with me in this FHA program. If the numbers make sense for the mortgage holder and the mortgage holder is prudent the holder will accept. This option may facilitate the rescue of a lot of homeowners from the foreclosure process who would otherwise lose their homes.

3) On this issue of the creation by the bill of the Office of Housing Counseling, good stewardship of public monies indicates that Congress should scrap this idea. It sure seems like the bill envisions a significant size staff for this Office which should be unnecessary. America has gotten thru 232 years of existence without an Office of Housing Counseling and there appears no compelling reason to create one now. The current problem in the home mortgage market has been brought about the financing vehicle known as the sub-prime mortgage and the specific cause of this problem is that many of these subprime mortgages should never have been issued because they were unaffordable to the burrower. This should be viewed as a one-time crisis the nation will solve. The permanent solution to this problem should not be to try to create this large counseling network to tell burrowers these are bad loans don’t enter into them, the solution is to ban lenders from making these types of irresponsible loans in the first place. Why can’t the legislation create some general underwriting safeguard for subprime mortgages that all lenders of these types of mortgages are bound to follow, something like the maximum allowed debt to income ratio is 55 percent – if the FHA has maximum allowed debt to income ratio restrictions why shouldn’t private lenders, at least for subprime mortgages? Along the same lines here this legislation authorizes the Federal government to spend up to $ 3 billion dollars a year for each of the years of 2008, 2009 and 2010 on a multi-media campaign promoting housing counseling. It is reasonable these large expenditures for 2008 and 2009, to stem the high number of Americans losing their homes, but the American people expect this problem to be solved by the end of 2009 and by that time there shouldn’t be the pressing demand for housing counseling, in part because there will be regulations in place and enforcement mechanisms in place where lenders will be acting responsibly and won’t be making unsound loans. The legislation should do away with this $ 3 billion dollar authorization for 2010 because it should be unneeded.

4) For the bill’s initiative allowing businesses to carryback losses four years instead of two years and the suspension of the 90 percent amount limit for tax purposes this is a good initiative this will help a lot of businesses survive our nation’s downturn and quicken growth of American businesses and should be made law. However, all banks, mortgage lenders and all financial investment types of businesses should be “excluded” from receiving these tax benefits. These tax benefits are going to cost the American taxpayer a lot of money and there is something not right and fair about the entities that are responsible for causing serious harm to the American people’s economy receiving monies from the American people they would not have otherwise received but for these entities wrongful behavior. And it is not only the mortgage mess that these entities need to be held accountable for, but the packaging of these unsound mortgages and making securities from them and selling them throughout the world and causing not only massive harm in our nation but throughout the world; moreover, with respect to investment businesses they have an added reason not to get this tax benefit because they have not been fully cooperative and acted like good corporate citizens in reforming the commodity markets. The petroleum commodity markets and the agricultural grain commodity markets are killing financially the America consumer and without question need reform. If these investment and brokerage businesses end up getting this tax break it will be a perfect example of how our political system is broken – the American people get the shaft and undeserving special interests get rewarded.

5) From the public record on these bills it appears that there exist provisions in these bills extending tax benefits for clean energy as it relates to housing. This is great and should pass and one can’t say enough how important to our nation such initiatives are. However, one such specific initiative doesn’t go far enough in light of how the energy picture is developing for our nation and the world. A knowledgeable and prudent assessment of future energy supplies available for our nation would conclude things look real real bleak with respect to oil and natural gas supplies. The nation should be doing everything it can to cut demand for these types of energy fuels. Many American homes use theses fuels to heat their homes and generate the hot water they use. It would provide meaningful help for the nation’s energy problem if a lot of American homes would convert to solar energy for providing heat and the hot water they use. To this end the legislation should contain provisions that double the tax credit to $ 4,000.00 for solar water heating systems (a solar photovoltaic system credit increase can wait to the House’s Energy legislation [HR 5351] is passed) and allow the credit to amount to 50 percent of the cost of the system as opposed to the current 30 percent.

6) On the Neighborhood Stabilization bill (bill giving grants and loans to states to buy foreclosed properties) the following should be done:
A) This loan and grant program will be run through the Department of Housing and Urban Development (HUD). The legislation requires states or qualifying state subdivisions to submit a qualifying plan to purchase foreclosed properties and get them back into use within 30 days of enactment of the legislation or be ineligible to participate and if the plan is kicked back to the state or state subdivision there is 15 days to resubmit. The legislation should provide sixty days for a submittal and thirty days for the first re-submittal. This initiative involves important matters, time should be provided for public input, good decision making processes and to give an accurate and detailed plan so that the initiative is as successful as possible.
B) The legislative scheme of this program is largely that the state allocation recipients are required to use the “loan” money to purchase and rehabilitate the foreclosed properties and the “grant” money for planning, administration, costs related to property acquisition, operating and holding costs. It is understood that the legislation wants to insure there is funding in place to carry the plans thru from acquisition of foreclosed properties to putting those properties back into use; however, it should seem to a reasonable person that there is too much restriction in the legislation on the “grant” money. More good (bringing foreclosed properties back into use) can be done with less restriction on this money. The legislation should provide that each state entity participating in the program first commit the “grant” money it is receiving to providing for all the foreclosed properties in the state entity’s plan that will be purchased with “loan” money from their acquisition stage to the stage where they’re put into use as sold or rented properties and all related expenses to those tasks and any remaining “grant” money can be used to acquire, rehabilitate and put into use and for related expenses for foreclosed properties whose ultimate use will meet the family income goals of ultimate users as set forth in the legislation.
C) There are references in this legislation that would indicate that it is permissible that these foreclosed properties purchased, rehabilitated and maintained with taxpayer hard earned money could be sold to for-profit companies which of course would then be used to generate profits for these companies. The American people don’t want this. The American people envision the foreclosed properties in this program being sold to individuals or rented through either public or non-profit organizations. If Congress is interested in doing right by the American taxpayer they will put restrictions in this legislation that the foreclosed properties in this program can only be sold to individuals or non-profit organizations.
D) This legislation has what is called a “shared appreciation” provision which essentially says to the buyer of the foreclosed properties in this program, you buyer you received a public benefit from buying a foreclosed property in this program which costs the public money and so to be fair when you sell this property you have to give 20% of the profits from that sale back to the public. When one considers that many of these buyers may hold onto these properties for fifteen to thirty years or longer it doesn’t seem like good public policy to require these buyers or their heirs to be obligated to pay this twenty percent when at the time of sale for these properties by the buyers or the buyer’s heirs the contribution to the sale by the federal government in comparison to the contribution to the sale by the buyers and the buyers heirs when one considers the buyers and the buyers heirs paid for the maintenance and upkeep of the property over the years. The legislation should scrap this “shared appreciation” provision. However, and this is an important however, the Congress should be concerned about buyers of these properties just flipping these properties and making a fast and undeserved buck. To address this concern Congress should put into this legislation provisions discouraging these buyers from turning over these properties for profit and preventing these buyers from receiving unwarranted profits from these property sales. One idea to achieve this is to mandate that for the first three years after the sale of the foreclosed property to the buyer if the property is sold by the buyer, the buyer must turn over 100% of the profits to the Federal government, and from three to five years 80% of the profits and from five to seven years 60 % of the profits and from seven to ten years 20 % and for sales beyond ten years the buyer owes none of the profits to the Federal Government. This mandate should go a long way to stop scheming in the buying and selling of foreclosed properties in this program at the public expense.
E) Congress should do away with this legislation’s requirements that all grant amounts be obligated and all loan commitments under this program be completed within six months from when a participating state entity’s plan is approved by HUD. It should be sufficient they are completed within the two year existence of this program. For one, common sense would indicate that it very well may take longer than six months for a state entity to acquire all the foreclosed properties that will be acquired through this program, assess the rehabilitation work needed to be done on these properties, put the rehabilitation work out for bid and decide on an acceptable bid. This is assuming, of course, one wants the work to be done responsibly with all the government participants acting like good stewards of the public’s monies.
F) The legislation calls for the purchase price the state entity or their designee pays for the foreclosed property acquired for this program to not exceed the lesser of the property’s assessed value or 110% of the average price of single family homes in the area. This could result in a lot of properties being overpaid for because they are in great disrepair and worth much less than the assessed or average values or the stopping of state entities bringing backs blocks of homes to being vibrant and good blocks because some of the foreclosed properties on the block desired to be entered into the program may have an assessed value above 110% of the average value. A better legislative scheme would seem to be to require all foreclosed properties to be purchased under this program to undergo a fair market valuation by a certified appraiser. The legislation then should mandate a state entity can pay for such a foreclosed property a price not to exceed the lesser of the fair market value of the property, 120% of the appraisal value of the property (appraisals can often be low because their out of date, etc.) or 120% of the average purchase of single family home in the area; with the state entity having the ability to apply for an exception to this mandate to HUD for good cause as long as the ultimate price paid for the foreclosed property does not exceed this120 % of average value figure.
G) In order for the legislation to make the best effort to stop waste, fraud and abuse in this program. The legislation should contain a provision classifying all the monies provided to state entities whether through loans or grants be treated as though such funds were community development block grant funds under title I of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 et seq.) – thereby subjecting all these monies to the protections provided in this chapter of Title 42. The legislation could and should even go farther in trying to stop waste in so far as state entities or their designees overpaying for work done on foreclosed properties. The legislation should mandate the following legislative scheme. For all construction, planning and/or design work with a single business totaling over $10,000 dollars in value on a single foreclosed property, the work has to be done thru a bid. And unless it is done thru an open bidding process where the lowest qualified bid is chosen it has to go thru a process to protect against over paying. The process is once the non-open bid is accepted by the state entity or its designee, the state has to publish the bid publicly and notify HUD of the bid, the publication and notification shall be a brief, fair and accurate description of the work to be done involving the bid and the price of the bid. And if HUD on its own initiative or at the behest of a member of the public determines the bid price to be unreasonable, then HUD can require the bid be re-done with an open bidding process being used and the lowest qualified bid being accepted.

 

[Zoomie1980]

The real answer to this was easy. And we will follow neither.

1) The Fed should have let the sub-prime market and all the investment houses that engaged in that excess simply collapse and live with it. Suck up the ensuing recession and move on. The real pain and lost investment fortunes would have been the best medicine of all for preventing future repeats.

2) Let the borrows lose the homes they have no business in, in the first place. A lot of this sub-prime was speculative, leveraged buying anyway.

Basically, what we needed here was NO government action of any kind. The lenders and investors in those instruments get beat down HARD and the borrowers do as well, and BOTH sides DESERVED it.