Frederick County Short Sale Blog | Homes for Sale in Frederick Md

"I'm From the Government and I'm Here to Help!"

If you hear that line, then you know it's time to be concerned.  Government and Help are two words that, when used together, define an oxymoron.  But we (the taxpayers) have been hearing that line ad nauseum these last few months.  The newest round of "help" is the Loan Modification program being proposed by the FDIC.  The details of the proposal can be read at the FDIC website. It's estimated that this would cost us in the neighborhood of $24Bil.  All this is, of course, an attempt to limit the number of foreclosures, which is absolutely neccessary to stop the bleeding. According to the article referenced, though, the recidivism, or re-default rate in a normal, healthy market is 40%.  Those are not very good odds.

There are some advocates of the loan modification solutions, who are saying that it could restore consumer confidence.  NAR, National Association of Realtors, has not formally endorsed the plan, but has not opposed it either.  (very politically astute of them:)  The program goes along with  NAR's 4-pronged stimulus plan, in general.  But there are also objections to not just the plan, but the idea in general.

Some feel that bailing out these folks with bad mortgages, the majority of whom made bad decisions, encourages bad behavior.  ie. the bad folks get rewarded, those who played by the rules get hosed. But that's the common sense crowd arguing common sense, which I guess is not so common these days.  I'm not sure that the common sense crowd is being heard.

I have been in conversations with people, good old-fashioned common-sense capitalists, who are poised and ready with some solutions.  But no one is listening to them.  This investment group that my friend is a part of is ready to buy up some troubled mortgages for about .70 cents on the dollar.  They believe they can sell them for .80 cents.  Not as much profit as they could have made a few years ago, but as much as can be expected in this market.  Viola!  A win-win solution from the private sector.  But they cannot get the time of day from anyone.  Banks are waiting in anticipation to see what goodies the government is going to offer them, keeping entrepeneurs on the sidelines, reluctant to entertain these offers. 

This is a very real example of the government's "help", even though it's still just a rumor, preventing the private sector from providing a solution.  A solution that costs the taxpayer nothing, and actually makes a tiny profit for the capitalist who takes the risk on himself.  The vitriole against the private sector is all that more damaging because it is so unfounded.  The government is to blame for the mortgage crisis, for its quasi intervention and for the politicization of the mortgage industry in the first place. For more information on the mortgage crisis, read Karen's full article.

There is much evidence that the Great Depression was prolonged by government intervention.  It wasn't until World War II that our economy came fully out of it, and it was the private sector, responding to the needs of the war effort that did the trick.  I'm pleading for true historians to speak out, but I fear they are not being heard either.

After this round of help, we all need to keep our eyes on something even more scary, the so-called Mortgage Cram-Downs, introduced once again by Sen. Dick Durbin. This legislation would allow judges to modify the terms of distressed mortgages on primary residences in bankruptcy cases.  Totally usurping the banks who own those mortgages, and giving the decision to someone who more than likely knows nothing about the real estate market.  This is absolute tyranny from the bench and frighteningly damaging to the free market.  But the "inside sources are saying that it will most likely pass in 2009. 

So, the question is, how much 'help' are we going to be forced to take?  Here's the links to our representatives:  Senators Barbara Mikulski, Benjamin Cardin  and Congressman Rosco Bartlett.

Thanks for letting me rant! Leave me a comment if you want to rant, pro or con, either way is ok with me!

The Highland Group