More on the Mortgage Mess - Opinion
November 7th, 2008 by admin
* * * * HARD CORE REAL ESTATE TALK * * * *
STATUS REPORT for TARP (Troubled Asset Rescue Plan).
Inspired by an article by Judi Barrett this morning, I just can’t resist offering a vision of what the “temporary fix” of the financial market looks like today to the average American citizen.
What did the “fix” involve?
About $700,000,000,000 for the first round. That is 7/10ths of a Trillion Dollars.
Secretary Paulson said: “Right now, our focus is restoring the strength of our financial system so it can again finance economic growth. The financial security of all Americans - their retirement savings, their home values, their ability to borrow for college, and the opportunities for more and higher-paying jobs - depends on our ability to restore our financial institutions to a sound footing.”
Let’s see. Sec. Paulson’s goal for TARP was to: “restore the strength of our financial system” so it could:
- finance ecomonic growth
- stabilize retirement savings,
- stabilize home values
- stabilize ability to borrow for college
- stabilize opportunities for more and higher-paying jobs
HOWEVER, IF ONE LOOKS AT WHAT THE BANKS CAN DO WITH THE MONEY THEY RECEIVED, between $2,000,000,000 and $25,000,000,000 each.
- Banks can buy other banks.
- Banks can loan the money.
- Banks can pay shareholder dividends.
- Banks can hoard the money.
- Banks can pay bonuses to executives and employees.
What is the public’s first concern?
- Are we going to be able to keep our home?
- Can I get a home loan?
- What will my house be worth next year?
- Will my job be here next year?
- What will groceries cost our family next year?
Question: What has been accomplished by TARP?
- TARP has not slowed foreclosures or short sales.
- TARP has not helped employment.
- TARP has not reduced interest rates for home mortgages.
- TARP has not increased home mortgage lending.
- TARP has not stabilized retirement savings.
- TARP has not stabilized home values.
GRANT ME ONE PREMISE. The American economy will not recover until the housing industry is stable and . . . . .
- Home prices are stable
- Mortgage funding is available
- Employment is stable.
- Retirement savings are stable.
The real estate industry starts with folks. Folks need shelter which means the average family can buy the average home. Home prices are now at an affordable level. Yet, buyers are not buying and foreclosure sales and short sales continue the downward pressure on home prices, thereby reducing the number of home buyers who would buy new construction or move up if they could sell what they have.
Nothing the government has done has helped . . . . yet.
Something lingers in my mind’s eye. An images of a closing package for a family buying a $250,000 home. In my market, with a VA or FHA mortgage loan, the package would contain about 50 pages and require about 20 signatures.
Compare that with the TARP outline provided the Congress.
3 Pages.
Mmmm. 3 pages to describe a government program to stabilize the American economy. Amazing!
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