Freeze Foreclosures! What's next - Freeze credit card debt?
Bloomberg reports that US banking committee senators have asked regulatory bodies (FHFA) now controlling mortgage giants Freddie and Fannie to freeze foreclosures for 90 days in order to "provide immediate relief to many homeowners'' and let the companies "turn these non-performing loans into performing assets to minimize losses". Lawmakers and bank regulators, including Federal Reserve Chairman Ben S. Bernanke, have pressed mortgage companies to help keep borrowers in their homes and out of foreclosure by reducing balances and changing loan terms. Joshua Rosner, an analyst with independent research firm Graham Fisher & Co. in New York responded by saying "[The government] really has to start thinking about what's in the best interest of the majority of taxpayers and I'm not sure that freezing foreclosures is in their best interest''
I agree with Mr Rosner. Foreclosure relief and counselling was part of the 2008 housing bill passed a few months ago and it seems to have done little to stem the tide of foreclosures and people walking away from their homes. Folks whose home values have dropped by 50% and/or have lost their jobs, would not really benefit much from a 90 day relief and it would just prolong the agony. It took a number of years for most people signing up for a mortgage they probably did not fully understand to being in a position where they can no longer afford the debt on the place in which they live. So a temporary suspension with little real longer term relief is meaningless. Unfortunately bankruptcy or just walking away may be their best option as house prices and jobs don't look like recovering anytime soon.
It is also seems more like a political stunt on the part of the senators and other government staff in the lead up to an election to show that they are "doing something". Sad, a waste of tax payers money and ultimately futile. What's next, is the government going to propose freezing credit debt or even provide interest free credit cards for those that are having problems paying off their credit card debt? Give me a break. For folks like me, who have been prudent and careful with their finances, it really irks me that we are bailing out people who have not been responsible with their finances.
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September 14, 2008 1:08 PM
The same is happening in the UK - it makes you a bit sick really - http://www.uncommonadvice.co.uk/node/20
September 14, 2008 1:11 PM
It irks me as well. Watching all of this unfold is almost like watching The Simpsons... Homer always finds a way to make it better in the end.
September 15, 2008 6:58 AM
It is frustrating on all levels. Bailout is one thing but to freeze the inevitable? You have hit it dead on, “you see, we are doing something”. Now, after the three months, I am fully expecting some sort of tax effect.
I mean, people walking away from a loan end up with form 1099C. A form saying you made money, when in reality this is what was not recovered by the mortgage company, thus if you received it the mortgage company gave it to you. (anyone see the write off the lender just received?)
Forgiving their debt for three months is going to be no different I foresee. Thus those who are “lucky enough” to get the three months may see that they have income that was unrealized. People need to be more afraid of this than thankful.
September 15, 2008 11:13 AM
It is a desperate attempt to delay the imminent financial market crash, which will likely push America into a deep recession. The government has failed and the fingers point to Allan Greenspan and the Federal Reserve.
They need to get out of the business of planning the economy and let markets determine interest rates.
September 21, 2008 5:00 AM
Look this is a tough one. Sure it can be interpreted as a political stunt on the one hand yet on the other hand it will help a lot of people.
Now whether these prople should be helped at the expense of the taxpayer is up for debate. Then again the bailout of the banks is coming straight from the taxpayer so the taxpayer is getting hit from both sides.
One part of me agrees with the freeze and thinks its a good idea another part thinks that the chances are that most of these people in financial trouble will have a lot of credit card and other debt. So the impact of the freeze will be limited.
Not an easy one to call.
September 29, 2008 6:14 PM
ummm ... didn't really like the comment at the end. I have good credit it too, but I wouldn't say it urks me that the government is considering helping out the lower class with their credit cards. A lot of people I went to college with are in debt because of tuition, books and all kinds of fees- with this kind of economic crisis a lot of people are struggleing I think some sort of freeze would actually be a good idea.