Project Lifeline
This week saw yet another program introduced to stop the foreclosure tsunami here in the U.S. housing market. Project Lifeline consists of six of the major mortgage lenders give all homeowners that a 90 days delinquent a 30 pause on foreclosure.
Other real estate bloggers have inaccurately described this program as being designed for homeowners with sub-prime loans that need relief. This program is for anyone with a mortgage that is 90 days delinquent regardless of what type of mortgage it is. According to U.S. Secretary of Treasury Henry Paulson, "This is an important new initiative targeted not only sub-prime borrowers, but all 90 day delinquent homeowners."
Project Lifeline will give a 30 day grace period for homeowners that have mortgages with the participating six mortgage companies only. This 30 day foreclosure reprieve is to allow delinquent homeowners time to seek refinancing.
This as other programs before it does little to address the real problem with foreclosures here in the Las Vegas real estate market and elsewhere, and falls woefully short of any real solution for distressed homeowners or the Las Vegas real estate industry. Project Lifeline is little more than a “feel good” news item that only those unaffected by foreclosure would or could receive any solace from. A 30 day reprieve on foreclosures is simply not enough time for a distressed homeowner to refinance.
I am not advocating that our government step in a bail out homeowners that bit off more than they could chew but I am sick and tired of these "do nothing" programs that are being announced weekly as if they will have a positive impact on a deteriorating situation. If our government intends to act then they need to do so in a positive manner. If they intend to let the situation work itself out than they need to so state their intentions and let the market take its hits and begin a natural healing process. This weekly deception guised as potential government intervention of foreclosures is slowing down the market recovery and needs to stop. It is time for our government to quit riding the fence. Either fix it or state clearly that you have no intention of fixing it.
7 Comments to Project Lifeline
Comments
I agree totally that only those unaffected by foreclosure would or could receive any solace from the feel good “news items” issued by the government. It is time for our government to fix IT or be honest and say they have no intention to fix IT.
The question I have to ask whenever this is brought up is…”What ever happened to people believing in the free market?” and “Why the hell should the government take my money(Taxes) and save some one who was irresponsible from foreclosure?” And “Why does it always seem these government programs really benifit the lending institutions and not the actual home owners?”
When congress can answer those questions I would be interested in seeing a proposal until then its all fluff.
Well don’t even get me started eveyone wants to put the blame on the Mortgage Brokers for this foreclosure tsunami. Well I have a question why were these loans even available in the first place? The entire system needs to be revised like a lot of other programs in this country. Now that our government has realized that these loans should have never been allowed in the first place the pass the buck and pass it on to everyone they can but themselves. The least they could do is to step up and offer a real solution to the problem not this bandaid fix that carries as much weight as a one! IMHO
I think I am with the crowd that says, why should my tax money be used to bail out the people who were not responsible enough to pay there bills, and not responsible enough to protect their credit. I can understand incredible situations, but incredible situations does not equal even 10% of the foreclosures.
Sam you make several good points. And circumventing the free market is never a good idea. It would be far better to allow the market to run its natural course and to let it do so quickly.
Al yes IF the government would offer a real solution I would be interested. I just don’t think that will happen. All of these “feel good” stop gaps are simply playing politics with the economy and slowing down market recovery IMHO. Like Rhonda stated in her real estate blog, “Before we can begin recovery we need to hit bottom.”
Jim if the government does a bailout our tax dollars would go toward keeping homeowners in homes that they could not afford to begin with. And we would be rewarding bad behavior. So if they buy a car that they can not afford is the government going to step in and pay for their car?
Sharon the government is doing great harm by not being honest with the American people. They are prolonging market recovery and thus allowing this to infect the real estate industry as a whole. We are seeing responsible homeowners lose equity as protracted market uncertainties drive prices down.
I think if the big banks are going to be bailed out, then why not homeowners underwater on their mortgages. Both made bad decisions.
Let me agee with you nearly whole heartedly. The only part I disagree with is allowing things to just go without any effort to slow it. I make this comment because of the nearly impossible job of correcting a rapid deflationary spiral. If that begins it will not be solely an adjustment in home pricing it will impact the whole world throwing us into a world wide depression. As a rapid collapse of property values would yank out massive amounts of capital from the financial markets. And what alot of people do not realize is that we have a fractional reserve banking system which means that banks can loan out 89% of all money taken in on deposit. Then that money is spent somewhere then winding back up in a bank where they again loan it out at 89%. This cycle turning over several times ends up turning 1 dollar into 9 dollars. So, each reduction of 1 dollar from the financial markets becomes the removal of 9. This is why if it happens to fast things disinegrate.
The federal banks of the world are trying to make a inflation play to prevent such a rapid disappearance of capital. Which I whole heartedly support, with that said what the treasury is doing isn’t the answer. They are squandering our tax dollars and blowing smoke up you know where.
If we want things to stabilize and correct properly then we need to reestablish the secodary market for mortgage backed securities. The bailout funds should have been used to do this by giving loans of 70-80% of the purchase price of mortgage backed securities requiring the investor to bring the rest in cash. Then the government would recieve 100% of their loan back until the investor lost everything. This would leave an investor with skin in the game but give a reason for them to take on the risk everyone is now avoiding. It would reestablish the movement of capital allowing for pricing to correct in an orderly fashion.
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