nyt: U.S. Loan Effort Is Seen as Adding to Housing Woes

I still can't believe only about 31,000 loan modifications were made permanent.

I agree with Geithner: 'This is a conscious choice we made, not to start with principal reduction, we thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.'

However, the 8K home buyer tax credit basically did that. In effect, $4K went to the buyer and $4k went to the seller...

The program where homes are foreclosed and former owner allowed to rent for a time would have been better. Forbearance makes sense if you believe the delinquent status to be temporary.

A great deal of money is being wasted here. When you look at the cost of these programs and the re default rate, it's mind boggling.

calculatedrisk has some interesting things to say about the efforts to forestall foreclosures. once again, none of the options seem too appealing.

http://www.calculatedriskblog.com/2010/01/hamp-seen-hurting-housing.html

any which way you slice it---if your home is significantly underwater and many others are in the same situation taking away any residual stigma---add in 10% (and actually much higher) unemployment along with significant loss in financial assets; we're back to one of those least worst decisions.

We're in one big bleeping hole, aren't we?
It's time for Marco to chime in: "Bulls?"

Look, we experienced an unprecedented and probably never to be repeated in our lifetime bull market(bubble) in real estate. Nothing goes straight up. If the stock market can go down 20%+ every decade or so, why can't housing. So let's say NYC is down 20% give or take from the peak. Not everyone bought at the peak, and in ten years time the probability is prices are higher from here.

yep.

what i continue to wonder about is what would happen if obama stood up and told it to us straight. a plan for real shared sacrifice with light at the end of the tunnel.

riversider---more of if it goes up, it has to go down, and then it'll go up again? i don't think even you believe this nonsense.

http://www.bloomberg.com/apps/news?pid=20601101&refer=japan&sid=abSwutZwawMA

uh oh....that seems to screw up riversiders economic thesis. it went up, it went down, then it went some more, then some more, then some more.....

That is the danger. We do seem to be repeating many of Japan's mistakes, but there are key differences.
1) Japan has an aging population and a negative birth rate.
2) Japan loses more jobs to China than the U.S

did you happen to notice that the auto industry moved to japan. and the furniture business moved to china. and, by the way, what country supplies the most goods to the largest US retailer--Walmart?

tell us more about the explosion of jobs on wall street in the last few months.

yes, the retiring baby boomers and all of the "virtual immigration" will help us out of our hole.

http://economistsview.typepad.com/economistsview/2009/12/virtual-immigration-continues-to-rise.html

Of course if the administration's policies throw us into an even deeper recession all bets are off.

brilliant....blame somebody. blame anybody. but blame them quickly.

clearly, there are no good options, yet people like you need action and then need to blame someone for that action. no wonder our politicians treat us like children.

all of the unemployed would have been magically employed if we had only forced the banks to foreclose immediately.

except all the people working in all the banks. and...and....and....

http://economix.blogs.nytimes.com/2009/12/31/by-simon-johnson-lessons-lea/?emc=eta1

In a speech to the American Economic Association in 2000, Lawrence H. Summers — the primary strategist during the crisis — put it this way:

“Prompt action needs to be taken to maintain financial stability, by moving quickly to support healthy institutions. The loss of confidence in the financial system and episodes of bank panics were not caused by early and necessary interventions in insolvent institutions. Rather, these problems were exacerbated by (a) a delay in intervening to address the problems of mounting nonperforming loans; (b) implicit bailout guarantees that led to an attempt to “gamble for redemption”; (c) a system of implicit, rather than explicit and incentive-compatible, deposit guarantees at a time when there was not a credible amount of fiscal resources available to back such guarantees; and (d) political distortions and interferences in the way interventions were carried out…”

We should ask ourselves whether this group applied in the last 12 months what it learned in the 1990s?

The group pushed early and hard for fiscal stimulus, which played the same role in stabilizing spending in the American economy as properly scaled lending by the International Monetary Fund did for weaker economies in the 1990s. At this level, the Summers group drew sensible lessons from the 1990s — listening finally to Joseph E. Stiglitz (then chief economist at the World Bank and now at Columbia), who stressed the importance of easing fiscal policy.

But in terms of the handling of the financial system, the Summers-Geithner-Lipton approach this time is at odds with the views and actions of a decade ago.

In the 1990s, they were opposed to unconditional bailouts — providing money to troubled financial institutions with no strings attached. At one point, according to Mr. Blustein’s account, they derided Madeleine K. Albright, Secretary of State, for proposing such an approach in South Korea. The Treasury philosophy was clear and tough: “a healthy financial system cannot be built on the expectation of bailouts,” Mr. Summers said in his American Economic Association speech in 2000.

In a few years, when maybe this housing mess is over, its time to go after the housing deduction as well.

From the article at top of post ---- that woman in Florida who appears to have been seriously mislead by Chase -----
Makes me think I'm going to close out my Chase accounts on Monday --------

Go after the housing deduction, somewhere else?
You really DO want to make a silk purse out of a sow's ear!
We're socialists in this country! We have an undying loyalty to our housing deductions!!!!!

poorirish...i actually thought the use of the extreme example of the woman accidentally foreclosed was poor journalism, just picking an extreme case because it makes sexier copy, rather than a run-of-the-mill messed up case which would actually be more damning if you think about it...but journalists often go for the most egregious cases..

i see this as a preparation towards cram downs of principal to reduce housing costs of deadbeat homeowners to up to 31% of their (many times illegally under reported income).

my biggest issue with this is that the gov is not doing anything towards making sure that no renter pays more than 31% of their income on rent. the second is the lack of willingness of the gov to prosecute those that over reported their income when taking on mortgages and now under report to get a bigger bail out. crazy! this rewards not only the financially illiterate but also the bigger lair.

well put admin....not to mention that all along the way the scumbags drove up the cost of housing for the diligent hard working honest people....this is just frigged up....

and...govt dollars going to pay for any subsidy to me is ludicrous because there are better uses of govt money in my view

rents were also driven up by this housing bubble. so why on earth do renters have to pay the mortgages that homeowners now are not so proud of having taken?

renters are yet to be compensated for the rent inflation that came from the housing bubble. imho asking anybody that's not a homeowner to pony up to re inflate the housing mkt is insane. there should be a special tax to pay for these type of policies that only homeowners should pay (either on a yearly basis or when they sell). call it the "keeping the homeownership dream alive" tax.

"Go after the housing deduction, somewhere else?
You really DO want to make a silk purse out of a sow's ear!
We're socialists in this country! We have an undying loyalty to our housing deductions"

Yes, we usually have undying loyalty to really lousy ideas...

admin...very well put again...this is just insanity, and morally wrong to take money from the prudent to help the imprudent (the only justification is to avoid wider turmoil..but i am very skeptical of that due to the moral hazard problem, govt screws everything up anyway, etc.)

while we;re on this...what do you think of fha approval for some of these sick condo projects...it's warped

in a way i can't wait for the FHA to blow up and need a big bail out. that might help show the avg joe that subprime lending is now being made by the government. the very same congress that 1st failed to regulate and then publicly condemn subprime lending is now allowing itself to be the main subprime lender in town.

dreadful or funny? but it's the current version of "kicking the can". maybe it's the only thing we can expect when people are in power for very short periods (i don't advocate the opposite, maybe kicking the can is the lesser of two evils).

the biggest "kicking the can" issue right now though is the entitlements and unfunded pensions imho. i have yet to wrap my mind around that one (what's gonna end up happening). baby boomers applications for SS up 20% and disability claims up 23% year over year... 2009 was supposed to give up the biggest surplus, but it end up giving a record deficit. men, that's scary. sure, in part is the recession. but the estimate of biggest surplus was done during the recession. these guys are the ones telling the old "don't worry, it's gonna be in trouble by 2046...". they are into sth much more powerful than kool aid imho. what is it? i'd be shocked if there's no trouble within the next 5 years.

can i add (as i sometimes do) -- millions of boomers have inadequate ssvings (esp after stock mkt and re mkt recently)...plus...millions of illegal immigrants uneducated doing manual labor will not be doing construction work etc up to age 65, so what will they do, how will they get health care

in the emergency rooms

so help me out here to understand how it will look like (in say 5 to 10 years). discretionary spending of local governments (health and education mainly) will go down as their pension liabilities are very unfunded. maybe the feds pick up the tab for health care benefits of retirees (or those benefits get reduced as for doing this, changing NY's constitution is not needed for ex, unlike cutting the pension check per se).

i just don't see a relevant increase in revenue from increasing tax rates. i'd expect a move towards the shadow economy imho. marginal rates are already high across every income level (if you count the benefits that you lose as money lost for the poor). if the liabilities weren't so huge, i'd take for granted that money printing would be the solution. but there's just so much money you can print. they are thinking about adding a nursing home type of insurance (also will be unfunded right away, like the prescription drug benefit). i mean, each program they add, brings the day of reckoning much earlier.

my biggest issue with this is that the gov is not doing anything towards making sure that no renter pays more than 31% of their income on rent. the second is the lack of willingness of the gov to prosecute those that over reported their income when taking on mortgages and now under report to get a bigger bail out. crazy! this rewards not only the financially illiterate but also the bigger lair.

Admin , just read this statement, what are you proposing here? The government steps in and renegotiates leases on upper floor apartments in Queens and screws the retired fammily using this apartment as a savings vehicle? Or are you proposing that we build more Soviet Style housing complexes like Stuy Town.