Feeling the Pain…and Not Much More

In last night’s Republican Presidential Debate, somehow dubbed the Western Republican Presidential Debate (is the West seceding…I hadn’t heard?), Michelle Bachmann directed an answer toward a question about how she, and the other candidates, might deal with the foreclosure problem in the Country. She responded as follows:

"That was the question that was initially asked. And what I want to say is this — every day I’m out somewhere in the United States of America, and most of the time I’m talking to moms across this country. When you talk about housing, when you talk about foreclosures, you’re talking about women who are at the end of their rope because they’re losing their nest for their children and for their family. And there are women right now all across this country and moms across this country whose husbands, through no fault of their own, are losing their job, and they can’t keep that house. And there are women who are losing that house."

"I’m a mom. I talk to these moms."

"I just want to say one thing to moms all across America tonight. This is a real issue. It’s got to be solved. President Obama has failed you on this issue of housing and foreclosures. I will not fail you on this issue. I will turn this country around."

Congresswoman Bachmann provided this “detailed solution” to the foreclosure issue while managing to produce dewy eyes on the verge of eruption. I’m somehow reminded of a used car salesman selling some junker by directing the buyer’s attention to the nifty radio and shiny hood ornament. Her compatriots and competitors did no better on the question. The whole debate in fact should have been an embarrassment to the Republican Party, if that’s possible.

Trying to convince voters that she feels the pain may garnish some support, but it won’t do a thing toward improving the economy.

The foreclosure issue is truly a critical issue directly relating to the economic “recovery” most politicians tout - with little resolve. As I outlined in my essay It Isn’t About Jobs (Pennyfound, August 22, 2011), producing some predictability to the housing market is a fundamental first step to recovery. It will, along with some increase in real wages, precede any notable drop in unemployment. The Federal Government can do something to speed that process.

The business-created perfect storm of inflated housing values, along with unbridled credit, has resulted in untold numbers of homeowners stuck in houses they can’t sell while paying mortgages based on pre-crisis interest rates. Many, either by choice or necessity, are just walking away from their homes, which they can do because mortgages in this Country are non-recourse. The resulting foreclosures only exacerbate the problem. This is all happening while mortgage interest rates have dropped to historic lows.

Neither the Obama Administration nor Congress has done anything substantive that might address a no-brainer solution to the issue. Obama’s HARP program was a complete failure by it complexity and limitations. If homeowners could refinance their mortgages to current rates (which they can’t do because of the drop in home value and thus their equity), foreclosures would be dramatically curtailed. Disposable income would increase to those most likely to spend it, having a direct effect on the overall economy. Homeowners would feel less pressure to sell (or walk away), having the immediate effect of boosting real estate values…predictability follows. What don’t these politicians get? Well…one does get it.

Currently (and finally) there is a bill in the House of Representatives, HR 363, introduced by Congressman Dennis Cardoza (D-CA) which is specifically directed toward enabling home owners to refinance their mortgages at current rates regardless of the market value of the home. All other criteria for refinancing would remain, such as credit and income, but there would be some reduction in fees. There is practically nothing but upside to this bill. It’s two years late in the making.

Amazingly this bill has received practically no support from either party or the Obama Administration. How is that possible? There is only one set of losers to this effort and I suspect those potential losers are calling the shots. Those who hold the investments created by the current mortgages and are enjoying the high interest rates, for which people are locked into paying, are the potential losers. They also just happen to be the same people, institutions, and corporations that benefited from the fiscal insanity and negligence that created the housing bubble and associated derivatives markets in the first place. Funny how that works; they know such an improvement would hurt their short term bottom line, and that bottom line appears to be one line these politicians won’t cross.

Michelle Bachmann, et al, may want to show American that she can do more than just squeeze out a tear for the people who continue to transfer their meager assets to America’s wealthiest by supporting HR 363. I’m not holding my breath…and neither should the mothers of America.