The Root Of The Housing Crisis

Recent figures show nearly 3 percent of all U.S. home mortgages are now in foreclosure, and experts are saying that number will rise for at least another year. The foreclosures add to the growing pool of unsold homes in a market that has been deteriorating for the past two years. This is driving down prices of all homes, most of those whose owners have never missed a payment. That’s why it is in everyone’s interest to stop this wave of foreclosures and get the unsold inventory off the market as quickly as possible. Unfortunately, the power to solve this crisis is in the hands of very people who caused much of the problem in the first place: bankers and the federal government. Pressured by federal bureaucrats after passage of the community reinvestment act, bankers gave mortgages to people who should never have gotten loans, asking for nothing down and little proof of income. Now, having repossessed the homes, the banks have become sellers, a role for which they are woefully ill-suited. Banks are notorious for letting offers pile up on their desks for months at a time. Would-be buyers – discouraged by the lack of response and ultimately enticed by the plethora of more accessible homes on the market – move on to other properties, most of which are more attractive than empty bank properties because someone is living there and taking care of them. Making matters worse, bankers give Realtors incentives to steer buyers away from the foreclosed properties by offering smaller commissions than the going rate for other homes. Is it any wonder that the inventory of foreclosed homes continues to grow? There is a way out of this mess, but it will require exactly the kind of short-term pain that everyone in government has been striving to a...

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...ttled and a buyer’s money is sitting at the title company, the FDIC can take weeks for final signatures. Left in the FDIC’s hands, millions of houses will sit empty and drag down values of surrounding properties for years to come. Congress needs to get these FDIC properties into the hands of whatever banks can show a track record of liquidating foreclosed properties in 60 days or less. This isn’t rocket science. A well-priced home in the hands of a responsive seller will sell fast. Get these foreclosed home into the hands of a few efficient banks and this crisis will soon be over. The real problem lies with the system that created the problem. If the federal government would just get out of the way, the good banks would step up to solve the crisis, the bad banks would disappear and a stronger system would emerge to ensure that this sad history never repeated itself.