mortgage

Bailouts and tax breaks

Thusday, Oct. 29
Written 1:30 p.m. EST

WHERE'S THE REMEDY?: A couple of days ago, in explaining why lenders refuse to modify some mortgages, I urged readers to put themselves in the lenders' shoes. A reader named T.T. responds:

Your article did give an interesting point of view of the person sitting on the other side of the desk. However, it didn't make any suggestions on how to remedy the situation or why it is so darn hard to refi or modify your home loan these days.

These banks accepted bailouts. Why shouldn't the average person trying to save their house have the same option?

To assume that just because someone is making good on their payments doesn't mean that they aren't suffering any financial hardships. Rather, you should assume that they have been making sacrifices and scrimping and depleting any savings that they once had to make "good" their end of this bargain.

While the banks, who probably shouldn't have given many of these loans in the first place, are sitting pretty on borrowed money that they were given to try to fix the downward economic spiral that this country is in.

Sorry, not trying to blame the messenger but what is one to do?

Obviously I am passionate about this subject because I find myself in a similar situation. I bought a home, market crashed and home value dropped, had to change jobs for lower salary and yet have been making good on my payments. Where does one find help?

I'm going to mull this one over. This is a populist argument, and I find populist arguments appealing. Then again, in my darkest hours I find the French Revolution appealing, too. Visions of bankers and guillotines dance in my head.

IN WASHINGTON: The Obama administration is asking Congress to extend the first-time homebuyer tax credit, which expires Nov. 30. The administration wants an extension for a limited period, adding: "In doing so, we urge the Congress to include effective measures to combat tax fraud, including setting a minimum age for home purchase and requiring documentary proof of the purchase in order to receive the credit."

I find this hilarious. An IRS inspector general discovered that children as young as 4 were claiming the tax credit. As far as requiring "documentary proof" that the taxpayer bought the home and deserves the tax credit -- yeah, that sounds like a good idea, doesn't it?

The administration doesn't explain that the IRS could require documentation. Congressional action is unnecessary.

The administration also wants Congress to appropriate $1 billion to the Affordable Housing Trust Fund, which was created last year, but not funded. The goal of the trust fund is to build, fix up and preserve 1.5 million rental units over the next 10 years.

Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, says funding the housing trust fund "will provide relief for low-income people who are unable to find decent affordable housing; and by funding rental housing, it will provide an alternative to pushing people into homeownership who cannot afford it." Frank understands that the homeownership rate rose too high during the boom.

NO ONE HOME: The Census Bureau says 11.1 percent of rental housing units were vacant in the third quarter. That's up from a rental vacancy rate of 9.9 percent a year earlier. From that, may we presume that renters are getting good deals?

The homeowner vacancy rate was essentially unchanged, at 2.6 percent. I say "essentially" because it was up from 2.5 percent in the second quarter, but the margin of error is 0.1 percent. In the third quarter of 2008, the homeowner vacancy rate was 2.8 percent.

The Census defines "homeowner vacancy" as homes that are vacant and for sale. That means that it doesn't cover abandoned houses, or those that sit empty after foreclosure but aren't yet on the market. The Census data jibe with Realtor data that show that housing supply has gone down.

Calculated Risk analyzes the info, and he believes that, because of the aging population, the homeownership rate will drop to 66 percent or 67 percent. He might be forgetting immigration, though -- a retired population needs cheap labor, and immigrants will supply it. I don't have the stats at hand, but I believe that the percentage of foreign-born U.S. residents has gone down in this recession. That percentage will rise when the recovery strengthens.

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