The other foreclosure bailout bill, and why it’s a bad idea
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The Barney Frank mortgage rescue bill got all the big headlines today, but the House also passed a more straightforward bailout bill: Rep. Maxine Waters’ bill to give local governments $15 billion to run out and buy foreclosed houses.
Waters: ‘This bill provides effective and meaningful help that is targeted, timely and temporary.... First, this bill targets assistance where it is most needed. The $7.5 billion in grants and $7.5 billion in loans would be allocated to states based on the number of foreclosures and the number of subprime loans 90 days delinquent and then adjusted to account for median home price. Second, the bill put funds ‘on the street’ quickly enough to stimulate the economy.’
More on the bill, from the Congressional Research Service: ‘Limits the use of such loans to: (1) purchasing or financing the purchase of qualified foreclosed housing for resale as housing for homeownership to families having incomes of up to 140% of the median income for the area in which the housing is located; (2) rental of such housing only by families whose incomes do not exceed 100% of such median income in the area; and (3) rehabilitation of such property for the purpose of reselling it within three months at a price as close as possible to its acquisition price.’
I’ve written before that this a bad idea. Foreclosed houses will sell at the right price. If they’re not selling, the price is too high. Giving local governments money to buy houses is a sweet deal for lenders -- they get a willing buyer with cash who is also a clueless negotiator. And do you really trust your government to go shopping for bank-owned properties without playing favorites? Do you trust your government to inspect, remodel and sell or rent a bunch of broken-down houses in a timely and cost-efficient manner?
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: U.S. Rep. Maxine Waters (D-Los Angeles), by Getty Images.