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Those Who Avoided Risk Call Plan A Raw Deal
Housingpanic.com yesterday excoriated the administration's "bailout" plan.
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The debate hits an American obsession -- the importance of homeownership -- and could be tricky for presidential candidates in states most threatened by foreclosures, including Florida, Michigan and Ohio.
"The epicenter of this problem [is] places with key electoral votes," said Christopher Mayer, director of the Milstein Center for Real Estate at Columbia Business School. "I think both sides have to figure out what to do. I don't think they are going to find it such an easy" thing.
Politicians need to appeal not only to people at risk of losing their homes but also to those such as Ben Sullivan, who sees the agreement as a undeserved bailout. After the 2001 technology stock bust, many people lost significant value in their retirement plans, Sullivan said. "No one was offering to pay for their 401(k) losses. Why should they do it for their housing losses?" said the 28-year-old commercial banker.
Sullivan lived in the District for years and watched as his friends flipped condominiums and investment properties. "I think we shouldn't be bailing out the homeowners that got greedy buying homes they couldn't afford," said Sullivan, who moved to Atlanta nine months ago.
The aggravation has been building for a while and stretches beyond the agreement announced yesterday. For instance, under one congressional proposal, there would also be a break for "short sales" -- that is, when owners sell a home for less than is owed on the mortgage and the lender forgives the difference. Now, the amount that's forgiven is regarded as income, and the seller owes tax on it. The proposed legislation would forgive that tax.
Without the threat of the tax, sellers might not be as reluctant to consider a short sale, said Northern Virginia real estate broker Frank Borges LLosa. He predicted the number of such sales could double.
Maybe Congress should allow a 50 to 75 percent break instead, he said. "I am not saying not to help out these people," LLosa said. "It's very sad. I have spoken to people who have lost their homes. I just don't know if a bailout is the right thing for the marketplace as a whole."
