Real Estate Matters
The Economic Numbers Tell One Story, Afflicted Homeowners Still Tell Another
It almost feels as though there are two economies.
We have big financial companies crowing about billion-dollar profits, paying $100 million bonuses and repaying warrants. But the other economy is reflected in the e-mails I get from Main Street, where people can't get lenders to call them back about loan modifications, jobs continue to be lost by the tens of thousands, home values continue to fall, net worth is destroyed and foreclosures continue to rise.
In which America do you live?
I'll argue that the vast majority of Americans are overwhelmed by debt, sinking house values and retirement accounts that have not recovered quite as well as the bonus culture on Wall Street. These Americans suspect that Wall Street and Capitol Hill can't wait to declare an end to the recession so everyone can get back to business and bonuses as usual.
I'm not sure we're making the right kind of economic progress just yet. We can say that the housing crisis might have turned the corner, that prices rose a little in different markets and for some types of homes, and that more people are starting to buy new homes again.
Or is that quite right? The June figures from the Commerce Department for housing starts and building permits, which purported to show a significant rise in new construction, carried this annotation: "The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero." In other words, maybe there was a rise in new construction numbers, and maybe there wasn't.
Of more concern are the dozens of letters I receive each week from homeowners who are still being told by their mortgage servicers that they don't qualify for a loan modification under President Obama's Making Home Affordable plan unless they are delinquent. Or they're being told that "foreclosures come first," and that if there's time later, they'll get to the loan modifications. Or they're told they don't qualify at all, without being given a reason.
And despite a financial incentive for second lenders to participate in loan modifications and refinancings, they remain slow to come to the table -- if they come at all.
What's going on here?
This week, House Banking Committee Chairman Barney Frank (D-Mass.) said loan-modification programs may be helping more people but they aren't anywhere near the level they should be.
Earlier this year, "cramdown" legislation, which would have permitted bankruptcy judges to modify primary home loans, passed the Senate but didn't survive the House. Frank said the law wasn't passed because mortgage lenders promised they'd take care of the broad problem of helping families avoid foreclosure.
"People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different," Frank said in a statement.