Why is it that politicians never tire of finding new ways to spend our money? Here’s a group of Hartford yahoos who want to double, to $60,000,000 a fund that will “loan” money to homeowners behind on their mortgage. That’s a heart-warming goal, certainly, but it’s a sure loser and will be totally ineffective to solve the current foreclosure difficulties which are primarily the result of falling house prices, not loss of jobs or unexpected medical bills as these legislators claim.
According to the article, the average loan to delinquent homeowners was $67,000 in 2011, up from $25,850 when the program started in 2008 – funny how government programs always grow, isn’t it? Armed with a calculator, I take the $60,000,000 in new money which, divided by 67,000, yields 895 homeowners who can be helped out here. A drop in the bucket.
One in 14 residential mortgages in Connecticut is currently in foreclosure. if I can work out the 2011 census data correctly, we have 1,026,645 owner-occupied homes (1,487,891 total residential units, 69% owner-occupied = 1,026,645). Can we assume 65% of those have mortgages? Why not, and that gives us 667,319 mortgages. Divide that number by 14 and you get 47,666 loans in foreclosure. Even if I’m way off, there are obviously far more than 895 people in danger of losing their homes.
As for the loans that are supposedly going to be repaid “when the borrowers get back on their feet”, is that really going to happen? I think it unlikely, in which case this $60,000,000 is gone forever – it certainly won’t be recouped when the houses are eventually sold at a loss.
Look – I’m sorry that there are homeowners in trouble who are going to lose their homes – I’ve been in homes being foreclosed and to see kids toys on the lawn and in the children’s bedrooms, boxes packed with belongings and family pictures still on the shelves is absolutely heartbreaking – I hate it. But selecting 895 homeowners at random and trying to help them while doing nothing for the other 47,000 is strictly a feel-good measure that can’t address the real issue. I’m afraid that the solution is to let the process continue until the housing bubble is fully deflated. The plus side? Houses will be more affordable and more people who couldn’t buy a house in 2007 will now be able to do so. Foreclosed owners will get out from under an unsustainable debt and, eventually, may be able to buy a new home – or even the same home – at a better price. Disruption of families and huge heartbreak and hardship will ensue, but I don’t see a better way – the Hartford solution certainly isn’t it.