Democrats push ‘ownership preservation’ agency

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A couple of news items today at the intersection of politics, government and the foreclosure crisis. Bloviation at no extra cost.

News item from LATimes.com: ‘Senate Democrats today demanded a much more forceful response to the crisis of home foreclosures, including the possible creation of a new government body that would purchase failing mortgages and help troubled borrowers refinance into new loans.’

More:

The idea ‘prompted criticisms of a government ‘bailout’ that would put taxpayers on the hook for costs that should be borne by speculators and unwise lenders. ‘I am concerned that further government action will expose taxpayers to excess risk or be a bailout,’ said Sen. Jim Bunning (R-Ky.),’ who is pictured at left.

Bloviation: The man from Kentucky is right, this is a big-time bailout. There’s a reason no one -- not even the Chinese -- wants to buy these failing mortgages: They are bad investments. Why should the government bail out lenders by stepping in to buy a $500,000 mortgage backed by a $350,000 home? Especially when the home will probably be worth about $320,000 a year from now.

News item from Sacramento via LATimes.com: ‘Legislation aimed at slowing residential foreclosures in California failed by a single vote in the state Senate on Wednesday, after Republicans balked at requiring lenders to talk personally with borrowers before they start the default process.’

Bloviation: An intriguing idea but completely unrealistic. Lenders and servicers are barely capable of answering their phones and their mail -- this is one of the main reasons the Bush administration told them to hurry up and make decisions on large groups of loans rather than individual loans. It’s unrealistic to expect them to suddenly get organized and start reaching out to homeowners. If I had a nickel for every story of incompetent lenders and servicers that has been e-mailed to this blog, I could buy Lefty the most expensive drink at Starbucks.

What can government do? For starters, it would be wonderful to see a local government that’s facing a foreclosure problem -- say, the city of Los Angeles -- stop complaining and instead start playing hard-ball with banks and lenders regarding the upkeep of foreclosed houses. Mosquitos in the pool? Tagging? Broken windows? How about a city ordinance calling for heavy fines against the (corporate) homeowners who fail to keep up these foreclosed properties? And how about a city website that names names of corporate owners who let houses and neighborhoods go to seed?

Enough of my thoughts. Yours? E-mail story tips to [email protected].
Photo credit: www.bunning.senate.gov