Posts Tagged ‘Dean Baker’

Renting from the bank

Via Felix Salmon, news that Sen. Chuck Schumer is signing on to a proposal to keep foreclosed borrowers in their homes as renters.

I love this idea in principle.  It renders literal the all-too-true idiom of overindebted homeowners: “They’re just renting from the bank.”

But in reality? The bill just intro’d in Congress, HR 6116, The Saving Families’ Homes Act, doesn’t come close to answering obvious questions. Who is going to be these now-tenants’ landlords – the mortgage servicers?? Good luck with that one.

And then are we to understand that the now-tenants are entitled to live in their homes indefinitely, for as long as they keep paying the rent? Why should former owners be entitled to a vital protection that most of the nation’s renters don’t have? This kind of unequal treatment is likely to lead to deep anger among many renters, who see homeowners who took excessive risks get benefits that those who prudently chose to rent — because they knew the numbers wouldn’t work — are denied. If you’ll recall, CNBC’s Rick Santelli tried to gin up a case for such resentments when the Obama administration announced its mild loan modification program. But here the sentiments would be real, and warranted.

Thursday, July 16th, 2009 | Tags: , , ,
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Bursting the bursting

I always appreciate Dean Baker’s thoughtful assessments of the dynamics of the housing markets, so I was glad to belatedly come across his December brief advocating for the systematic deflation of housing prices, by basically putting Fannie Mae, Freddie Mac and Ginnie Mae on strike in overpriced housing markets until sales prices come down — they would simply stop buying mortgages there. Eerie overtones of Fannie’s history of redlining aside, it’s an appealing idea. Housing prices indeed must come down. But there’s one thing I can’t get past in the Baker plan: doesn’t deflating housing prices kick out whatever wobbly support all the existing mortgage backed securities (and their derivatives) depend on? After all, those falling housing prices reflect the collateral on which all those securities are underwritten. Deflate those rapidly, as Baker is suggesting, and it would cause even greater havoc to the banks vested in those securities than we have now. And much as I don’t feel for the banks or bankers that made the misery, we can ill afford to worsen their plight now.

I do like Baker’s idea of a structured rental program for owners who’d otherwise go into foreclosure — companies have been doing these leasebacks anyway, under conditions that leave the now-tenants with few rights. Better to bring the practice out into the daylight.

Tuesday, January 27th, 2009 | Tags: , , ,
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