Just because I’m petty and George Bush was very proud of the increase the home ownership rate under his presidency, latest census figures out today have the home ownership rate at 66.5%. It peaked at 69.2% in 2004, falling to 67.5% as Bush was about to leave office.
66.5% brings us back to 1998 levels. While this is a bad thing to some extent due to the fact that it’s in part a symptom of other bad things, there really isn’t any reason that everyone should feel inclined to own a home.
What this amounts to, really, is a vast transfer of wealth from the working poor and the middle class to the bankers and financial elites. Not only were these huge, risky institutions bailed out by the government and shielded from the worst consequences of their recklessness, they also made a ton of money selling and re-selling mortgages that people never should have been able to afford in the first place. Then, when all was said and done, they were able to come back in and foreclose on the very people they’d already made so much money swindling – and whose tax dollars went in part to bailing the banks out in the first place. This doesn’t even take into account the mismanagement of pension funds and other investments which, inexplicably, have made a lot of the financial folks very rich while ruining the retirement prospects of countless ordinary Americans.
We should be looking at ways to reform the bankruptcy process – to give homeowners the same benefit of doubt we gave to struggling banks:
We could easily pass a streamlined, modified version of bankruptcy just for this crisis. Adam Levitin has proposed this with his Chapter M for Mortgage bankruptcy. It would remove foreclosure actions from state court to federal bankruptcy court. Successful petitions can be offered a standardized pre-packaged bankruptcy plan. The plan would be based on HAMP modification guidelines (interest rate reduction to achieve 31% DTI goal, but without federal funding) plus cramdown to address negative equity.
We can make this fair on the backend. If the homeowner redefaults we can speed up the foreclosure process. It wouldn’t affect non-mortgage lenders. It is fast-tracked relative to traditional Chapter 13. It can have clawback mechanisms to address potential future appreciation.
And going through the process can give the lender clean title. Because there’s this whole issue of who owns what in the securitization chain which is a few court cases away from putting our financial system over a cliff. And the best feature is that it has no cost to the federal government. Like other smart policy, it builds off already existing infrastructure, so it can be started immediately using existing courts and Chapter 7 panel trustees for sales.
This makes a lot more sense to me than giving people tax credits for new home purchases, or allowing the current system of home foreclosures to go on indefinitely. The point isn’t to get the housing market back to the good ol’ days of the mid oughts, or to punish people for getting in over their heads (often at the insistence of ethically dubious lenders and a real estate industry drunk on the delusion of a housing market that could never possibly implode). We don’t want, and couldn’t sustain anyway, a return to the inflated prices of 2003 – 2006. But we don’t need the adjustment to happen in the most painful way possible either. With unemployment in the double digits, anything we can do to keep people in their homes without impossible debt sheets is a good thing – not just for the homeowners, but for the economy at large.