Time to save the average homeowner

Seems counter intuitive to make loans to people who have no income. I am all for saving homeowners but do we expect these loans to be paid...some time in the future?

What about renters who face eviction because they've lost their jobs and can't pay their rents? Seriously, what's with this bias toward supporting home ownership as if homeowners are somehow special and deserving of preferential treatment? If we're going to assist people to stay in housing during hard times, it should be all kinds of housing. And, yes, I'm a homeowner.

"The money, appropriately, would come from the payments financial companies who received bailout money are making to the federal government."

This money you speak of should have never been allocated because it doesn't exist. It'd be one thing if there was a wealthy Uncle bequeathing of his plenty to those in need, but all we have is a highly indebted Uncle effectively running a ponzi scheme to make it look like he has power to make cash flow. The money lent to banks never "earned", so it's a bad fiscal idea to pretend that the paybacks are now at our disposal to include in national budgets.

Susan, my reaction is the same as yours--but when owners of two- or three-family homes get foreclosed upon, their tenants are usually evicted too. It's not an either/or situation: we've got to do both.

Frank has become a circus sideshow. He has a truly horrific record when it comes to this housing crisis. Years ago he claimed Fannie Mae and Freddie Mac were sound and that every idiot under the sun should be a homeowener, now he wants to waste more taxpayer money to try to prop up a crashing market. All of these government proposals will fail. Let the market crash on it's own. There can be no recovery until housing bottoms and these silly policies just prolong the reaching of that bottom.

I always had a soft spot for poor people who were taken advantage of with sub-prime loans and other forms of "creative" financing.

But I have no sympathy at all for normal people who just made a bad investment and/or decided to live outside of their means. I made the mistake of buying a condo last year that is probably now worth about 30k less than what I paid for it. But at least I only bought a small condo, so I can still make my payments (even if I lose my job for a while) and I'm not so far underwater that it would make sense to walk away.

So Scott, you're telling me that you favor a policy that would have rewarded me if I had instead been irresponsible instead bought a much larger and more expensive house than I needed? Don't even try to paint yourself as a "liberal" by advancing this type of thinking. What you're talking about here is socializing losses on bad investments made by the middle and upper middle class. I think it's a little bit bizarre that I have to explain this to you, but that's not even the slightest bit "progressive" or "liberal". A more "progressive" policy would be one that helps these individuals with the cost of foreclosing and then moving into a smaller apartment that they can afford. It's just not fair to be subsidizing homeowners in this situation, when a person in similar situation living in an apartment might end up homeless. Scott, please don't confuse "limosine liberal" mentality with truly progressive policy.

Barney Frank and good idea don't belong in the same sentence.

A simple explanation from Karl Denninger on why none of these bailouts, modification programs etc. will work.

"We are in a credit recession. We cannot get out of the credit recession until the conditions that led to it no longer exist. The conditions that led to it are too much debt and too much leverage, and yet the prescriptions of both the Bush and Obama administrations are to add even more debt and more leverage to the system, shifting bad debt around and stuffing it under the rug in an attempt to hide systemic insolvency, rather than force it into the open and demand that the excessive leverage and debt be either paid down or defaulted."

Kenia, these are not loans to people who will never have future income, or never be able to pay them back. Typically, these programs offer direct assistance to homeowners who were perfectly capable of paying their mortgages until they encountered a temporary setback, like a job loss, and are expected to resume making payments later. Or at least have time to sell their house in an orderly fashion.

I really have no objection to the basic idea of helping unemployed people during a recession. It's stimulative and helps avoid much larger economic losses. However, it's silly to suggest this money isn't going to banks. Of course it is. Who does Frank imagine receives the mortgage payments? Why aren't the banks sharing in the costs? Why aren't they doing any serious loan mods in the first place, after already receiving so much taxpayer cash? Plus, I'm not sure how much good adding more debt to an already overburdened consumer is going to do. There's lots of politically-motivated jawboning about the federal deficit, from people who apparently just discovered yesterday that we have one, but the real problem is the private sector debt burden.

Government subsidies only further delay the inevitable for a housing market that is on it's last leg. No one who is upside-down wants it to happen, but the truth is that it NEEDS to happen. Dangling a carrot in front of the troubled homeowners provides "hope" ... but for how long, A week? A month? A year? What they really need is a dose of reality and they need it now. Stop supporting Barney Frank ideas... he's the one who got us into this mess in the first place.

What about renters who face eviction because they've lost their jobs and can't pay their rents?

Susan hits the nail.

Frank's proposal isn't a subsidy to the home "owners", it's a direct subsidy to the banks that hold their debt.

Frank's record of bad ideas throughout this crisis is abysmal. It's just too painful to write them all down at once; that should be a blogger's job.

To the good people of the Fourth District—please do yourselves and your country a favor and remove Frank from his office in 2010.

You mean this Barney Frank:

“Fannie Mae and Freddie Mac are fundamentally sound. They're not in danger of going under.... I think they are in good shape going forward.”
-Barney Frank, chairman of the House Financial Services Committee [July 2008]

Dave:

You got my support.

Again with subsidies to housing? Come on already. Let the market bottom out, correct itself and start anew. People who can't afford to pay mortgages have full access to bankruptcy courts and rental market. Stop this crazyness please. Man, I will start voting Republican if I have to, but this stuff has to end.

Sunny Jim, Hung, and Bobby: You gentlemen hit the nail on the head.

Soooooooooooooo.....

If I cant afford to pay my RENT, temporarily, because I was laid off, I should get help from the state, to help me pay my RENT.

Oh, wait. I do get help. Its called UNEMPLOYMENT BENEFITS.

Oh, so you want to give MORE benefits on top of that to HOMEOWNERS but not to RENTERS, if they are laid off.

Makes perfect sense.

sure, nothing would work better to fix a problem caused by imaginary loans like adding more imaginary loans. Sort of like pouring water on a drowning man

And "take the money from bank repayments"???????? Only a complete financial ignoramus could come up with that one. Sadly, the evidence is very strong Barney Frank qualifies. Where does he think the money that was loaned to the banks in the first place came from?

I think Marcus is right. Barney Frank believes in Sparkly Blue Ponies. They gave govt the money!

Amen, Alex. Perfectly stated.

Barney Frank has a big heart and small head. That said, on it's merits, this is a bad idea.

The unemployed should focus on finding a job they're qualified for. Not finding a job, within(!) their local community. Barney's policy will keep adults unemployed longer, then if they were free/forced to move.

So if we let the foreclosures begin on families that have been making payments until the bread winner lost their job or someone became ill and ran into a temporary setback that is likely to be corrected a year or two from now, then what? Those folks become homeless and absorb more public money from other progarms rather than becoming productive loans in a year or two. Thier kids become at risk. The banks lose by paying the cost of foreclosure and they lose again when they resell the property for less than the loan amount. The neighbors lose value on their homes and some of them may walk away from their loans, too. The last time this cycle was handled that way, it took 8-10 years to recover and was then followed by a period of loose credit and unleashed pent up demand which led to the current situation. Maybe it does make sense to help people who are in default through no fault of their own so that it "props up" the existing market and keeps the rest of the homeowners motivated to stay in their homes.
I am not suggesting that fraudulent loans be bailed out here, I am suggesting that not all borrowers (and tenants) that are in default deserve to be put out on the street. Landlords with tenants in distress may deserve some assistance, too, to help keep thje from loosing their property, particularly owner-occupants of 2-4 family property. Seems to me that if you get bailed out in some way, that an equity sharing arrangement with your lender could be a good alternative to losing your home and trashing your credit.

It's called Life is Tough. If you're a homeowner and lose your job, or suffer a setback, then something's gotta give. You can adjust your lifestyle and live off Unemployment benefits and/or Savings, and ride the wave out until you find another job. If the recession really deepens, maybe something can be worked out with the bank that lets you "reverse" mortgage any equity in your house until you start making mortgage payments again.

If all of that fails, then I'm sorry, why should the government (i.e. the taxpayers) support a lifestyle you can't afford at the moment. Millions of people rent, or even live at home, to help grow a savings so they may one day own a house. Why are we penalizing them by helping out homeowners who can't afford their house anymore? People who might foreclose could sell their house and go back to renting (or even living with their parents / relatives) until they get back on their feet. Doesn't that sound more natural instead?

Although it has good intentions to help "innocent" people out, it's just another way of rewarding failure: the failure to keep a job, the failure to save for the future, the failure to live within your means, etc.