In My Humble Opinion #2

More homeowners than ever are falling behind on their mortgage payments according to an article, “U.S. Mortgage Delinquencies Reach a Record High,” by David Streitfeld, on the New York Times website.

In a survey conducted by the Mortgage Bankers Association, ten percent of homeowners were at least one payment behind on their mortgage, or approximately five million households. Though these bad results were expected, analysts predict many more foreclosures are coming.

“The combined percentage of those in foreclosure as well as delinquent homeowners is 14.41 percent, or about one in seven mortgage holders,” according to Streitfeld.

Although subprime loans drove the collapse of the housing market initially, it seems that now unemployment is what is holding homeowners back from catching up with their mortgage payments, and consequently turning around the housing market. In the past, when employment opportunities were bad, homeowners could sell their home and relocate. In the current recession, homes are worth less than what homeowners owe, leaving them trapped in financial difficulty.

Unfortunately, the government’s efforts to financially support the “big banks,” in hopes that they will become liquid and start lending again, has fallen very short of making any significant impact on the housing situation, in my opinion. In this trickle down theory, they have failed to put safeguards in place to ensure proper use of the funds made available and have put too much of an emphasis on new home purchases. While one family loses their home due to the declined value, another person is buying that home at record low rates for the same price that the original family could have sold the house for in the first place. The only difference is that when the original homeowner needed the assistance, the bank chose to turn away from them in favor of turning the property over to a new buyer. Banks are still ultimately lending on the decreased value of the home, not what it originally sold for but now at the expense of a family’s security and happiness.

If the government ensured that the bail-out funds went to stopping foreclosures specifically I think we would already be experiencing more positive changes. Even more directly, if funds went to other efforts to stimulate the economy and creating a better job market, I think we’d see positive results even faster. In a trickle up theory, if the working class and homeowners received more substantial support than what was already issued, they would be happy to pay their bills and put food on the table, which would immediately stimulate the economy. Those monetary activities would trickle up to the banks and give them the lending power they need, but through the traditional ways of supply and demand.

I think the government’s efforts are much appreciated but far from effective. It’s time to trust the tax payers that financially back this country and offer them the tools to make changes.

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