Monday, September 6, 2010

A Question about Housing Market Rescue

As I read another article about the housing market (this time that some people say it should collapse), I wonder this: why are all the solutions so blasted uncreative? For example, an 8k tax credit was NEVER going to do more than encourage people to buy sooner rather than later (as opposed to inducing buyers to buy rather than rent).

What I wonder is what would happen if the government (who theoretically controls a huge portion of the market anyway because of bailouts to banks, aid to Fannie/Freddie) just said that anyone who:

-Was losing their home because they lost their job and cannot pay (but otherwise could)
-Was able to prove that they had been defrauded by mortgage companies

just would receive a temporary moratorium on home payments until they either got a job or got their payments reduced to a level they could afford.

The reason I say this is because I think that we have yet to see our government actually flex its muscles in this crisis. We could actually save the economy, I believe, if we just decided that it would be some mortgage brokers or banks that were going to lose rather than homeowners. The problem is that a lot of "fake" money has been created and it needs to disappear in order for the market to go back to "normal." Why can't we let that fake money come from a few banks? Why can't we modify payment terms for people who are losing their home because they lost a job due to this bad economy? I am actually interested in answers to these questions.