Thursday, March 25, 2010

A Government success story?

A story about existing home sales falling for the 3rd straight month also included the following:

The number of homes on the market jumped 9.5 percent, pushing the time it would take to sell all properties at the current sales pace up to 8.6 months from 7.8 months at the end of January.

The increase in supply last month was “unusual” and “discomforting,” Lawrence Yun, the Realtors’ chief economist, said in a news conference. The jump may be caused by more distressed properties coming on the market, particularly condominiums, and by trade-up buyers who are now putting their houses up for sale before purchasing another property, he said.

If inventories exceed a 10-months’ supply, it would lead to larger price declines and signal the housing slump was not over, he said
(italics, ours)

Distressed properties = foreclosures

In other totally related news:

Scrutiny of the Home Affordable Refinance Program is heating up in Washington, as lawmakers continue to question the mortgage refinancing program and say it is failing to meet expectations.
The House Oversight Committee announced today that it will hold a hearing to examine the program Thursday.

Special Inspector General for TARP Neil Barofsky is scheduled to release his report on the program at the meeting. Herbert Allison, who oversees the Troubled Asset Relief Program for the Treasury Department, also is expected to testify.

The $75 billion HAMP program, which can use up to $50 billion of TARP funds, provides incentive payments to lenders who can help responsible borrowers modify their mortgages.

(ed. note: The TARP program was never intended for this)

Earlier this year, committee chair Edolphus "Ed" Towns (D-N.Y.) requested data on the program from the Treasury Department as part of an investigation into HAMP.

Towns has criticized the program for failing to require that lenders give homeowners an explanation for a modification denial and for failing to establish an appeals process.

That's because, Ed, HAMP lenders are rolling on the floor in gut-wrenching laughter after seeing the nature of these appeals for assistance and are unable to respond.

Seriously, could this actually be good news? Could it be good news that an inefficient government bureaucracy is, in reality, aiding the "purge" cycle of a recovery as they are unable to throw good money after bad to homeowners compelled to stay in their homes by the lure of cheap, easy government money?

The article goes on to talk about the difficulties in assessing what constitutes the success of the program and that leads to a very interesting point. By usual government standards, they would simply point to the number of cases that have been processed and/or the amount of money expended through the program but as we alluded to above and which is a point we have long been critical regarding these types of programs, the housing market is little served by keeping distressed homeowners on terminal life support.

Generally speaking, foreclosing and moving into a cheaper rental in order to save up money to enter the market in a more solid financial situation in the future is better for everyone all around. But dammed if the government is going to let you out of your American Dream that easily.

No one seems to be pleased with the HAMP program,as is, but rather than shutting it down, recognizing it for the failure it is, rest assured, tweeks will be made to speed up processing which will also entail loosening qualifying criteria and lending standards... is any of this sounding familiar?... so that the bean counts start meeting approving nods.

Double-dip, anyone?

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