The Congressional Oversight Panel (COP), which oversees the spending of TARP funds, released its March report today entitled “Foreclosure Crisis: Working Toward a Solution.”
But are we actually facing a foreclosure crisis? The left chastises “deregulation” as the evil at hand when the Government Sponsored Entities Fannie Mae and Freddie Mac purchased the majority of subprime loans. This in turn forced private banks to enter the market in order to compete with Fannie and Freddie.
[I]t is a fact even admitted by the majority report that some loan modifications are simply not economical and thus some foreclosures are inevitable.
So the government is going to bailout everyone. Thank you. The next question becomes much more difficult: where should the line be drawn? Rep. Hensarling writes in his alternative view (emphasis in original):
Without a doubt, in any loan mitigation program there will be some otherwise eligible borrowers who can pay their mortgages but who choose not to pay them or not to make the difficult decisions to sacrifice on other things because they want to get relief.
However, this has been “nearly universally omitted” from government plans.
According to a Comptroller of the Currency and Office of Thrift Supervision report, the rate of delinquency after loan modification has increased from the first to second quarter of 2008: jumping to slightly over 40%.
So, if loan modification is largely not working in over half of the scenarios, why should we spend $100 billion dollars? Then again, government is used to throwing money at programs that have massive failure rates.
If you think this is bad news, look at the statistics of who’s really having loan problems now. A Mortgage Bankers Association report found that second homes accounted for about a fifth of foreclosures in 2007.
Then the fun begins. According to a U.S. Census Bureau survey, only 46% of the population actually has a mortgage: the other 54% have paid off their mortgage or rent.
But the federal government is involved in the supposed mortgage problem because it is a problem that affects our country at large, right? Wrong. Only nine states have foreclosure rates above the national average.
The delinquency statistics: loans over due by 30 days account for a mere 7.29% of loans and those in foreclosure, a minuscule 2.97%. So about 10% of loans are late. This number alone creates a mystery to the hysteria, however, when combined with the fact that less the half of Americans have a mortgage the number reduces by half: 5%.
Rep. Hensarling asks (again, emphasis in original):
Is it fair to expect 19 out of every 20 people to pay more in taxes to help the 20th person maintain their current residence?
As a lover of liberty and limited government, the answer is clearly no.