Mitt Romney’s position on foreclosures sounds similar to real estate brokers who think they stand to profit from more foreclosures (more sales, more commissions); nevermind how crazy it is:
ROMNEY: Are there things that you can do to encourage housing. One is, don’t try and stop the foreclosure process. Let it run its course and hit the bottom, allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up. The Obama Administration has slow-walked the foreclosure processes that have long existed, and as a result we still have a foreclosure overhang.
Mitt Romney, watch it yourself here.
I have heard this “let the market work” argument repeatedly after the banks got their bailouts and now are turning profits, giving bonuses and trying a variety of ways to increases their fees. At a press event over the summer I took a preachy tone in frustration.
“[A]re we going to blame this whole mess on a guy who lied on his loan application? Really? Have you all been duped that much that you are going to continue to write that story, that that is what this is all about? That Wall Street didn’t invent mortgage-backed securities?
This stuff didn’t just happen overnight. The guy who lied on his loan app didn’t just get born these last four years. This thing was created by Wall Street and aided by the players. Everyone had their hand in it. The Realtor, and no offense to Mr. White, but the profession, what is their answer — sell, sell, sell! Absolutely. That’s what they want. That puts more money in their pockets.”
Robert W. Doggett, Texas RioGrande Legal Aid, more of that story here.
Romney obviously has been advised to sound tough during this primary season — let those liars suffer, they get what the deserve is the thought process. It might sound tough but it is totally wrong. A editorial published yesterday took a moment to explain why he is way off:
Efficiency. Mass foreclosures are a rotten way to stabilize the market. They impose huge costs on neighbors, communities and local governments, and on the broader economy, as falling prices erode equity, depress consumer spending and mire the housing market in a deep hole.
Logic. Who does Mr. Romney think will buy up millions of foreclosed properties? Borrowers who lose their homes to foreclosure or who sell their homes for less than the balance on their mortgages can be denied credit for years; many will never be homeowners again. … Investors are inclined to buy distressed properties only if they believe home values will rise, a confidence that is hard to come by in a market that is threatened by more foreclosures and renewed price declines.
Danger. With the economy still weak and vulnerable to shocks, more foreclosures and the resulting price declines would only weaken the economy further.
Fairness. The let-it-crash argument conveniently ignores that the housing bubble was the result not only of overborrowing but of reckless lending too. When the bubble burst, the banks were bailed out, while speculators and uncreditworthy borrowers — whom lenders had aggressively pursued during the boom — quickly began to lose their properties. But the economic damage went far beyond the “bad” borrowers, as evidenced by deep recession, ensuing slow growth, high unemployment and crashing home values — all of which has now harmed millions of homeowners who never went near a subprime mortgage. They are the collateral damage of the banks’ binge and bailout. They deserve help, not scorn.
NYT editorial, November 26, 2011 - here.
At a recent debate, Mr. Romney was asked why he was willing to risk further huge losses in home equity by pushing foreclosures. “What would you do instead?” he replied. “Have the federal government go out and buy all the homes in America?” Story here.
What is needed is a set of policies — rentals, forbearance, principal write-downs and refinancings — on a scale that tackles the problem. So far nobody has successfully pushed forward such a plan so we all continue to suffer while to politicians wrangle on what sounds better to the voters and donors. Romney painted the choices as: 1) tough it out and take our medicine or 2) let federal government take all our homes. Seems fair.