Political Hay
House Flippers
The Senate version cuts Rep. Maxine Waters’ favorite “neighborhood stabilization” provision. For how long?
Congresswoman Maxine Waters won’t be happy.
The California Democrat, known for her Freudian slips, has demanded that $4.19 billion be included in the stimulus package for Housing and Urban Development’s Neighborhood Stabilization Program. In theory, the funds would enable local governments and nonprofits to purchase and then resell foreclosed homes, ostensibly avoiding blight. The House version, passed Jan. 28, included the earmark. The Senate version, passed Tuesday, did not.
The neighborhood stabilization program was one of several appropriations that got the axe before the Senate approved the package 61-37. Three Republicans broke ranks and joined Democrats in supporting the bill. The package is now in a conference committee where House and Senate leaders can hammer out differences.
Whether the stabilization funds will be included in the final version remains to be seen, as negotiators are aiming for a compromise in the $800,000,000,000 range. (Yes, it pains me to juxtapose the word compromise with a number that contains so many zeros.) But lawmakers would be wise to keep the funding out, given the probability that it will be ineffective and mismanaged.
Granted, that claim could be made about most of the porkulus bill. The federal government’s last go at stimulating the economy produced some nice bonuses and parachutes for CEOs, but not much in the way of real economic relief. The potential for fraud is especially acute for the NSP, which essentially gets Uncle Sam into the house-flipping business.
The U.S. Office of Inspector General recognizes the danger of misuse — it has identified NSP funds as “high risk.” Republican lawmakers fear the funds could end up in the pockets of leftist nonprofits. Chief on that list is the Association of Community Organizations for Reform Now, or ACORN, infamous for voter fraud last year.
ACORN has denied all interest in the money. “We have not received neighborhood stabilization funds, have no plans to apply for such funds, and didn’t weigh in on the pending rule changes,” said Bertha Lewis, chief organizer for ACORN.
Even if you buy that line, hundreds of other nonprofits are applying (some of them clearly leftist), and plenty of money is already up for grabs. Congress allocated an initial $4 billion for the NSP in the mortgage industry bailout passed in July. That money is now in the coffers of state governments awaiting distribution to counties, municipalities, and nonprofits.
It isn’t hard to imagine the myriad openings for fraud in this scheme. HUD has pledged to monitor where the money goes and hold organizations accountable for its use, but let’s not kid around. Billions in taxpayer dollars are being spread to every corner of the country. Much of it will slip through the cracks.
Even if the money is used for its stated purpose, though, supporters ignore one inconvenient fact: devoting federal dollars to foreclosed homes has the unintended consequence of encouraging foreclosure.
That goes back to the left’s inability to understand moral hazard, either in culture or the marketplace. Offering welfare incentives for working fewer hours or having a child out-of-wedlock will produce — shockingly — more people who work fewer hours and have children out-of-wedlock. Likewise, doling out government bucks to buy foreclosed homes gives incentive for banks to foreclose on more homes.
To boot, it’s generally not a good idea to get the federal government involved in the real estate market. Congresswoman Virginia Foxx, a Republican from North Carolina, puts it well: “If you liked the way the federal government handled Hurricane Katrina relief, you’ll love the way they handle real estate investments.”
Aiding homeowners in tumultuous economic times is a noble goal, but it’s critical to weigh the consequences. Lawmakers must think, not feel — a tall order in a panic-stricken economic atmosphere, but an essential one. Here’s hoping they have enough sense to keep at least this earmark out of the porkulus juggernaut.
About the Author
David N. Bass is a journalist who writes from the Old North State. Follow him on Twitter.
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Drudge Ette Obama| 2.12.09 @ 6:58AM
Like most socialist concepts, the initial idea sounds appealing: buy foreclosed homes in blighted areas and put people in them. How nice. Flush it out, though, and a number of issues come to light.
For example, many foreclosed homes are associated with mortgage fraud. What price will the government pay? Bank balance price or fair market price? These homes are already up for sale as REO properties at fair market values and no one is buying. So, what do we pay? Less than fair market value?
What people do we put in these homes? Will they become federally subsidized housing units? Section 8 housing is not a property value enhancement.
There are too many homes out there as it stands. Supply outweighs demand througout the country. Why not just raze the foreclosed homes in blighted areas. Gets rid of the crack house problem and increases demand. These houses are not in good shape.
Right now banks pay the taxes, insurance and property maintenance costs on REO properties. If the government buys them, has anyone factored in this additional and substantial expense?
The argument that foreclosures will increase makes some sense, but foreclosures occur after the owner discontinues paying mortgage payments. Now we are back to the easy credit home loan crisis. Most people who lose their homes in foreclosure are in or have been in bankruptcy. They can't pay their mortgage, even after it has been modified. The default rate after loan modifications is high.
Now add in if Congress passes bankruptcy reform that allows judges to rewrite mortgage loan terms (interest rates/payments) and allows the cramdown of the primary residence to the value of the property (subjective value) with the undersecured portion being paid at 1%, then you will see the following:
tens of thousand more bankruptcy filings to permit all the people who got into bad, stupid loans to rewrite their mortgage terms. This will have a tightening effect on home loan lending that has yet to be seen.
And people who can pay their mortgage but are adversely affected by the decreased property values will consider bankruptcy to rewrite the terms of the mortgage so that they are at least not under water at the price of destroying their credit.
The hand of government as it reaches further and further into free market activity creates absolute havoc. Have some of us gone completely insane?
Doctor Right| 2.12.09 @ 7:23AM
To: Drudge ette Obama
In answer to the question posed "Have some of us gone completely insane?", I answer, emphatically, "YES!".
But that was evident on November 5th, 2008. >50% of the voting public has no intellectual or spiritual connection to the Constitution.
And the Party they support is corrupt, not insane. Let's not defame the mentally ill.
Drudge ette Obama| 2.12.09 @ 7:45AM
Which reminds me, Dr. Right, who the hell wants a halfway house in your neighborhood, another creative use of federal funds in the foreclosed housing problem.
But if the food is good, I might move in because I am reapidly becoming one of the defamed mentally ill people in the country.
Warren Waldmann| 2.12.09 @ 7:58AM
Let's see now. This money ultimately would go to Community organizers. The House and the Senate Democrats love community organizers. It fits in with the Frank, Dodd, Waters, et al. infatuation with "Affordable Housing" as a hand fits a glove. It will be in the final stimulus bill.
Doctor Right| 2.12.09 @ 9:45AM
This entire "stimulus" scenario reminds me of my favorite line from last year's REAL best movie..."The Dark Knight":
"It's all...Part of the plan..."
- The Joker
WilliamInWien| 2.12.09 @ 10:35AM
Something that really bothers me is the funding for "neighborhood" organizations, such as ACORN and Obama moving the national census responsibility into Rhambo's office. How better to stimulate the local economy than to have neighborhood organzations contracted to conduct the census! I stood in front of an ACORN voter registration effort for 20 minutes waiting for my spouse and I was never asked if I was registered. You can speculate as to why!
Pingback| 2.12.09 @ 10:37AM
house » Blog Archive » The American Spectator : House Flippers links to this page. Here’s an excerpt:
Crusader| 2.12.09 @ 11:02AM
Not to beat a dead horse, (OK yeah it is because it is so much fun) but why didn't ol' Henrietta Hughes buy one of dem dare houses in da projex? At least then she would have a kitchen (and bathroom).
Speaking of houses I am still waiting for obambi to make his way to KY and now OK too. All those poor, poor, WHITE folks who lost everything. Where is the hand of gubmint for them? Where is FEMA? Does Obama hate white people (wait, don't answer that!).
Martinn| 2.12.09 @ 1:39PM
No doubt Sphincter Pelosi will find a way to put it back in.
TonySoprano| 2.12.09 @ 2:26PM
We have alot of experience in neighborhood turn arounds. How does one apply for these funds?
Marc Jeric| 2.12.09 @ 2:33PM
Abu Hussein from Kenya started his career as a community organizer; then he became a lawyer for community organizers; and finally he was law instructor for future lawyers for community organizers. ACORN goons are his baby, and they will get their $5 billion. Their activities remind me of Hitler's brown shirts and Stalin's block committees - I am old enough to remember them well.
Jeremiah| 2.12.09 @ 6:04PM
Interesting that this piece doesn't actually make an argument against the anti-blight initiative proposed by Waters.
Any chance someone around here is capable of reasonable discourse?
What is it that you don't like about the measure?
My advice: state your case and leave name-calling and sophomoric "porkulous" talk to the radio clowns.
Jeremiah| 2.12.09 @ 6:07PM
All reactionaries can do these days is call people names: "socialists" and "nazis" and "terrorists" and even "sphincter" from a particularly stupid poster.
Face it, comrades. You're out of ideas.
Jeremiah| 2.12.09 @ 6:09PM
Marc Jeric --
If you can seriously compare ACORN to Nazis, it's unfortunate to hear you're old enough to remember them.
You should have grown wise before you grew old.
Nick| 2.12.09 @ 9:24PM
Jeremiah,
Finish that article about the study by 2 UCLA economists yet?
Jeremiah| 2.13.09 @ 9:21PM
Nick, I'm still trying to stomach the way S.L. Toddard kicked my butt about my appartment in Springfield MA! He told me, under a socialist government, I would have to share it with 2 families! Didn't think about that... Liberals are real nazi socialist sphincters! They really stink!
Marc Jeric| 2.13.09 @ 9:24PM
Jeremiah you should grow old before pretending to be wise. Obnoxious sphincter.
S.L. Toddard| 2.13.09 @ 9:28PM
*reactionaries*? *comrades* ? What's that smell?
Jeremiah watch your sphincters before making those weird sounds you pass for thoughts. This no goddam north korea here. Not yet.
S.L. Toddard| 2.13.09 @ 10:12PM
*What is it that you don't like about the measure? *
It sucks, it's dumb, it's insulting and it's liberal . Plain and simple. What part of this sentence don't you understand?
Jeremiah, what the f.uck are you doing on our blog, obnoxious jerk?
S.L. Toddard| 2.13.09 @ 10:14PM
And why should we answer your questions? Who the hell do you believe you are?
S.L. Toddard|| 3.13.09 @ 11:34AM
Jeremiah - the person posting with my name is NOT me. It's the same troll who does this with other people's usernames. I haven't posted here in over a month, and this douche has been using my name that whole time.
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