Government’s New Own to Rent Program
San Diego home
This post is follow-up to my 7-16-09 post about the latest government foreclosure program. If you are unfamiliar with this proposed new government program, please read the prior post.
Capitalists, big business, oil companies, mining companies, coal/oil electric generation, banks, home mortgage lenders, the 700+ scientists who disagree that man is causing climate change and now landlords, are now all cast by the government as needing enlightenment. Thus, it should come as no surprise that another ill-conceived law directly affecting real estate is now being considered. Although cloaked as helping the disadvantaged, it is just another move to re-distribute wealth and force the greedy landlords into submission.
If passed as currently proposed, this new law would create an implicit contract between the lender and borrower that allows the borrower to rent the house after foreclosure. The contract would be defined by the law and applied retroactively to every existing residential mortgage loan. This adds significant uncertainty to mortgage lending and would raise rates and down payment requirements to offset the additional risk to the lender.
To boil it down, this proposal would change one of the building blocks of democracy… the rights of parties under a contract. It would change every mortgage contract, or at least every mortgage contract issued by or underwritten by the government. So, loans sold to Fanny Mae, Freddy Mac or insured through VA/FHA would be subject to this proposal. It would force banks to be landlords. While they may be willing to do it for short periods, I doubt many banks want to be long terms landlords. Think about this: banks would be forced to lease property to people who have already proven they cannot or will not meet their obligations. Not exactly the best tenants. Who will set the rental amount, a new federal rental Czar or a judge? Will the rental amount be at fair rental value or some much lower taxpayer subsided amount?
There is already a government subsidized rental program. Federal assistance provided by the United States Department of Housing and Urban Development (HUD) dedicated to sponsoring subsidized housing for low-income families and individuals. It is more commonly known as Section 8, in reference to the portion of the U.S. Housing Act of 1937, under which the original subsidy program was authorized. Here in San Diego, few landlords in better neighborhoods will accept Section 8 renters. Yes, believe it or not, the government has not gotten around to making it mandatory. Why are landlords reluctant to accept current Section tenants? It is because it’s almost impossible to get them out for lease violations and at the end of the lease term.
Using actual sales data but applying the law hypothetically to the past few years: A homeowner purchased a luxury condominium in the Mission Valley area of San Diego in 2005, for $675,000. In 2008, the homeowner had financial problems and a $270,000 negative equity position on the condo. Let’s say the owner applied to the “rent vs. mortgage†program and gave up his/her position as owner and just rented the unit from the bank. Now in 2009, the tenant (former owner) decides to move after one year. The bank, which was blocked from selling the property in 2008, will now discover that based on the San Diego Association of Realtors, San Diego condominium prices have dropped an additional 35%. just in the one year period. So, the Mission Valley condominium that was worth $405,000 a year ago, is now worth just $263,250! Who pays for the $141,750 in additional loses the lender was forced to suffer because their right to foreclose and sell the condo was stripped by this proposed law? Does the term U.S. taxpayer sound familiar?
Since January 2009, with tongue-in-cheek humor, I’ve been suggesting that the government’s real goal with these foreclosure plans is just to let these poor, disadvantaged and troubled homeowners remain in their homes for free. This action would be the ultimate sign of Omaha’s ‘redistribution of wealth’ campaign promise. This proposed own to rent program is just a small step away from my prediction.
San Diego California Realtor
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The legal changes Obama is bringing will force a more equitable distribution of wealth AND risk. First, he will rebuild the social safety net, shredded by decades of rightwing mismanagement. Second, the better government regulation will bring more centralized control back over the markets. As time goes on, the federal government will reassert its rightful authority over more sectors of the economy, and we will march together into a brighter future for our children!
San Diego medical research studies
So how bad is it? I hear all these ramblings, fancy financial terms and so on. But what does it all really mean? Does the US collapse? Do we see soup lines and down trodden people like the experience was during the Great Depression? Seems to me the US financial catastrophe is pretty simple. Our government and the citizens of the US have consistently spent more than they take in. At some point the debt becomes so great we are unable to pay it back, or manage it. When we are no longer able to pay our debts what happens? Do we surrender assets, land and military hardware to the foreign nationals we’ve been burrowing money from over the last two decades? Maybe a fire sale of America? The whole system is a sham and we only have ourselves and those shysters in Wall Street and the Scum of Washington DC to blame..Sorry to say but, Obama won’t be able to save us from this SNAFU. The concept of uncontrolled spending and deficit through credit has finally caught up with us. This decade is perhaps a time for reckoning in which our short sighted ways and embrace of Wall Street’s psychopathic free market capitalism garnered by greed and unequaled corruption will finally get the best of us..
Fort Lauderdale bail
Something to keep in mind as you read the story. The best way to be the 10th person is to start your own business and/or buy real estate.
Lesson in Taxation
Each evening, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this.
The first four men — the poorest — would pay nothing. The fifth would pay $1: the sixth would pay $3; the seventh $7; the eighth $12, the ninth $18 and the tenth man — the richest — would pay $59. That’s what they decided to do.
The ten men ate dinner in the restaurant every evening and seemed quite happy with the arrangement — until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.” So now dinner for the ten only cost $80.
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still eat for free.
But what about the other six — the paying customers? How could they divvy up the $20 windfall so that everyone would get his fair share?
The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would end up being *paid* to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same tax formula, and he proceeded to work out the amounts each should pay.
And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59.
Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth. “But he got $7!” “Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got seven times more than me!” “That’s true!” shouted the seventh man. “Why should he get $7 back when I got only $2?
The wealthy get all the breaks!
“Wait a minute,” yelled the first four men in unison.
“We didn’t get anything at all.”
The system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next night he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. Something to think about.
They were $52 short!
And that, boys and girls, journalists and college instructors,
IS HOW THE TAX SYSTEM WORKS.
The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.
The ratified changes Obama is conveyance leave intensity a author equitable distribution of wealthiness AND try. Low, he will build the sociable area net, cut by decades of rightwing misdirection.