Editorial: Help for Homeowners
The perils our economy faces due to the collapse of the sub-prime mortgage industry have real impact in the Triad, where a sustained real estate development boom and subsequent foreclosure spree have put us very much in the midst of the storm.
And still the coming quarter looms, when the interest rate for billions of dollars in adjustable-rate mortgages resets and borderline usury kicks in.
As the eleventh hour approaches, there is activity in the White House in the form of expansion of the Federal Housing Administration program to help families – not institutions – who face financial crises under their current agreements.
And the plan, as it was outlined by the president last Friday, seems a reasonable, just response to a potential disaster.
We’re as surprised as you are.
It takes into consideration the differences between residential families and speculators who looked to cash in on a wildly escalating market. It acknowledges the errant actions of an opportunistic mortgage industry taking advantage of those who can least afford it. And it protects homeowners whose property has lost value when the bubbles began to burst.
Moreover, by absorbing home loans at the federal level it gives the government a taste of what the hedge fund managers have been selling these past few years: the reward, and risk, of the sub-prime mortgage industry, which with reasonable restrictions in place could turn out to be quite profitable.
This proposal certainly has its detractors – most of whom say the plan goes too far, rewarding those who took on financial obligations they couldn’t handle, or that it does not go far enough, providing relief for only a fraction of those who face foreclosure in the coming months.
And while we’re wary of ulterior motives, at this point we’re buying this plan. It even seems… smart.
The position has been well played on the political front as well. This time Bush is siding with the little guy – well, the middle class, anyway – against big business interests, which should satisfy some on the left. But the effort is restrained enough that there will be sufficient financial suffering to appease hard-line free-marketeers.
“We’ve got a role, the government has got a role to play – but it is limited,” Bush said in his address.
“It’s not the government’s job to bail out speculators, or those who made the decision to buy a home they knew they could never afford. Yet there are many American homeowners who could get through this difficult time with a little flexibility from their lenders, or a little help from their government.”
Of course, increasing the capabilities of the FHA is an expansion of the powers of the federal branch. But really, isn’t this what government is for: To protect its people from one another?