One of the issues we are expecting to hear about in President Obama’s State of the Union address tomorrow night is the housing crisis. Economists tell us that the nation’s economy won’t dramatically improve until the housing market stabilizes and demand for new homes gets back on track. That’s how important the housing construction industry is to creating jobs.
But that industry won’t be coming back for a while if there is no effective action taken by the federal government.
As I pointed out last October, according to an analysis by McClatchy Newspapers, at that time there were 2.2 million homes whose owners had received initial foreclosure notices or notices of default but hadn’t yet been foreclosed on. Another 1.9 million properties at that time had owners who were 90 days or more behind on their payments but hadn’t yet been served with foreclosure notices. That’s 4.1 million homes that are soon to be put into the foreclosure bucket. To put that into perspective the official number of all houses for sale in the nation is only 3.5 million.
The drum beat for the President and Congress to take strong action to solve this crisis to boost our economy has been growing. Last week 27 Congressional Democrats from California asked for a meeting with the President after meetings with top Administration officials such as Tim Geithner failed to produce needed action.
For some time I’ve been advocating that we should “muscle the private banks and Fannie and Freddie to do everything in their power to keep the current home owners in their homes by letting them refinance at today’s rock bottom rates (no questions asked) and, if necessary, reducing the principle they owe.”
There is a push in the House to have the government-controlled Fannie and Freddie write down mortgage principles for owners deep under water. Federal Reserve Chairman Ben Bernanke wrote this month that “it might be worth the expense to lose money now in an effort to shore up the books of the government-sponsored enterprises for the long term while helping the economic recovery.”
But what about the big private banks of JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, and Ally Financial? The states’ attorneys general have been working since the fall of 2010 to have these financial giants help the homeowners they victimized by their earlier foreclosure papers robo-signing scandal. However this agreement is expected to compensate only about one million homeowners with principle reductions. That will be too late for many and a drop in the bucket to really help our economy.
It is time for these private banks to give back to the country for bailing them out. The profits they’re reeling in now wouldn’t exist if it wasn’t for the taxpayer.
A call for principle reductions and the lowering of interest rates for both public and private mortgage holders in trouble should in the President’s speech tomorrow night. If he really wants to get the economy rolling sooner than later, this is the course of action we must follow.