The Housing Rescue Bill and Foreclosure Myths

The Housing Rescue Bill that was signed by Bush recently stands to serve about 400,000 people, as well as offer incentives of $7500 tax breaks to first-time homeowners.

In the cynical and self-centered era of American politics we live in, of course rather than people looking at the big picture and being grateful this Bill was passed, it seems the media focuses on the backlash. It's important to look at the big picture - this is going to result in a net movement toward something positive. Let me elaborate.

Myths, Complaints and Observations about the Housing Rescue Bill:

1. It rewards irresponsibility and bails out selfish people:
This is probably the most popular counter-argument/complaint I hear about the rescue package, and I definitely understand where a lot of the people are coming from. To some people, it may seem that people who overextended themselves, didn't save up enough down payment, didn't "work as hard" or "manage their money" with as much prowess as others, or who thought they deserved a bigger house than they could afford. The bubble years created a mentality that real estate was only increasing exponentially. This put the idea in a lot of people's heads that even though prices were high, they were only going up higher. Spending $800k on a house when you made $45k a year seemed like a viable investment, albeit risky. This makes us wonder - HOW could somebody making $45k/year afford an $800k house?

The answer: Predatory lending. In the boom years, when the AMerican Dream of home ownership migrated from the land of privilege to birthright, people became much more suspectible and possibly more gullible. They didn't read the fine print, that a certain adjustable rate mortgage might go from 3% in the first 2 years, to 11% after. Certain legal lingo was used to confuse or obscure details about the borrower's responsibility to pay even the principal on certain types of loans, higher interest rates after a given period of time, etc. Lenders targeted people who "couldn't" read between the fine print, and took them to the cleaners. I'm not advocating that we absolve people of personal responsibility. I am saying that we have to hold the lenders as accountable as the borrowers. You know - the majority of the victims are single middle aged mothers.

2. 400,000 people is a small fraction of the millions affected. Why even bother?

It's still 400,000 people! Listen - 400,000 means 400,000 homes are saved. That means that many more construction jobs get created. That means the constant climb of unemployment filings (in some areas, overwhelmingly due to the loss of construction sector jobs) decreases for a change. This means the huge glut of unoccupied housing we have in America starts dwindling.