Friday, April 4, 2008

What Congress could do to help fix the housing crisis

In the spirit of answering the question asked to Benny in the Congressional hearings, here's what Congress could do to help fix the housing crisis. No, I don't expect them to do any of these, or even anything in the right direction, but I figure at least one post in a sea of criticism should be what the right things to do should be.

1. Streamline the foreclosure process.
Foreclosures take on average 15 months to process from first missed payment to eventual resale on the market, and some take much longer. The process should allow some time between initial delinquency and re-possession, but everything from that point on should be as streamlined as possible. Work with states to ensure that once a house is foreclosed on, it's sold at market price ASAP.

2. Force lenders and lien-holders to move on properties
Some lenders are letting properties sit when payments are delinquent, so they don't have to take joint responsibility for them; this is very detrimental to the area and the market. Make lenders jointly responsible from the moment they are legally allowed to begin the foreclosure process, unless the forgive the entire loan at that point.

3. Actively oppose bailouts for speculators
Challenge the Fed's authority to give taxpayer money to IB's that over-leveraged. Vote against proposals to subsidize builders who overbuilt areas (such as those that provide incentives for people to buy those properties now). Vote against subsidies for people who buy specific types of properties (such as foreclosures), as this makes housing less affordable for people. Encourage investors to accurately value properties in the current market without subsidization inflating prices.

4. Challenge the lack of oversight
Ask how the Fed/SEC could let IB's get too big and interconnected to be allowed to fail, without splitting them up and/or diversifying their assets. Hold the oversight agencies accountable. Create new legislation to encourage oversight agencies to fight systemic risk in the market by actively opposing excessive leverage at vital financial companies.

5. Clarify lack of government backing of private companies
Explicitly legislate that GSE's are not government backed, and can fail if they make bad investments based on bad rules.

6. Consumer education
Fund consumer education, in the form of unbiased collections of information about historical housing prices, affordability ratios, and debt management. Use free internet resources as much as possible (as opposed to paid-for studies, which are inherently biased).

There ya go, Congress... that's what you can do to help.

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