What’s needed, Foster says, is a “light touch” to help the natural correction that’s occurring unfold more quickly. A good example is the Hope Now program. Launched by The Treasury Department and Department of Housing and Urban Development in October 2007, Hope Now is a voluntary alliance of investors, counselors and other mortgage market participants working to keep credit-worthy borrowers in their homes. With its help, the mortgage industry is working to keep 160,000 families a month in their homes by modifying their loans or revising their payment plans.
In the interest of fairness, and for the sake of our economy, we can’t resort to blanket, indiscriminate bailouts. Take the proposal by Sen. Johnny Isakson, R-Ga. He wants to provide a one-time, $15,000 tax credit to they buyers of either a newly constructed home or one that is in foreclosure or default. But as Heritage’s own David John points out, this subsidy would reward homeowners at any income level who either borrowed all of their home equity or took on a loan they couldn’t repay. It also would help homebuilders who ignored signs that the market was slowing and built homes that shouldn’t have gone up in the first place.
There are things Congress should -- and shouldn’t do -- on this issue. In a recent “Heritage in Focus” video, former Congressman Ernest Istook, a Heritage visiting fellow, lays out “Five Standards for Solving the Mortgage Madness.”
Besides, where would the bailout bonanza end? As Istook puts it:
“If Congress bails out those who borrowed too much for a home -- or who pulled out too much equity -- then what’s next? How about those who spent too much for a car? Or a home theater system? Or who bought stocks that went down instead of buying stocks that went up? … Government can’t guarantee success -- and it destroys character when it tries. And a government big enough to give you everything you want will do it by taking everything you’ve got.”
Our Founding Fathers understood the importance of individual liberty and individual responsibility. And if you lied to get a loan you couldn’t afford when the market was riding high, you have no business running to your government crying when the market tanks and it’s time to pay your bills.
Congress shouldn’t meddle. It needs to avoid the temptation to “do something” -- and let the market correct itself.