What then should we as a nation do to resolve the aforementioned problem? Before we leap to an answer let's look at the alternative to home ownership: rental housing. You do not have to own in this country to have a place to live. You can rent a house, apartment, a boat, a warehouse etc. The missing ingredient in this particular sector is the ownership of the facility that is being rented. The owners are very similar to the ones mentioned above. Some have lost their places to foreclosure already, and many more are in or about to be in foreclosure. In some areas of the country tenants have been evicted after the foreclosure and in other places tenants have paid their rent to owners on the verge, who have kept the money and not given it to the banks. Those tenants are also being evicted.
Last, but not least, rents have taken a substantial increase as demand becomes greater meaning that renting isn't quite as good as it used to be.
There are simply two sides of the story. Save the economy by stopping the foreclosures, at any cost? Or let it go and watch the real estate industry reel, along with the lenders, Wall Street, the banks and a number of foreign countries who are holding a large amount of our loans and financial obligations? The road to recovery for the real estate industry is through lower mortgage rates, fewer foreclosures and ways and means to get the public buying houses again. The other side of the story dictates doing nothing to help the real estate industry, let housing prices continue to fall and let the foreclosures mount. Again, if that happens other industries, cited above, will also shrink.
If we do decide to save real estate, how do we deal with the initial problem I mentioned in this column: the thousands of borrowers on the verge of adding to the already too large number of foreclosures? I believe most of the problem can be handled with fiscal policy instead of the way we have gone up to now with monetary policy. The only problem with fiscal policy is those borrowers who need help are usually unemployed or underemployed and do not pay taxes. But consider this: why not use accelerated write offs, investment tax credits and a forgiveness of withholding except for social services? This would result in a bigger deficit for the country, as does the monetary policy, but would give borrowers immediate help with their cash flow which might act to stop potential foreclosure problems.
Is this the best idea we have? I can't believe it would be, but it is an idea. We need more ideas, from more people as quickly as possible. We need to discuss them, dissect them and hopefully come up with something that can work. What we don't need is more money thrown at the problem, hastily, without being carefully thought out because we neither have the money, the time or the patience to watch a great nation brought to its financial knees by politicians whose main goal in life is to be re-elected. It is our country, our government and our problem. It is up to all of us to help solve it or at a minimum keep others from making it worse.