Election Year Politics And Mortgage Bailout Schemes Bad For Katy, Houston Area Homeowners

The pending mortgage bailout proposed by Rep. Barney Frank and Sen. Chris Dodd is just one more political fix that is doomed to failure.  Government has a poor record of correcting economic imbalances that would be better left to correct on their own.  When Congress starts tinkering with financial markets to compensate for previous mismanagement and oversight, all mortgage borrowers will pay the price.  The sub-prime pain that has already claimed millions of foreclosure victims has now spread throughout the capital markets, inflating the cost of borrowing for all homeowners.

Housing markets in many parts of the country are correcting for a reason; They need to come down to affordable levels.  Market bubbles do not last forever, and the borrowers, speculators and banks that made those risky loans should bear the brunt of the losses.  Giving mortgages to borrowers with FICO scores that were low enough to disqualify even most renters was a recipe for disaster.  The same can be said for mortgages made to investors who put down little if any of their own money.

Adding more bad loans to the FHA's already burdened portfolio will not help the problem.  The financial markets are already taxed.  Additional backing by the government will just mean more taxpayer expense.

William Wheaton, a professor with the MIT Center for Real Estate, advocates letting the housing crisis run its course.  He has also noted that many homeowners facing foreclosure would actually be better off renting in the current market than trying to refinance a bad mortgage.  This is an excellent point that few, if any, politicians are addressing because it is politically unpopular.  When MIT professors and Yale economists are telling you that the market needs to run its course, I would be inclined to listen.

The housing market is adjusting, and it will be painful for a lot of families, particularly those who had their hopes set on the dream of home ownership.  I'm a huge fan of home ownership, I just don't want to be forced to subsidize someone else's high-risk mortgage.  Sentiment appears to be growing against the housing bailout.  Sites like www.AngryRenter.com and www.NationalBubble.com are seeing plenty of traffic.  It will be interesting to see if anyone in Congress is listening.   

For more information about real estate and mortgage issues in Katy or West Houston contact Aaron Layman.  He is a licensed real estate broker and mortgage broker.  You can contact him directly at 281-994-5190.  You can also visit him on the web at www.AaronLayman.com.