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Tuesday, September 27, 2016

The U.S. housing market and any economic recovery are confronting a brick wall, and no one is discussing it. Like a speeding train, the housing market and our economy are heading over a cliff with no bridge. Yet, no one in Washington wants to discuss this very real and approaching danger.

Recently, Salon ran an article on the conflicting, confusing, and ineffective nature of housing policy to date. The article traced the conflicting narratives and debate associated with principal reduction and the Obama Administration’s efforts in this arena.

Andrew Leonard, the author of the article, interviewed me as he was trying to sort out the different issues, and the article correctly states, that I believe there is a “night-mare scenario” in which Congress fails to extend essential legislation before it expires at the end of this year. If Congress does not act, we will almost inevitably see a further collapse in the housing market, with a ripple effect that has the potential to destroy vital consumer confidence, stop any economic recovery, or even cause an economic catastrophe.

There’s even a nightmare scenario in which the entire fight over principal reduction becomes, in Judson’s words, “irrelevant.”

Here’s why:

That’s because, says Judson, tax law historically treats principal reduction as income to the homeowner who gets it. In other words, if you have a $300,000 mortgage on a house that is now only worth $200,000, and your bank gives you a $100,000 break to bring the mortgage and the home value in line with each other, the IRS will consider that $100,000 break taxable income.

Congress recognized this obvious insanity in 2007 and passed a provision that gave homeowners a waiver from that liability, but the waiver will expire on Jan. 1. Not only would the change in tax law mean that getting a principal reduction would make no sense for a beleaguered homeowner, but it would also destroy the market for “short sales” — in which banks allow homeowners to get out of their mortgage by selling their property for less than the mortgage is worth. Judson believes some 30 percent of home sales are currently short sales. Knock the legs out of that market, and you’re asking for serious trouble.

“If we hit a train-wreck on Jan. 1,” says Judson, “it will take the housing market and any economic recovery down with it.”

  • The Republican House and an emasculated can’t-get-60 Senate will cavalierly allow this to happen; they will tank everything and throw everyone under the bus because a man who dares to be not-white sits in the Oval. Excuses to the contrary are lies.

  • EdC

    Of course it’s another train wreck and the Republicans ARE doing it on purpose. The banks get to sell the loans that buy the property, then when it goes bottom up, the Repiblicans won’t allow restructure that the democrates want, so after a year the banks foreclose keep all themoney then resell again at even a higher rate, This happens two or three times, gettin the CEO a big chunk of money who runs off to a tropical island, and messes with yougirls or boys of his choice. the only way that the train wreck can be adverted is by creating good paying jobs where working people can once again have the American dream. However we have seen the just say No policy of the REpublican party to that idea. They just got away with cutting wages for police, fire, and teachers to 1970 standards in Wisconsin

    • Disillulsioned

      Wisconsin.
      What a disgrace ! I’ve just be talking about this to our friend Jespell up here ^. ‘R’ actions against policy, procedure or law. They’ll do anything, say anything and crawl into any gutter to get their hands on everything. Some need to be dragged out by their ears in a massive firing campaign ! Be very careful who you vote for in November… and HOW you vote. Remember, the electronic voting machines do not give you a receipt and are owned by ‘Diabold’. And you know who’s ”friend’ that is !!!
      Disillusioned

    • rmarqua2921

      The fascinating story to me about Wisconsin, is Walker must be a very weak governor! He can’t even negotiate with his own people? His only chance is to destroy the opposition, the unions! No contract becomes valid with public employees solely by the signature of the unions! The governor has to also sign the contract! I hear unions called “thugs” by the supporters of Walker? The dictionary describes “thuggery” as “a cruel or vicious ruffian, robber, or murderer.” Was Walker beat up to sign the contract? Was Walker even threatened with harm so that he would sign the contract? Was Walker robbed? Was the life of Walker or his family threatened with death? I have seen no evidence of any of that! All I see is that Walker is a weak administrator who didn’t have the skills to negotiate a reasonable contract with the public employees.

      Instead, he used his partisan State Congress to destroy his own people’s, his own employees, rights to negotiate a contract! HAS THIS BECOME THE AMERICAN WAY? It’s my way or the highway! Is that the way of democracy? Just do like Romney, when you don’t like the hair of the other guy, just calling the THUGS and cut it off! That is what I saw Walker do! Now that is the real epitome of “thuggery”

  • Jerpell

    Well when we have a leader in Obama that has never had a real job his entire life, he has always sucked off the tax payers, how in the world could this buffoon have any business sense at all. His idea of strengthening up the private sector is to hire more teachers and firemen….Every time idiot Obama opens his mouth he proves every point I make!

    • Never held a job ? Bagger GOP Fox Hogwash Obama.. College Professor Senator Author Now Pres ..hardest job on earth these days
      Obama took on Worst crash in 80 yrs 2 mismanaged wars based on lies- war profits- un funded corp cuts- huge debt- good jobs gone- US auto industry was dying Obama saved it Bush gave up Mit said Let them DIE Obama Seals
      got Bin laden & 20 top al Quada Gave mid class tax cuts- created 4 mil jobs in
      3 yrs yes More is needed I’d call that working as a high level executive.
      If GOP had not blocked everything We would have done better
      GOP # 1 job is GET RID of Obama screw the economy- jobs- middle class

      • Jerpell

        You answered my article……He never had a real job, all of his jobs were payed by tax payers, he sucks off the tax payers of this country! He added more to the debt than all of our presidents put together, all of them 240 years worth….get your head out of the sand and stop letting facts get in the way of your made up loony left nonsense!

        • Disillulsioned

          Jerpell and the like…
          How much are you being paid to throw up smoke on these comment pages in the form of out-and-out blatant lies !? This all began with the worst president in history, George W. Bush (and the dark lord Cheney), who made sure all his ‘buddies’ in banking, oil and the media were taken care of to the detriment of this country and its treasury, which they managed to ‘rob’. It was contrived to keep our attention off of them, while we were constantly reminded of 9-11, and we invaded other countries (for oil) without the call for war! Then, when Obama is hired, much to your stupid dismay, and he valiently attempted to clean up the worst mess here in history, your group, I assume, beginning with ‘R’, gathered to stop everything he planned to do, so you can keep the new ‘status quo’ in America and your hands on the ‘gold’, lying to the citizens, and breaking laws while the citizens stave and die !! We need other words besides ‘evil’, and ‘greed’, to describe the likes of you !! Of course you have articles, it’s what you do… spreading ‘cancer’. But you don’t see that we see … right through you in an election year !
          Disillusioned (…in some peoople )

        • DukeDacat

          HEY Jerpell…………… What part of the following is too hard for you to understand???

          “Reportedly, Republicans believe that extending the tax exclusion will cost the government $2.7 billion, and oppose it, in large part, based on this estimated cost. This makes no sense. First, no one has ever released the source for this estimate.”

  • Control the economy by refusing to do anything. What did we send those politicians to Washingto DC for? To collect their high pay and sit & argue about frivolous things like whether or not we should have IN GOD WE TRUST on our money? Anything the least bit chancy that some constituents might not like they avoid like the plague. I wish they would get some back bone!

  • howa4x

    Instead of bailing out the banks as was done the Republican way, we should have just gave people who were underwater or facing foreclousure enough money to repay enough of their loan to get even again. We could have then renegotiated the amout of the loan with the banks. If they knew there weren’t gong to be bailied out they would have done it. That way there would be no crisis since everyone would have remained in their homes. Now we have another round of foreclousures coming, more housing to be put on the market, more credit ruined and neighborhoods pulled down. This is what happen when you only reward the top.