Housing

Not Your Clinton’s Foreclosure Holiday

First the gas tax holiday, then the Columbus Day holiday, now again with the foreclosure holiday. Everyone should be wary of “holidays” in taxation or government function largely because it […]

First the gas tax holiday, then the Columbus Day holiday, now again with the foreclosure holiday. Everyone should be wary of “holidays” in taxation or government function largely because it (if not directly) gives the perception of putting off a current problem until later, perhaps, say, until after November 4.

Not to say that Barack Obama’s plan to place a 90-day moratorium on home foreclosures would not work, but we should tend to take “holidays” with a grain of salt — primarily because of their short-term appeal, but as-yet-determined long-term benefit.

At first blush, Obama’s proposal does appear to be different, and indisputably safer, than the proposal Obama opposed eight months ago, when then-Democratic presidential candidate Hillary Clinton proposed a 90-day moratorium on foreclosures and a five-year interest rate freeze on existing, adjustable-rate mortgages — a plan that was largely criticized by economists, who said the Clinton plan would damage the housing market and send new mortgage rates into the stratosphere.

Ah, the halcyon days of Primary Season 2008.

At the same time last spring, Obama proposed to offer $10 billion in bonds to homeowners and give them a tax credit — a plan that was criticized amid concerns that it did not do enough for homeowners already in foreclosure, or those on the brink.

Of course, the game’s changed since then, and economists are warmer to some kind of moratorium. From the Los Angeles Times:

Economists, investment advisors and real estate experts interviewed Monday said they approved of parts of Obama’s plan.

In general, they tended to favor some sort of moratorium on foreclosures, in large part because it has an expiration date and would give lenders and borrowers some breathing room until the panic subsides on Wall Street and at bank teller windows across the country.

“Ordinarily, I’m not in favor of moratoriums of any sort, but these are not ordinary circumstances,” said Kerry Vandell, the director of the Center for Real Estate at UC Irvine.

But, the story adds:

However, some economists warned that the foreclosure moratorium would just delay the resolution of underlying problems in the housing market.

I’m not so sure that that’s the case this time around. Obama has, throughout the campaign, favored sustainable approaches over short-term headlines like “gas-tax holiday” and so on. Under the Obama plan, families face foreclosure who are already working with finance firms taking part in the $700-billion rescue package Congress passed last month would basically get 90 extra days to make the effort to pay their mortgages.

When key members of the Senate recommended a foreclosure moratorium in September after Fannie Mae and Freddie Mac were placed under federal control, Rooflines questioned the plan’s sustainability:

Is this simply a “gas-tax holiday,” stopgap approach to long-term solutions that benefit the homeowners in danger of losing their houses, or will Congress offer a robust examination of the housing market, loans held by Fannie and Freddie, and enable the ability for homeowners to restructure their mortgages?

Obviously much has changed since then, but that initiative, unlike the Obama plan announced this week which takes account for the Congressional bailout plan and thus can be implemented under existing law, did seem much more like a “wait and see” approach. Sadly, the media, and the zing-y headline that “Foreclosure Freeze” brings, cannot quite differentiate the two proposals in the same zippy fashion, which is why we will inevitably see bloggers claim that Obama was “for the freeze before he was against it.”

Oh, wait. We already have seen it.

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