The latest policy being implemented is known as HAFA. Here's how it works in a nutshell: It incentivizes short sales and distressed sales, especially in the cases where a 2nd mortgage of some sort is holding up the whole process by taking Taxpayer money and paying the deadbeat borrower $1500 to vacate, $1000 to the people who process the mortgage paper work (the servicers), $1000 to the new "investor" who is buying the property AND $3000 to the second mortgage holders to induce them to sign the papers releasing all liens. Here is a link to the details: LINK Please note that this information is hosted on the website of the National Association of Realtors.
I exchanged some emails with Mark Hanson, of http://www.mhanson.com/, a.k.a. "Mr Mortgage," who has done an incredible job historically of analyzing and presenting the details of the housing bubble and its demise. But in his latest public blog post, LINK, he promotes the HAFA program as a means of speeding up the process of distressed housing sales. I'm all for speeding this process up, but not with MY money or Taxpayer money. Let the market sort this out. Here's is what I concluded in my email exchange with Mark:
The failed economics of a bad housing transaction - from the buyer's overpaying and taking on too much debt to the lender willingly funding the buyer's bad economic choice - should not be subsidized by the many who chose not to engage in bad econmic decisions. Why should I be required to reach into my pocket to help an idiot move out his disaster, help the new buyer try to make money on this disaster (many will still fail), partially cover the subordinated lender's mistake, and let the real estate broker make what is ultimately a subsidized commission?I concluded with:
The taxpayers have subsidized enough of the housing disaster. It figures that the NAR loves this program because it ramps up the volumn and velocity of home sales and prohibits the servicer from forcing the real estate broker from taking a hit on a commission. That's total b.s. and I wouldn't be surprised if the NAR was influential in the drafting of this program.
You do great work. But the only way to cleanse the system is to let the market - free from any kind of Govt intervention of any kind - take the market to where it needs to go. This market either naturally or unnaturally is eventually going to go a lot lower.
Why do we need any Govt intervention, especially when it involves penalizing everyone by transferring wealth from all of the taxpayers to those who screwed up? In fact, the brokers and lenders have made money every step of the way, a lot of it based on Govt implemented wealth transfers, like HAMP and now HAFA.
If the Govt would just step aside altogether, we can get the nasty process of correcting the problem out of the way. Govt intervention of any sort only drags out the process, makes it worse and unfairly penalizes those who refrained from drinking the spiked kool-aide.
And one more point, the primary lender banks ultimately are not taking losses. Those losses are being monetized by the Fed and the Treasury, whether you realize it or not. The second lien lenders may be the ones holding up the process and maybe HAFA greases the wheels to get them out of the way, but the whole process STILL requires that I reach into my pocket and give everyone at the table some of MY money. At this point, HAFA will only serve to transfer overvalued homes from deadbeats to new "distressed" investors, most of whom will end up walking away once they can't rent out their "investment" or it continues to tank in value, which it will.
Again, all HAFA does is stimulate the velocity and volumn of housing sales, while using taxpayer subsidies to artificially hold up price levels and facilitate continued misallocation of money and economic resources.