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Is Barack Becoming a Landlord?

Posted by Larry Doyle on July 15, 2009 6:36 AM |

Is Barack Obama about to move into the rental market and become the largest single landlord in the process?

Hat tip to AK for pointing out this developing story.  Reuters reports, Obama Mulls Rental Option for Some Homeowners:

U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration’s thinking said on Tuesday.

First things first, I fully empathize with all those whom are struggling at this time. However, from the standpoint of economics and capitalism, would this program actually serve as an incentive for some homeowners to stop making their mortgage payments? Would it cause other perverse, unintended consequences as well? Would it redefine the American dream?

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.

Surrender ownership to whom? The bank holding the mortgage? The mortgage servicer? Uncle Sam? How is a rental payment determined? If based on percentage of income, does this program actually serve as a disincentive for individuals to increase income, if only to lose this benefit?

Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.

That $50 billion housing aid kitty is money still in the TARP. Not that the rule of law means much anymore, but does anyone want to check if we actually need to write new legislation on the disbursement of funds under the TARP for a program such as this? What happens when the $50 billion is exhausted?

As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said.

How much and for how long? Who would oversee the program? Think there is the potential for massive fraud?

A few other questions and comments.

1. The mere fact that this idea is being floated would seem to me to be an admission that the housing market is a long way from bottoming.

2. How would this program impact the principle of property rights? If Uncle Sam is effectively dictating how an owner of a property, be it a bank or otherwise, can utilize that property, does this become precedent for other assets as well?

3. Would Uncle Sam consider establishing incentives for the banks and the homeowners to develop a program such as this through the private market? A tax incentive of some sort for the bank? Do we care to try to embrace free market principles?

4. Do we even try to determine the long term impact of this program on our economy in general and housing in particular?

Little doubt this type of program would be a sharp turn left on our economic landscape. I guess this woman wasn’t too far off in her prophetic statement last Fall:

Thoughts, comments, questions are all appreciated.

LD

  • And what about all of the Americans who work hard, have a job, didn’t buy too much house, and pay their mortgage payments on time every month? Or rent and pay their rent on time every month? What reward do they get?

  • Aaron kramer

    Matt you have to understand all those people you named don’t count because the elite have decided to save their political cohorts. The government is making decisions to further political ambitions and goals nothing else. the idea that falling home prices are inherently bad is only true when leverage is involved. I live in NJ and Corzine has been fighting the scourge that is “Unaffordable housing,” while fighting foreclosures because too many people are “Adversely affected by failing home prices.” The bottom line is that Corzine is supporting his political backers with both programs while contradicting himself at every turn.

    The political process is so corrupt on a local, state and national level that there is nothing left for those who play by the rules. You only benefit when you seek advantage through government connections. Both parties play this game and we are the victims.

  • It is not just the elite that are being screwed though. The average man in the middle class is taking arguably a worse hit than the upper echelon of society are. Those people will be alright, it is the guy in the middle that may not.

  • Mike

    I think the government is going a little too far with a proposal like this one.

    When did TARP go from cleaning up toxic assets to doing whatever the higher-ups feel like will push their agenda further?

    Stimulus, Quantitative easing, Health-Care reform, Climate Change reform, oh and aren’t we STILL at war??? … Meanwhile California is broke and Michigan is probably next.

    Barack is trying to make a lot of things happen right now and it’s unfortunate that we really can’t afford it.

    Let alone the rising pressure on the integrity of U.S. debt…

    It seems that everything points toward the rich fronting the bill through higher taxes.

    If I made a million dollars a year I’d be pissed.






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