Housing bailout benefits builders, offers “counseling” for homeowners

posted at 10:20 am on April 3, 2008 by Ed Morrissey

Democrats and Republicans on Capitol Hill came together in a bipartisan effort to take action to support those hit hard by the housing slump and mortgage meltdown. They managed to rescue builders, lenders, and local governments — but for homeowners, they reserved just a fraction of the billions in the bill. Those facing foreclosure can compete for a slice of the $100 million Congress left for them to get “counseling”:

Senate Democratic and Republican leaders rushing to address the nation’s housing crisis reached agreement yesterday on a package that would provide billions of dollars in tax rebates to the slumping home-building industry while offering little to homeowners threatened with foreclosure.

After working through Tuesday night to flesh out a bipartisan agreement, lawmakers unveiled a bill that rejects the most ambitious plans for aiding distressed homeowners, including a Democratic proposal to permit bankruptcy judges to modify the mortgage on a person’s primary residence.

Instead, lawmakers settled on a sharply scaled-back array of measures that would provide $4 billion in grants for cities to buy foreclosed properties, temporary tax breaks worth up to $7,000 for home buyers who purchase foreclosed properties, and new tax deductions for almost every American who owns a home. The package, which would cost about $15 billion over the next 10 years, also would jump-start stalled legislation to streamline the Federal Housing Administration, one of the top priorities of the Bush administration.

Families who cannot afford to repay their home loans — the group at the heart of the mortgage meltdown — would benefit mainly from $100 million to expand foreclosure counseling services and greater latitude for local housing authorities to use tax-exempt bonds in refinancing subprime loans.

Color me underwhelmed. Congress has no business bailing out people who took foolish risks in the housing market anyway, and this looks like a bunch of politicians in an election year pandering for their incumbencies. They have taken tax money from people who didn’t take the foolish risks to subsidize the results of bad decision-making. That only produces more folly later, as speculators will come to expect DC to bail them out of the next crisis as well, rather than suffering the consequences of stupidity in the market.

However, if Congress wanted to help out those who needed it the most, they missed their target by a mile. They’re bailing out the lenders who made bad loans, the builders who overbuilt, and the local governments that can now snatch up more private property for public control. The one sympathetic group — marginally-qualified, non-speculating homeowners — got nothing from this bill. Oh, not literally nothing; they get counseling to remind them that they shouldn’t have bought property in the first place and not to rely on adjustable-rate mortgages that rely on unrealistic estimates of equity growth.

Of course, they know that now, but the humanitarians on the Hill left them $100 million to hear it officially.

And they have more bad news. Now that the two parties got together on this bailout bill, Democrats and Republicans plan to offer more bipartisan bailouts in the future. Eventually, they may even get to the people facing foreclosure, although by that time, it may have to be recast as a homelessness-abatement package.

Update: Why counseling? Michelle reminds us:

As I’ve pointed out several times over the past year, mortgage counseling is a thriving racket that benefits far Left groups ranging from the AARP to ACORN to La Raza and Legal Aid. The Department of Housing and Urban Development funds hundreds, if not thousands, of these groups across the country. In October, HUD announced more than $44 million in new housing counseling grants to over 400 state and local efforts. The White House has increased funding for housing counseling by 150 percent since taking office in 2001.

Here’s a list (PDF) of national, regional, state, and local housing counseling grantees for fiscal year 2007–all of whom presumably were in operation when subprime borrowers got into the current mess.

Michelle has much, much more. Just keep scrolling, and thank the Lord Glorious Hope that it got limited to $100 million.

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All that this action is going to do, is cost the taxpayers.

Johan Klaus on April 3, 2008 at 6:37 PM

All that this action is going to do, is cost the taxpayers.

Johan Klaus on April 3, 2008 at 6:37 PM

…and future market participants.

LimeyGeek on April 3, 2008 at 7:30 PM


Homeowners have been getting far more than counseling for decades…There are a list of housing programs longer than your arm out there. HUD and VA are popularly known but there are many others. A common thread among these programs is that they are geared toward first time homeowners and they provide for little or no down-payment. The unfortunate bi-product are thousands of homes that have been foreclosed. This is not un-charted territory for the banks or the government. Taxpayers have been supporting this stuff since after WWII. I have seen whole neighborhoods of government repos for sale. To add insult to injury the government provides first priority re-sales (after re-hab) to the under-qualified buyers again with low or no down-payment government loans. And so, the cycle continues…

Nozzle on April 3, 2008 at 9:43 PM

I say the government should step back and let the hellish firstorm burn itself out. It’d be funny.

Capitana on April 3, 2008 at 11:13 PM

All that this action is going to do, is cost the taxpayers.

Johan Klaus on April 3, 2008 at 6:37 PM

could be the deal of the century for the taxpayers.

unseen on April 4, 2008 at 12:55 AM

hmmm 80,000 jobs lost last month. Now the jobs are starting to affect professionals. I’m sure people will start changing their views when its their job at stake and not just blue collar workers.

unseen on April 4, 2008 at 10:22 AM

Buyer: $1,000? Hmmmmm, that’s going to be a stretch. But we’re a young and healthy family, so I guess I can drop my health insurance and use the money for premiums for the house and car loan. I guess we can’t have everything, so something has give…..

Fast forward: Mortgage adjusts to 8% and buyer cries foul for being “forced” out of his home when payments more than double. Gas hits $4.00 and the SUV gets 9 miles to the gallon and he can’t afford to drive it to work

funky chicken on April 3, 2008 at 3:26 PM

Not in Michigan. Young healthy families wish they had jobs. The last COBRA health insurance I purchased had a premium of $700 a month.

tragic not greedy. The sad part is the banks would rather take the house and sell it for 20 percent of value than refinance with the owner for the new depreciated value.
entagor on April 3, 2008 at 12:20 PM
Actually, I’ve been trying to buy some foreclosed properties, and haven’t found that to be the case. The banks still have enough reserves to not slash prices on homes in decent shape in good school zones……just another reason why I know the chicken littles are full of nonsense.
The banks are holding out for the big gvmt payoff rather than liquidating homes at crazy prices, at least for now.

Dammit, I’m trying to build my slumlord empire here! LOL

funky chicken on April 3, 2008 at 1:05 PM

Again, Michigan seems to be very different from the area you live in. I have saved the tax foreclosure issue of our major newspaper. It is surreal. The 2008 Wayne County tax foreclosure list runs 120 pages of fine print. For each property is listed the holders of interest, banks, mortgage companies and others. It was something else. The banks are letting the county have the houses and the liability of maintaining them with no buyers in sight.

entagor on April 4, 2008 at 12:39 PM

I will add, that unemployment in Michigan cannot exceed $200 a week for 26 weeks with no extensions and they also deduct child support.

entagor on April 4, 2008 at 12:44 PM

unseen on April 4, 2008 at 10:22 AM

Did you see Jim Cramer’s take on “Mad Money” this afternoon?

Reference who shouldn’t get their [6 billion] dollar portion of the significantly larger financial, “mercy jump” parachute?

J_Gocht on April 4, 2008 at 8:48 PM

entagor on April 4, 2008 at 12:39 PM

Builder’s — 50 %
Banker’s —45%
Dumbe asse buyers without 20 % down payment with NO CREDIT history—5.0000%

Who are the ‘perps?”


Hey folks, the “builder’s” multi millionionaires started this “shit’1

J_Gocht on April 4, 2008 at 9:57 PM

My thought would be the contractors, the over builders of this meltdown are the actual perps . They convincenced their easy long time marks and “buds” in banking to finance their wet dream loser projects.

“Hell… I can take Jonesy to lunch and he’ll loan me another two million!
We’ sittin’ in the “catbird” seat here partner!”

J_Gocht on April 4, 2008 at 10:11 PM