Housing bailout benefits builders, offers "counseling" for homeowners

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.