Let's Assess Foreclosures - Anecdotes Wanted

You all pretty much know my thoughts surrounding the housing market. Not too different to the Ricker's:

http://www.cnbc.com/id/15840232?video=1039849853

Here is the outline of the plan straight from the White House followed by a simplified illustration:

http://graphics8.nytimes.com/packages/pdf/politics/20090218factsheet.pdf

http://www.nytimes.com/interactive/2009/02/18/business/0218-housing-graphic.html

I bet you think by now I'm going to say the whole thing is hooey. Well, I had written out how I can get behind the first item of the plan somewhat, but then had to reconsider. There is a reason those loans are being refied onto Fannie's books - no bank wants that default risk!

As for the other elements of the Homeowner Affordability and Stability Plan, I cannot really budge either. Markets happen!

But let me introduce another idea. This plight of foreclosures is an exaggeration of both Pols and the media. Can you tell me of anyone you know or know of, who lives in a "mature" neighborhood that has experienced price deterioration of his or her home beyond the general decline in the market as a result of a neighboring foreclosure(s)? Let's define mature as existing prior to 2000. I have not heard or seen one such complaint, but would be curious to hear examples of such phenomena.

At the end of the day, you cannot start to convince me that the "mortgage crisis" is an issue that the normal buying and selling of a market cannot solve, until we see a meaningful increase in foreclosure related price declines in these mature neighborhoods. This does not mean there will not be foreclosures in these neighborhoods, but I think most buyers will treat those distressed prices as one-off, rather than setting the bar for future sales.

It looks as though this plan is locked and loaded, so like the Stimulus, I hope it accomplishes even more than expected! The issue is different than nitpicking around the Stimulus though, I just think the solution here is simple - don't do anything because it is unnecessary and supports bad/stupid behavior. If you need proof just watch the CNBC documentary, House of Cards, and focus on the interior of each interviewee's house. Not everyone needs to live in the Pottery Barn showroom and have a pool!

-2outof4