"The Most Ambitious Domestic Agenda Since FDR"

Via atrios, the housing market collapses:

Sales of previously owned U.S. homes dropped more steeply than expected in July to their lowest pace in 15 years, an industry group said Tuesday, implying further loss of momentum in the economic recovery. The National Association of Realtors said sales dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest level since May 1995. June's sales pace was revised down to a 5.26 million-unit pace.

FDR created HOLC. The Obama Administration HAMP'd us.

Speaking for me only

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    Ahem (5.00 / 3) (#1)
    by Edger on Tue Aug 24, 2010 at 10:34:32 AM EST
    "In the end, if the people cannot trust their government to do the job for which it exists - to protect them and to promote their common welfare - all else is lost."

    Barack Obama, University of Nairobi, August 28, 2006
    An Honest Government, A Hopeful Future

    To be fair to him, he wasn't speaking to an American audience...

    One D candidate supported HOLC in 2008. (5.00 / 4) (#2)
    by lambertstrether on Tue Aug 24, 2010 at 10:54:44 AM EST
    Just saying.

    Too bad the operational defintion of "hope and change" turned out to be "screw the homeowners to help out the banksters."

    Well (5.00 / 3) (#5)
    by Big Tent Democrat on Tue Aug 24, 2010 at 11:01:52 AM EST
    When it SEEMED possible, I wrote about HOLC 3 times a day.

    Obama and his team clearly f*cked up.

    And Greg Sargent and them just want to pretend they did not.


    ultimately, (5.00 / 1) (#8)
    by cpinva on Tue Aug 24, 2010 at 11:13:43 AM EST
    it boils down to employment. if there's no demand to drive the economy, property values continue to decline.

    you can do all sorts of nifty, creative refi's, but at some point it becomes more advantageous to just "quit claim" the property, and walk away. the wealthy (or their advisors) know this. they also know they won't suffer any adverse consequences by doing so, unlike the middle-class.

    Unemployment plus the safety net (none / 0) (#11)
    by ruffian on Tue Aug 24, 2010 at 12:14:21 PM EST
    of home equity. Even the employed are not going to spend extra money if they are deeply underwater on the major investment of their lives. It certainly is a death spiral.

    But thank god the banksters are doing well.


    My first thought was about the couple I met at (5.00 / 2) (#15)
    by jawbone on Tue Aug 24, 2010 at 03:21:54 PM EST
    their yard sale, which they're were having because they have to live on one part-time income. They both worked previously, and, back in the Clinton era, they bought a little fixer-upper. The housing bubble swelled and the took out a loan to finish their fixing up. Nothing grand: a deck, weather tight doors, repair the fireplace chimney, repair wiring.

    Now, 11 years later, with 11 years of payments and the downpayment put into the house, they can't make the payments. Both lost their jobs and can't find new ones, except for a part time job at CostCo. They're moving to a small apartment and can't have their dog and three cats. Losing the house hurts; the pain is compounded by losing the pets (maybe they can sneak one cat in...).

    They were hoping to sell their house to avoid foreclosure.

    So, I thought about them, and I fear for their chances of getting it sold. Our damnable modern Dems! Not there when people really need them to do something effective.

    My second thought was that as I'm nearing Medicare and I can move from NJ (only way to stay covered for pre-existing cancer was to stay here and keep my individual out-of-sight expensive plan. Oh, I was so hoping there would have been early Medicare buy-in, as Hillary urged....), my own house will be worth even less when I try to sell.

    And now Obama wants to use his Obama/Pete Peterson Cat Food Commission wo mess around with SocSec.

    A Dem prez going after the foundation stone of the FDR safety net, doing what Repubs have worked for since the '30's! What is this world coming to?

    NPR guest just now was on, pointing out that with the fall in home ownership, the rental market is tightening and rents are beginning to rise.... That is not a silver lining for those losing their homes, of course, but great news for those with rental properties.


    HOLC did some good and was a primary (none / 0) (#3)
    by BTAL on Tue Aug 24, 2010 at 10:57:53 AM EST
    driver of the 20 year mortgage vs previous much shorter amortizations - helping with payment amounts.

    But as your updated HOLC link points out, it was not the be all and end all of solutions with a 20% default rate.

    A more recent article introduces the fact that strategic defaulting is a new term, the same thing happened under HOLC.

    Yet although HOLC made mortgages its loan officers thought would succeed, about 20 percent of the new loans defaulted anyway, a number not as high as the default rate with HAMP but still extraordinarily high. While some of those who failed to pay were victims of high levels of unemployment or other unforeseen circumstances during the Great Depression, the majority of those who defaulted, in the opinion of the bailout agency's loan officers and appraisers, were capable of paying but knew a good deal when they saw one.

    An analysis of HOLC's records by Columbia University economist C. Lowell Harriss, published in 1951 by the National Bureau of Economic Research, found that HOLC personnel classified about 65 percent of all defaults as resulting from borrowers' "noncooperation" with the agency after receiving a new mortgage, or from an "obstinate refusal" to pay. "This type of noncooperation could sometimes be attributed to a desire to obtain free housing . . . an object that, in view of HOLC's nature, was not difficult to realize," Harriss wrote.


    Yet the HOLC loan officers gained nothing from foreclosing on homeowners, and still they ultimately decided that as many as 135,000 homeowners were an early version of the strategic defaulter. This shouldn't be so surprising. Incentives mattered then, and they still do.

    RealClearMarkets 8/18/2010

    When 20% default (5.00 / 1) (#4)
    by Big Tent Democrat on Tue Aug 24, 2010 at 11:00:22 AM EST
    80% do not.

    That is correct (none / 0) (#6)
    by BTAL on Tue Aug 24, 2010 at 11:07:01 AM EST
    However, 20% is still a very large percentage.

    With today's housing market price declines and employment situation coupled with a different "mindset" it is feasible that percentage could be significantly larger.

    As mentioned, the introduction of the 20+ year amortized mortgage was a new twist that helped people more than just the interest/principle alterations.  Would a HOLC II use 30-40 amortization?  If not, what?


    It's less than 100% (none / 0) (#7)
    by Big Tent Democrat on Tue Aug 24, 2010 at 11:11:26 AM EST
    Compared toHamp (none / 0) (#9)
    by msaroff on Tue Aug 24, 2010 at 12:02:55 PM EST
    It is a tiptoe through the tulips

    If HAMP only had a 20% failure rate (none / 0) (#10)
    by ruffian on Tue Aug 24, 2010 at 12:10:17 PM EST
    I would call it pretty successful. We are talking about 20% default of mortgages that were already almost sure to default. The HAMP default rate is what, 60-65%?

    Don't get me wrong, HAMP is one major (none / 0) (#12)
    by BTAL on Tue Aug 24, 2010 at 01:32:55 PM EST
    major cluster f'up.  

    My only point is that HOLC II is not necessarily a silver bullet that it may have been the first time around due to several new variables in play today.  One being it would be run by the same folk who dreamed up and operated HAMP.


    if it works three times better (60% vs. 20%)... (none / 0) (#14)
    by Dadler on Tue Aug 24, 2010 at 02:15:06 PM EST
    ...then you know what? imo, in this climate, it's a friggin' miracle.

    Send the spray tan guy in (none / 0) (#17)
    by Militarytracy on Tue Aug 24, 2010 at 04:55:32 PM EST
    to fire them all then.  The spray tan guy does not hire though.  Stiglitz, Volcker, and Krugman need to be doing the hiring if we want to get anyplace while Warren oversees the whole process.

    You do understand that in this (none / 0) (#18)
    by Militarytracy on Tue Aug 24, 2010 at 04:59:10 PM EST
    economic destruction we float in right now, if only 20% ended up having to default...nothing this incredible has happened since Jesus walked on the water?

    Err, even Nixon's agenda was more ambitious (none / 0) (#13)
    by beowulf on Tue Aug 24, 2010 at 01:52:23 PM EST
    I'd argue Lyndon Johnson's was the most ambitious but even Richard Nixon's agenda was pretty damn impressive.  I just cited Nixon's 1971 State of the Union Address at Ian Welsh's board--  Nixon proposed a negative income tax, universal healthcare, revenue sharing, a Keynesian full employment budget, national economic planning ("balanced national growth"), environmental protection laws, new parks and open spaces as well as consolidation of cabinet departments.  That was all in one speech.

    Didn't even get kissed (none / 0) (#16)
    by Militarytracy on Tue Aug 24, 2010 at 04:52:55 PM EST
    while getting HAMP'd either.

    It was always a poor joke (none / 0) (#19)
    by mmc9431 on Wed Aug 25, 2010 at 09:27:30 AM EST
    As usual for DC, it's all the blame game. The banks blame DC for lack of clarification and DC blames the banks for not moving forward.

    Since the program was voluntary for the banks (and they seem to make more money on writing off bad debts rather than correcting them) they have no incentive to work with anyone.

    If the problem is lack of clarification why didn't whoever is in charge of the program sit down with the heads of the major banks and get it clarified?

    It seems that the program was designed totally as a PR stunt with no real interest in stabilizing the market or helping anyone. But it sounds good on the campaign trail that they "tried" to help the little guy.