Most politicians and many media commentators have been telling us for a long time about how the economy and the real estate market are getting better. They trot out whatever statistics that they feel back them up and show them on lots of colorful charts and graphs. Then, a few days, weeks, or months later, when it becomes clear that much of what they said was false, they propose more “help” from the government.
Well, guess what folks. It’s not working! Whether the government is talking HAMP, tax credits, or any other program, they just delay the inevitable. Worse, they run up the nation’s debt, thus making it more difficult to spend money in areas that really could make a difference.
All of these programs, including the mortgage interest tax deduction, need to be shut down – most of them immediately and a few select exceptions more gradually. By the way, this includes getting rid of Fannie Mae and Freddie Mac, who only exasperated the most recent crisis. Even the FHA programs need to be restructured, and the whole idea that everyone should own house should be scrapped.
Yes, this would make the current crisis seem worse in the short term, and some voters will get upset that the government isn’t assisting them. But in the medium and long term, this honest and courageous move would help stabilize the market and minimize the risk of a repeat crisis. I recognize that this approach will probably never fly politically due to the entrenched special interest groups that would be against it, but wouldn’t it be nice if our public servants actually acted like servants rather than being public masters?
The market (with some regulatory guidelines) could fill in the critical gaps that are left by government programs, and manage them more efficiently than the government ever could. Banks could start making loans again, and this time make sure that the loan terms and applicants are a good fit.
The private mortgage market could play a smaller, but still critical role. If a property owner wants to sell a house or parcel of land, he or she may choose to create a real estate note (also called a mortgage note or deed of trust note). He may decide to keep that real estate note or sell the note to a mortgage note buyer. The U.S. has a variety of mortgage note buyers who buy notes on various property types, across different geographies, and with different characteristics. A good mortgage note buyer can present the mortgage note holder with a variety of options with which to purchase their real estate note.
The U.S. economy and real estate market are at a critical juncture. We can either slowly start a healing recovery or “kick the can” down the road for a future mess. Let’s hope that our leaders do the right thing this time.
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