Many times over the last six years, I made the argument that lower debt service burdens are the key to a sustained economic recovery. Bankers and the federal reserve want to see an expansion of credit for completely self-serving reasons. They point to times in the past when an expansion of credit fueled economic growth as evidence of its necessity for a vibrant economy. Perhaps it’s partially true. An expansion of asset-backed debt is good for the economy, but most credit expansions involve the populace taking on huge amounts of signatory debt, and expansions of signatory debt invariably lead to personal Ponzi schemes, HELOC abuse, and a contraction of credit when debtors have to pay the bills. 
A sustained economic recovery requires disposable income. An expansion of signatory debt creates an artificial and short-lived economic stimulus as people and borrow and spend. This leads to less disposable income and an inevitable reduction in economic activity when the bills come due — which is what we have been experiencing over the last five years. Eventually, people either pay down these debts, refinance at lower interest rates (if rates keep falling), or discharge these debts through foreclosure or bankruptcy. One of the signs I have been waiting for to signal the end of our economic malaise is an overall reduction of consumer’s debt burdens. Apparently, we have reached the point where American’s have enough disposable income to fuel a sustained economic recovery. 2013 may be a good year.
household debt burden hits 29-year low
Thu Dec 27, 2012 3:57pm EST — By Lucia Mutikani
Dec 27 (Reuters) – A measure of the burden of U.S. household debt tumbled in the third quarter to its lowest level in 29 years, which should help free up money for consumer spending and support the economy.
The household debt service ratio — an estimate of the share of debt payments to disposable personal income — fell to 10.61 percent from 10.72 percent in the second quarter, the Federal Reserve said on Thursday.
It was the lowest level since the fourth quarter of 1983.
The period from 1983 to 1999 was a great period of sustained economic growth. It was prefaced by a reduction in debt burdens triggered by declining interest rates very similar to the conditions we have today. Of course, that was sustained by a 30 year period of falling interest rates — something we probably don’t have to look forward to.
“Consumers have more money in their pockets to spend, which should be positive for the economic recovery going forward,” said Gennadiy Goldberg, an economist at TD Securities in New York.
U.S. households built up a massive debt load as the housing bubble expanded and efforts to pay down those debts have been a restraint on spending and the economy’s recovery.
Hyman Minsky predicted this 50 years ago. His writings on the economic and credit cycles were prescient:
“Minsky claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial crisis. As a result of such speculative borrowing bubbles, banks and lenders tighten credit availability, even to companies that can afford loans, and the economy subsequently contracts.
This slow movement of the financial system from stability to fragility, followed by crisis, is something for which Minsky is best known, and the phrase “Minsky moment” refers to this aspect of Minsky’s academic work.”
The debt service ratio, which takes into account outstanding mortgage and consumer debt, peaked in the third quarter of 2007, shortly before the economy tipped into recession.
The Fed has sought to help consumers dig out by keeping interest rates near record lows. It has held overnight rates near zero since December 2008 and has bought around $2.4 trillion in bonds to further lower borrowing costs.
Lowering interest rates can only do so much. Now that we are at the bottom of the interest rate cycle, the only tool available to the federal reserve is inflation. For the next 30 years, the federal reserve will deal with the dilemma of inflation. If they raise rates, economic activity will decline, and the economy will tip into recession. If they don’t raise rates, inflation will rise, and people will see a decline in their standard of living. The 60s and 70s saw this play out with numerous recessions and bouts of inflation capped off by a collapse in the value of the dollar, a severe double-dip recession, and the need to raise interest rates to near 20% to restore value to the currency and curb inflation.
Even though households are now in better shape, analysts caution that consumer spending could stall if Congress fails to prevent higher taxes from taking hold next year.
An even broader measure of financial obligations that includes automobile lease payments and the cost of renting a home also fell in the third quarter, dropping to 15.74 percent of disposable income — the lowest level since the first quarter of 1984.
That drop reflected an easier burden for homeowners as mortgage debt payments dropped to 8.90 percent of disposable income in the third quarter, the lowest in 11 years.
The reduction in the cost of ownership of residential real estate has been dramatic. A decline in prices couple with a decline in interest rates have reduced the cost of ownership to late 1980s levels.
Both the overall homeowners measure and separate mortgage gauge peaked in the third quarter of 2007.
“You have a lot of people refinancing their mortgages at lower rates,” Goldberg said.
In contrast, the relative cost of rent rose to its highest level since the first quarter of 2010.
The weak housing market has led Americans away from home ownership and toward renting, pushing up rents. At the same time, a modest economic recovery has encouraged some people who had moved in with family and friends to seek their own lodgings, further strengthening the rental market.
While a lightening of household debt burden puts the recovery on firmer ground, it also highlights a hesitance to take on new debt, which could be an obstacle to spending.
“We all (would) like to see better growth in credit, banks being more willing to make more loans to consumers, demand for loans rising,” said Omair Sharif, an economist at RBS in Stamford, Connecticut.
“That would push the ratio higher, but that’s not necessarily a such a bad thing, especially if rates are so low and you are able to service that debt.”
Those last statements reveal the bias of lenders and the disastrous mindset that leads to the creation of more Ponzi schemes. The economy would be much better off without an increase in debt. Further reductions in debt service would further boost the economy as workers would have even more disposable income to purchase goods and services.
Lenders want to create more debt because that’s how they make money, but that’s not the best thing for the economy. Frugality and prudence is.
Expanding debt didn’t help this borrower
As an example of how expanding debt creates a temporary economic boost, one need look no further than the personal finances of the bubble-era Ponzis. The former owner of today’s featured property borrowed and spent more than a million dollars between 2000 and 2005. He undoubtedly stimulated the economy during that time. However, once the Ponzi loans dried up, he no longer contributed to the economic health of the country and became a drain instead.
- This property was purchased on 3/3/2000 for $680,000. The former owner used a $544,000 first mortgage and a $136,000 down payment.
- On 5/16/2000 he obtained a stand-alone second for $68,000.
- On 11/4/2003 he refinanced with a $750,000 first mortgage.
- On 3/14/2004 he opened a $266,000 HELOC.
- On 12/2/2005 he refinanced with a $1,000,000 first mortgage.
- On 12/29/2005 he opened a $755,000 HELOC.
- Assuming he maxed out the HELOC, the total property debt was $1,755,000 and the total mortgage equity withdrawal was $1,211,000.
That was some serious economic stimulus!
He quit paying the mortgage in 2009 and was allowed to squat in luxury for two and a half years.
The wisdom of the ages
Matt138 recently posted a link in the comments to the writings of Frédéric Bastiat, a 19th century French economist. He has a great essay on Thrift and Luxury that speaks to today’s point on the economy. 
Mondor and his brother Ariste, having divided their paternal inheritance, each have an income of fifty thousand francs a year. Mondor practices philanthropy in the fashionable way. He is a spendthrift. He replaces his furniture several times a year, changes his carriages every month; people talk about the ingenious devices to which he resorts to get rid of his money faster; in brief, he makes the high livers of Balzac and Alexander Dumas look pale by comparison.
What a chorus of praises always surround him! “Tell us about Mondor! Long live Mondor! He is the benefactor of the workingman. He is the good angel of the people! It is true that he wallows in luxury; he splashes pedestrians with mud; his own dignity and human dignity in general suffer somewhat from it. …. But what of it? If he does not make himself useful by his own labor, he does so by means of his wealth. He puts money into circulation. His courtyard is never empty of tradesmen who always leave satisfied. Don’t people say that coins are round so that they can roll?”
Ariste has adopted a quite different plan of life. If he is not an egoist, he is at least an individualist; for he is rational in his spending, seeks only moderate and reasonable enjoyments, thinks of the future of his children; in a word, he saves.
And now I want you to hear what the crowd says about him!
“What good is this mean rich man, this penny-pincher? Undoubtedly there is something impressive and touching in the simplicity of his life; furthermore, he is humane, benevolent, and generous. But he calculates. He does not run through his whole income. His house is not always shining with lights and swarming with people. What gratitude do the carpetmakers, the coachmakers, the horse dealers, and the confectioners owe to him?”
These judgments, disastrous to morality, are founded on the fact that there is one thing that strikes the eye: the spending of the prodigal brother; and another thing that escapes the eye: the equal or even greater spending of the economical brother. …
But how superior it appears, if our thinking, instead of confining itself to the passing hour, embraces a long period of time!
Ten years have gone by. What has become of Mondor and his fortune and his great popularity? It has all vanished. Mondor is ruined; far from pouring fifty thousands francs into the economy every year, he is probably a public charge. In any case he is no longer the joy of the shopkeepers; he is no longer considered a promoter of the arts and of industry; he is no longer any good to the workers, nor to his descendants, whom he leaves in distress.
At the end of the same ten years Ariste not only continues to put all of his income into circulation, but he contributes increasing income from year to year. He adds to the national capital, that is to say, the funds that provide wages; and since the demand for workers depends on the extent of these funds, he contributes to the progressive increase of remuneration of the working class. Should he die, he will leave children who will replace him in this work of progress and civilization.
Morally, the superiority of thrift over luxury is incontestable. It is consoling to think that, from the economic point of view, it has the same superiority for whoever, not stopping at the immediate effects of things, can push his investigations to their ultimate effects.
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Proprietary OC Housing News home purchase analysis
29581 MONARCH Dr San Juan Capistrano, CA 92675
$949,900 …….. Asking Price
$680,000 ………. Purchase Price
3/3/2000 ………. Purchase Date
$269,900 ………. Gross Gain (Loss)
($75,992) ………… Commissions and Costs at 8%
============================================
$193,908 ………. Net Gain (Loss)
============================================
39.7% ………. Gross Percent Change
28.5% ………. Net Percent Change
2.6% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$949,900 …….. Asking Price
$189,980 ………… 20% Down Conventional
3.98% …………. Mortgage Interest Rate
30 ……………… Number of Years
$759,920 …….. Mortgage
$189,482 ………. Income Requirement
$3,619 ………… Monthly Mortgage Payment
$823 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$237 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$215 ………… Homeowners Association Fees
============================================
$4,895 ………. Monthly Cash Outlays
($836) ………. Tax Savings
($1,099) ………. Equity Hidden in Payment
$262 ………….. Lost Income to Down Payment
$139 ………….. Maintenance and Replacement Reserves
============================================
$3,361 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$10,999 ………… Furnishing and Move In at 1% + $1,500
$10,999 ………… Closing Costs at 1% + $1,500
$7,599 ………… Interest Points
$189,980 ………… Down Payment
============================================
$219,577 ………. Total Cash Costs
$51,500 ………. Emergency Cash Reserves
============================================
$271,077 ………. Total Savings Needed
The property above is available for sale on the MLS.
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Debt ceiling solution could hasten g-fee rise
By Christina Mlynski January 8, 2013 • 4:54pm
The looming debt ceiling could quicken the increase in guarantee fees as the government looks for additional revenue, analysts predict.
While the upcoming debt ceiling negotiations pose a more immediate risk to mortgages — exhausting the Treasurys “extraordinary actions” to avoid hitting the debt ceiling are likely to halt in March — the g-fee increase could be accelerated as a means to fill budget holes, JPMorgan Chase ($45.38 -0.03%) said in its 2013 securitized weekly outlook.
G-fees are projected to increase by at least 25 basis points in 2013 as a way to help bring private capital into the mortgage market and reduce the government-sponsored enterprises market share of securitizations.
At the beginning of last year, Congress authorized 10 basis points in g-fee hikes for the next 10 years as a way to fund the temporary reduction in payroll tactics.
“Arguably, this is a tactic that appeals to both parties: it helps shrink the footprint of the GSEs, while raising revenues,” the report said.
For example, a one-time 10 basis point increase in g-fees could generate nearly $30 billion in additional revenue over the next 10 years.
Therefore, while mortgages are likely to underperform as debt ceiling angst rises, the asset class could “ultimately benefit from lower callability if g-fees are raised as part of the deal.”
The next round of g-fee hikes is expected to differentiate more on borrower credit — loan-to-value ratio or FICO score — helping ensure that GSE securitizations do not become overly concentrated in high LTV, lower credit score loans and particularly if banks retain better credit quality loans.
While the timing of g-free increases is uncertain, current acting director Ed DeMarco of the Federal Housing Finance Agency has described the pace as being “gradual.”
“Consequently, we could envision a 10bp increase in March (to coincide with debt ceiling discussions), as well as perhaps another in the third quarter, but it‘s very difficult to pinpoint the timing,” the report said.
Last month, Bank of America Merrill Lynch ($11.98 -0.11%) posted a similar forecast for g-free increases in 2013, with a bigger prediction that g-fees are expected to rise by at least an additional 30 to 50 basis points to match recent private label execution.
Currently, BofAML maintains an overweight recommendation for mortgage-backed securitization despite the hawkish tone of the Federal Open Market Committee minutes, according to its securitized report.
Thus, rates are biased lower heading into the February/March timeframe for the debt ceiling discussions.
“Benefiting from this volatility are opportunistic investors who will leg in on weakness and provide technical depth to the market. Lower dollar prices and higher yields have lured in the banks, agency real estate investment trust properties,” BofAML said.
In comparison, the Societe Generale Cross Asset Research suggested that while the debt-ceiling negations are likely to provide uncertainty, the markets will be more resilient than anticipated.
“We believe that volatility related to this issue will be relatively muted and should be viewed as an opportunity to add risk assets – given our view that another ‘last-minute deal’ will be reached,” the credit strategy report stated.
Agency Expects More Short Sales in 2013 with Debt Relief Act’s Extension
YouWalkAway.com, a foreclosure agency, conducted a survey of its clients and revealed 78 percent of those who responded said they were walking away from their primary residence. In addition, at least 74 percent of all respondents would be eligible for tax relief through the Mortgage Debt Relief Act of 2007.
The Mortgage Debt Relief Act allows forgiven debt through a short sale, loan modification, or foreclosure to be excluded as taxable income.
The act faced expiration December 31, 2012, but Congress extended the act for another year on January 2.
“This extension hasn’t been well publicized but it is important to homeowners and realtors nationwide. Had this law not been extended, it could have brought a drastic halt to short sales and had a devastating effect on underwater homeowners,” said Chad Ruyle, YouWalkAway.com co-founder.
In a report, the foreclosure agency explained the one-year extension is not likely to encourage a new wave of mortgage defaults in early 2013.
While it could be argued that extending the act could encourage underwater homeowners to strategically default, YouWalkAway.com does not expect to see new defaults. Strategic default occurs when borrowers decide to stop making payments on a mortgage they could afford. Oftentimes, strategic defaulters are underwater.
Instead, YouWalkAway.com expects the one-year extension to provide tax forgiveness for just the homeowners currently in the foreclosure process since new defaulters would have just a year to receive tax forgiveness, which is not enough in certain states with lengthy foreclosure timelines that exceed a one-year period.
On average, 85 percent of YouWalkAway.com clients have not made a monthly mortgage payment in 14 months. Thus, the agency concludes, a 12-month extension is not encourage new strategic defaulters.
Instead, the 12-month extension will motivate homeowners to seek options outside of the lengthy foreclosure process and seek alternatives such as a short sale, deed-in-lieu, or a modification, the agency explained.
Fitch: Final QM Rule to Shape Future Market
While the mortgage market continues its slow trod toward recovery—with distressed liquidations and delinquencies on the decline—industry participants await the final word from lawmakers on one key issue affecting the future of their businesses.
The Consumer Financial Protection Bureau has expressed its intent to announce its final decision on what constitutes a qualified mortgage this year. This, in turn, will give the industry some insight into what can be expected to define a qualified residential mortgage (QRM), according to Fitch Ratings.
“Finalization will, at a minimum, provide clarity to the market and allow institutions, particularly banks, to assess the costs of re-entering the market,” said Suzanne Mistretta, senior director at Fitch.
In addition to anticipated announcements regarding the QM and QRM, Fitch said “key announcements” from the Federal Housing Finance Agency “are supportive of a housing and mortgage market recovery.”
Those “key announcements,” according to Fitch, include new guidelines for representations and warranties and a streamlined short sale process.
Meanwhile, “[i]nventory is declining and distressed liquidations have sharply dropped while mortgage delinquencies are improving for most sectors,” Mistretta said.
Despite the overall positive movement in markets across the country, a closer look reveals some markets continue to outpace others.
Detroit, Phoenix, and Atlanta have improved markedly, while New York and New Jersey are still hindered by “a backlog of distressed inventory and long liquidation timelines.”
Depending on the guidelines this could mean the federal involvement (90%) in the mortgage industry could around for a very long term. If there is a strict interpretation (I hope) then it will just be a few mortgages and we have pull back of Fannie Mae and Freddie Mac’s market share.
Yes, that’s exactly the issue. If the lower the down payment requirement to 10% or less, the government will be insuring loans forever. If they set it at 20%, private lending will have to step into the void.
Will 2013 Bring Declining Originations and Rising Interest Rates?
As we delve into the new year, many wonder what lies ahead in the mortgage industry. According to one mortgage lender, we can expect declining originations, rising interest rates, and fewer mortgage professionals.
Residential mortgage origination volume will decline 24 percent this year, largely driven by significant declines in refinances, according to Milford, Connecticut-based Total Mortgage Services, LLC.
The mortgage lending company foresees purchase originations rising by about 16 percent this year. However, a sharp decline in refinance originations will more than offset this growth, according to the company’s analysts.
In addition, interest rates that continue to hover near record lows will soon become a thing of the past, according
to Total Mortgage Servicing. The company anticipates rates will begin rising by the second half of 2013.
The lender expects strengthening in the overall economy will contribute to higher interest rates. “Rising employment and wages, while supporting the residential real estate market, will also help to push interest rates higher and cut refinance volume significantly,” the company states.
Changes in the mortgage market landscape this year “will present mortgage lenders with a new set of challenges,” said John Walsh, president of Total Mortgage Services.
“This new set of challenges will require adaptation by lenders that wish to survive in the new lending environment,” he added.
As refinances decline and purchases rise, originators will have to adapt. Total Mortgage Services suggests the “vast majority of mortgage originators are wholly unprepared” for this change.
However, not all originators will adapt, according to the company, and not all will need to. The company anticipates a 30 to 35 percent decline in employment in the originations sector this year.
While a decline may be warranted this year, “the most likely victims of the industry’s reduction in force [will be] younger, less experienced workers.”
This trend will lead to a whole new obstacle for the industry: “the graying of the mortgage industry,” Total Mortgage Services says.
This bit right here…
“Rising employment and wages, while supporting the residential real estate market, will also help to push interest rates higher and cut refinance volume significantly.”
…just made me file the whole screed in the folder labeled “Ravings Of Assorted Lunatics.” These folks expect rising real (after inflation) wages in 2013?
They must be about the only economists not enthralled by the Trillion Dollar Coin scheme to think so. Have they looked at U-4 or U-5 lately? Do they know people in real jobs who’ve been offered 6% raises this year (which would barely keep you ahead of inflation in healthcare premiums and increased taxes)?
ABA President: Few lenders will dare to make a loan that doesn’t come with the government’s blessing
“Banks Seek a Shield in Mortgage Rules” (DealBook, Dec. 18) did not reflect what is at stake in new mortgage regulations. The safe harbor under consideration in pending rules has no relation to past obligations or failures to comply. This safe harbor is intended to be an integral part of tough new rules and penalties to ensure that all future loans are underwritten in the interests of consumers.
Consumer protection rules in 2013 will be different from the past. The potential bases for lawsuits will expand significantly, regulatory penalties will increase by multiples, and consumers gain a “life of loan” ability to recoup all payments made, including interest.
If lenders are to face such new liabilities, they need clearly written rules and safeguards. The future of mortgage finance hangs in the balance as the Consumer Financial Protection Bureau works to develop parameters for what it considers a “safe loan.”
Few lenders will dare to make a loan that doesn’t come with the government’s blessing, so the rule will dictate what loans are available and which lenders decide to remain in the market.
A survey we conducted found that 10 percent of banks would exit the mortgage business if a safe harbor is not included, and others would curtail lending. They simply could not face the legal risks even for those that are fully compliant. Neither consumers nor the economy can afford to face this outcome.
FRANK KEATING
President and Chief Executive
American Bankers Association
Washington, Dec. 20, 2012
Is there any real background on this guy?
Jack Lew expected to be next Treasury Secretary
By Julie Pace, AP White House Correspondent
WASHINGTON (AP) — White House chief of staff Jack Lew is President Barack Obama’s expected pick to lead the Treasury Department, with an announcement possible before the end of the week, as the administration moves to fill the most critical jobs in the Cabinet.
White House officials would not confirm that a final decision had been made. But aides did not dispute that Lew is emerging as the consensus choice.
Lew would bring to the Treasury Department a wide range of experiences in both the public and private sector. He has spent much of his career mastering the mechanics of the federal budget, including two stints at the helm of the Office of Management and Budget, once under Obama and also under former President Bill Clinton.
That background could help shape the Obama administration’s strategy in its forthcoming talks with congressional Republicans over the federal debt ceiling. Republicans are expected to demand deep budget cuts as the price of agreeing to raise the debt ceiling. The federal debt limit is expected to be tapped out sometime in February.
Obama is about to begin his second term in office with new secretaries of state, defense and treasury. He has nominated Sen. John Kerry of Massachusetts to succeed Hillary Rodham Clinton at State and former Sen. Chuck Hagel at the Pentagon. He also has proposed John Brennan as the new CIA director.
The 57-year-old Lew would also bring private sector and international experience to Treasury Department. He has held top jobs at Citigroup’s wealth management branch and at the State Department, where he oversaw international economic issues in his first job for Obama.
A person familiar with the selection process said that experience was particularly important to the president, given the treasury secretary’s key role in coordinating with European allies on the continent’s debt crisis, among other global financial matters.
Lew, an observant Jew who doesn’t work on Saturday, is well-liked in Washington by both Democrats and Republicans, and well-respected by staffers at the White House, where he has served as chief of staff since January 2012.
A pragmatic liberal, Lew has also been a key player in several negotiations between the White House and Capitol Hill, including the recent talks to avert the “fiscal cliff.”
If confirmed by the Senate, Lew would replace current Treasury Secretary Timothy Geithner, who plans to leave around Obama’s Jan. 21 inauguration. He is expected to be easily confirmed by the Democratic-led Senate.
The sources spoke on the condition of anonymity in order to discuss the expected nomination ahead of the president.
A fresh series of economic deadlines would await Lew at the Treasury Department. The first will be the need, around the end of February, to raise the $16.4 trillion federal borrowing limit to avert a first-ever default by the government. That deadline will likely trigger a confrontation with congressional Republicans over spending cuts.
At the beginning of March, $110 billion in cuts to military and domestic programs will automatically kick in if no congressional budget deal has been reached by then. Congress and the administration postponed that issue in the fiscal cliff agreement that received final congressional passage on New Year’s Day.
The third pressing deadline will occur March 27. That’s when a congressional resolution that’s keeping the government operating without a budget will expire. Without a new bill, the government would shut down.
Lew’s immersion in the minutiae of federal budgets contrasts with the experience of most previous Treasury secretaries. Many arrived from high-level posts on Wall Street, where they presided over securities trading and investment banking. Obama’s choice of Lew is seen as a signal of the president’s determination to control record-breaking budget deficits during his second term.
“I think Wall Street would have preferred someone with more financial market specialization, but Lew is being brought in because he knows the budget,” said David Wyss, a former chief economist at Standard & Poor’s. “Clearly, Obama has decided that his priority in a second term will be the budget.”
Lew’s nomination would also signal Obama’s intent to keep Treasury close to the White House sphere as Obama engages with Congress on fiscal issues and as the administration continues to implement key aspects of the financial regulation overhaul that Geithner helped shepherd into law in 2010.
Lew’s nomination would also have a domino effect at the White House, creating a vacancy for his chief of staff post that could be filled internally.
http://www.powerlineblog.com/archives/2013/01/cant-obama-find-an-honest-man-for-treasury-secretary.php
That’s a hardcore right-wing view of this guy. It may be correct, but the author is clearly biased in his interpretation.
OK, now my blood pressure is up.
Oakland County joins program to help homeowners avoid foreclosure for unpaid taxes>
# By Lauren Abdel-Razzaq
Pontiac — Oakland County Treasurer Andy Meisner announced Wednesday the county would participate in a new property tax foreclosure prevention initiative to help pay the delinquent taxes, interest, condominium dues and fees of eligible homeowners.
The program would pay for applicable households that owe up to $30,000. The program is being administered by the Michigan Housing Department Authority under the name Step Forward Michigan Loan Rescue Program.
Funding comes from the federal “Hardest Hit” foreclosure relief program.
“Oakland County and our region must continue fighting foreclosure on all fronts,” Meisner said in a release. “This helps families keep their homes and helps the county’s bottom line.”
The program will be launched Jan. 15.
The state received $498 million in federal funds in 2010 to prevent mortgage foreclosure, but the program is now being expanded to include payment of back taxes.
To qualify, homeowners must live in their home as a primary residence, demonstrate a significant hardship and can’t have more than six months of family cash reserves. People who have previously received “Hardest Hit” or “Step Forward Michigan” dollars are not eligible.
If approved, the money will be sent to the county treasurer’s office, which will then pay the delinquent taxes.
The government giveth, and the government taketh away.
They create a program that transfers money from one government agency to another ostensibly to help loanowners. Who is really being helped here?
CA is doing the same thing with the same federal dollars for hard hit states. Reward failure, punish success!
I don’t know what I find more outrageous, that they are doing this, or that nobody seems to care.
IR,
IMHO the difference between the economy of the 1960s/70s & the economy of toady is wage inflation – it was rampant back in the day but is pretty much impossible today. Indeed, for many forced to change careers their wages have fallen significantly. When prices go up (price inflation), without a corresponding wage increase (wage inflation) people stop buying what they can do without and less of what they cannot. I’m not an economist but it’s hard for me to see how a traditional inflation cycle could be self-sustaining in today’s environment.
Wage inflation won’t become a problem for another 5 to 10 years. We have to get back to full employment first. In that respect, we are most like the late 50s or early 60s in the interest rate cycle.
At some point, once we have achieved full employment, continued low interest rates will bring on wage inflation which in turn will cause price inflation as people bid up goods and services. That’s when the fed gets in the bind of raising interest rates to curb inflation but tanking the economy.
Agree, but it’s not likely we’ll come anywhere near ‘full employment’ in my lifetime. Can you see a self-sustaining traditional inflation cycle w/o full employment?
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