The New President’s Legacy
Jul 6th, 2008 @ 5:35 PM by Alden Smith
Let’s face it – whoever wins the White House in November is gaining a legacy that will be hard for the toughest individual to face. Although a President has many powers and authorities, he cannot change the fact that the foreclosure crisis and values of homes in the country of ours is going to magically change over night. We know that any President does not have the direct ability to change mortgage rates by the stroke of a pen. It simply cannot be turned around, until the market is ready to correct itself.
Both presumptive candidates promise relief. Both Obama and McCain are looking to the FHA to be a big player in the new presidency. The plan is simple – provide new mortgages to distressed homeowners who are losing to foreclosure. The banks might have to bite the bullet, but a home saved from foreclosure is one less empty house on an already glutted market. It can be seen as a win-win situation because it is cheaper for a bank to do this than it is to foreclose and then have to handle the sale of a house in a market that just isn’t ready for it.
Both presumptives seem to be focusing on the magic number of 400,000 homeowners to be aided. Obama feels that it should aid homeowners who may not have exactly stellar credit, but can make payment. McCain seems to lean towards those that had good credit when first applying for the original loan.
Obama, who supports legislation by Sen. Chris Dodd, D-Conn., would pony up $1 billion from the FHA side of things. McCain, on the other hand, is looking to spend $3 billion to $10 billion, depending on cuts from other programs to pay for it, and have the government borrow more to go with it. The McCain camp is looking to cut spending. How they do that by borrowing from the sources available and by cutting other services hasn’t quite hit me yet.
Regardless of the plan, neither candidate has a real fix for the situation. The reality is this – experts predict foreclosures will continue to climb well into 2009. Others feel it will carry over to 2010. No matter who takes office, there is no good fix, and it will affect the economy in ways we cannot even predict yet. Once again, we must stare into our crystal balls and then just sit back and wait and see what happens.