Hot on the heels of its $307-billion farm-bill giveaway, Congress is plunging into another multi-billion-dollar spend-a-thon. The next targets of its affection are mortgage holders, soon to be seduced with other people’s money. Maddeningly enough, part of this courtship will be billed to America’s 83 million equity-starved renters who only fantasize about home ownership.
The House has approved and the Senate presently will consider legislation to provide federal insurance for $300 billion in refinanced home loans. Taxpayers will have to shell out hard cash if borrowers default on this government-guaranteed debt. This new program is expected to cover just 500,000 to 1 million homes. Thus, these taxpayer-insured mortgages would average $300,000 to $600,000. This is not exactly low-income housing.
This bailout, the Wall Street Journal
reports, would cover more than just those Americans who struggle to pay their mortgages. It also would benefit those whose home prices have sunk below the value of their mortgages. It is unfortunate if someone possesses, say, a $1 million mortgage on a home now worth $900,000. But so long as that person’s monthly mortgage check does not bounce, there is no reason for government to rush to the rescue. Impending homelessness due to negative cash flow is one thing. Steady, positive income that finances a lifeless housing investment is something else and does not merit public relief. Only 2 percent of mortgages are in foreclosure. The balance are current or at least manageably in arrears.
Congress’s lavish scheme is a particularly shabby deal for renters. While politicians routinely ignore apartment-dwellers and other renters, people like us inhabit 34.7 percent of America’s 108 million households, according to the National Apartment Association. More than one third of U.S. homes are rented, yet rent payments are not tax-deductible, as are mortgages. Where is the social justice in that?
This massive bailout will suck tax money out of renters’ bank accounts and swallow savings that some are salting away for home purchases. If this plan achieves its purpose, residential prices will rise again, pushing the American Dream of home ownership back above many a renter’s reach.