Reports abound, such as this one written by Trey Garrison in HousingWire recently, “Pinto: We’re building toward another mortgage meltdown,” that point to the “challenged” domestic policies that are negatively impacting the economy in general and the housing sector in particular.
In Garrison’s article he quotes Ed Pinto, the resident fellow and coordinator of the American Enterprise Institute’s International Center on Housing Risk, from a Wall Street Journal piece where Pinto says the White House is steering housing back into the same dangerous waters it has been trying to climb out of for over six years.
In Pinto’s Wall Street Journal column, as Garrison reported, Pinto said, “The Obama Administration’s troubling flirtation with another mortgage meltdown took an unsettling turn on Tuesday with the Federal Housing Finance Agency Director Mel Watt’s testimony before the House Financial Services Committee.”
What Pinto was referring to was Watt’s comments to the committee regarding his receiving “feedback from stakeholders.” Apparently, because of this “feedback,” Watt expects to release near the end of March of this year new guidance on the “guaranteed fee” charged by Freddie Mac and Fannie Mae to cover credit risk on loans these federal mortgage agencies guarantee.
To Pinto and others, these new guidelines on housing policy will again lead to the lowering of lending standards in order to put mortgages into the hands of many people who may not be able to afford them.
We should applaud efforts made to make mortgages available to more segments of our society, but, unless stringent guidelines remain in place we will find ourselves fueling another housing and economic meltdown before we have truly escaped from the last one.
In fact, there is more proof that unintended consequences all too often follow the implementation of government-sponsored programs purportedly created in order to “help” consumers.
After five years, the rate on HAMP loans began to tick up 1% until reaching its previous rate before modification, for example.
These mortgage payment increases are only one percent per year, but it happens over a two and in some cases, three year period. Understanding how stagnant wages have been for middle class Americans and especially those in the lower-middle-class, these increases could be problematic. With so many in this economic strata living paycheck to paycheck, any increase in costs can negatively impact a household’s ability to keep up. Again, these are the people who were supposed to be “helped” by the HAMP program.
Add to these stories reports that the initial Fourth Quarter GDP estimate came in well below many analysts expectations and you too will no doubt come to realize that the so-called housing recovery has been illusory at best.
At the heart of all this bad news related to housing and the economy is the fact that the unemployment and underemployment situation in America today is far worse than what has been reported. To this point, FOX News recently quoted the non-partisan Gallup research and polling organization CEO and Chairman, Jim Clifton, from his blog posting of Feb. 3, that the U.S. unemployment rate is really an underestimation and a “big lie" perpetuated by the White House, Wall Street and the media.
FOX reported that what Clifton revealed in his blog Tuesday about how the Labor Department arrives at the monthly unemployment rate is no secret -- including that Americans who have quit looking for work after four weeks are not included in the survey. This means that the department's current rate of 5.6 percent unemployment is exceedingly inaccurate, if not completely disingenuous.
In the report, Clifton was quoted as saying “Americans out of work for at least four weeks are as unemployed as one can possibly be,” and argued that as many as 30 million of them are now either out of work or severely underemployed.
Without the creation of meaningful full-time jobs in this country we cannot possibly have a full economic, let alone housing recovery. It is time that the media, Wall Street and their acolytes, as well as the Administration, tell the American people the truth… and stop creating “feel-good” programs that almost always have negative, unintended consequences.