Dennis' Mortgage Blog

What’s Worth Fixing?

It is universally accepted that the current economics of the Social Security Administration are flawed and in the coming years and decades will implode from lack of revenue and ever growing expenses to an aging population. This being somewhat universally accepted, at the start of his second term President Bush initiated Social Security reform. Part of his proposal was the partial privatization of Social Security, oops that let the fur fly!

Instead of engaging in productive meetings and talks to explore a range of possible solutions to the national crisis that will affect every American, Congressional Democrats and many Republicans reacted with emotion and sound bites to their constituents. Despite already have government supported private retirement accounts (deductions to 401k and IRA are deductible), the proposal to take potential future money from the Social Security Administration—i.e. government control and access—and placing it directly in the accounts of Wall Street investment banks caused their heads to spin and more importantly the messages to the constituents back home.

The result was no progress on much needed Social Security reform and a problem that is only bigger today than it was in January 2005. Rather than solving the pending crisis of no retirement funds or better yet refunds of our contributions when mine and future generations get to retirement age, many politicians are now adding to the problem by suggesting illegal immigrants working in the U.S. be social security eligible. A shining example of why Congress has such low approval ratings: big problem and no solutions or discussions. Another opportunity to work together to solve a real crisis missed.

Instead of taking up the heavy lifting of issues such as Social Security, Congress is falling over itself to find “solutions” for the mortgage and housing market problems facing the country. Looking for was to legislate relief for homeowners in or facing foreclosure on their adjustable rate mortgages, Congress is asking all Americans to help shoulder the burden of a few Americans who got themselves into the financial hardship they are currently in. Homeowners who prudently purchased homes they could afford, qualifying on the income they actually make and obtaining mortgages they knew they could afford for several years, are being asked by Congress to help out their neighbors who over-stated income, purchased homes above their financial ability to qualify or pulled tens of thousands (in some cases hundreds) of equity out of their homes using adjustable rate mortgages and now face default or foreclosure.

The numbers of American families whose homes are at risk are increasing as the two and three year fixed rate mortgages they used to purchase their homes or pull out equity are entering their initial adjustments to rates and payments they cannot afford. Nationally this is a very small percentage of home owners, some estimates are less than 1% of all homes are affected. Yet despite the low number of those actually affected, politics and sound bites dictate elected officials react.

Rather than work to solve a real problem affecting all Americans for generations, Congress wants to involve all Americans in financing solutions to a relative few homeowners who face foreclosures due to bad decisions on their part—or in some cases deception by mortgage professionals. One problem affects all Americans and they refuse to address it, the other problem affects a small percentage of Americans and they treat the problem as a national crisis. Time for Congress to let the markets and consumers correct the current housing problems and instead work together on solutions to problems that will harm all Americans. Quit avoiding issues that affect all of America to ineffectually intervene in issues that affect a small percentage.