Lucas County Commissioners yesterday approved a contract for $200,000 to help up to 60 families who are facing foreclosure on their homes. That's $3,333.34 each.
According to Comm. Pete Gerken, "This is darn good public policy and don't let anyone tell you otherwise."
Um...right. It's good public policy to take money from everyone in order to give it to a few who've made bad decisions with their finances over a period of time.
Robbing Peter to pay Paul is NEVER good public policy. It's only good for Paul or the person who wants Paul's vote!
NewsTalk 1370 WSPD has a sound clip of Gerken on the subject (link will be added when clip is available) in which he addresses the criticism some would level on such a policy. His reasoning is that he "makes no apology" for spending tax money to help people stay in their homes.
Of course, he's not helping them - you and I are. And in taking our tax dollars for this purpose, he's saying that government needs this money to help people more than you need it for making sure you don't end up in the group they're trying to help!
Missed in all the hoopla over helping people is that the money isn't even going to the families in such need. Nope - the money is going to pay for services and classes being put on by the contracted agencies. Eligible families will participate in counselling, budget classes and training on interest rates ... a bit after the fact, if you ask me.
Perhaps the loss of a home would be a good enough lesson in those subjects. Don't misunderstand me - I'm not being an evil, heartless conservative. I don't want families to lose their homes.
I just believe that, often, the best-learned lessons are the hardest ones. Sometimes the only way people truly learn is when they are allowed to suffer the consequences of a bad decision. It happens as we grow up and it continues into our adulthood. When government steps in to try and save people from the consequences of bad decisions, the cycle - and precedent - becomes never ending. And the result is less freedom for everyone.
As it is, our commissioners are more interested in the few (60 families) than they are the many (the other 400,000 residents in the county). They're perfectly willing to expend $200,000 of your tax dollars to 'save' up to 60 families.
Now, this is only available to families - at least one parent/guardian with a minor child in the house. That's because they're using TANF (Temporary Assistance to Needy Families) dollars.
For at least four years, the commissioners have found new uses for these funds, adding new programs that can be paid for with these dollars. That's because we get more money than we actually need - and because we spend it all each year (by adding new services), we continue to get more. Lucas County has also increased the eligibility levels for many of these programs, most up to 250% of poverty level and some have been as high as 300% of poverty level.
(Remember: 300% of poverty level for a family of four is about $62,000. According to 2005 IRS data, that income puts you into the top 25% of wage earners in the United States. That's hardly 'poverty.')
As a commissioner debating a similar issue, Gerken once accused me of hating social service agencies and of not wanting to 'help' people. I replied - rather forcibly - that it wasn't that I didn't want to help people, I just believed in doing so with my own money rather than by spending other people's money that had been entrusted to me. There was no retort.
If every Ohio county spends $400,000 on foreclosure programs (the total amount that our commissioners have set aside), the cost of such help adds up to $35.2 million. If every state copies this, that's $1.76 billion - and now you're getting into 'real' money. Money that has been taken from each taxpayer who would probably have a better use for it.
“I’m sure everyone feels sorry for the individual who has fallen by the wayside or who can’t keep up in our competitive society, but my own compassion goes beyond that to the millions of unsung men and women who get up every morning, send the kids to school, go to work, try and keep up the payments on their house, pay exorbitant taxes to make possible compassion for the less fortunate, and as a result have to sacrifice many of their own desires and dreams and hopes. Government owes them something better than always finding a new way to make them share the fruit of their toils with others.” ~ Ronald Reagan
*****************
If you have an opinion about the decisions the commissioners made - or their logic in making it - let them know. They'll think they're doing the right thing unless we tell them otherwise:
Tina Skeldon Wozniak: twozniak@co.lucas.oh.us
Pete Gerken: pgerken@co.lucas.oh.us
Ben Konop: bkonop@co.lucas.oh.us
Phone number: 419-213-4500
*****************
For another perspective on foreclosures, try this article which says foreclosures are good for some...
UPDATE:
GOV'T TO BLAME FOR MORTGAGE CRISIS
"There simply was no such thing as a developed Subprime mortgage industry until the US congress created it by ordering banks to issue loans to people who were not credit worthy."
- Columnist Jerry Bowyer
Showing posts with label foreclosure assistance. Show all posts
Showing posts with label foreclosure assistance. Show all posts
Wednesday, April 02, 2008
Wednesday, January 23, 2008
Questions for Commissioners on their mortgage bail-out plan
The three Lucas County Commissioners voted unanimously yesterday to fund mortgage bailouts for residents facing foreclosure. (my post, and The Blade article on the announcement)
Here are some questions I think should have been asked prior to them making such a decision - though I doubt they even thought about most of these. Primarily, they've got a lot of TANF money ($400,000 by news accounts) that they need to spend by the end of June or it goes back to the state and federal governments. So I'm sure this 'program' makes perfect sense to them.
1) How many foreclosures are there in Lucas County and how does this number compare to the past 30 years, especially to years when there were similar difficult economic times and downturns in the housing markets?
It's one thing to say we have some of the highest foreclosure rates in the country - it's another to look at the historical foreclosure rates within the county. Nationally, the foreclosure rates in the 1980s were higher than now - and yet, we somehow managed to survive without such programs. Why is that?
2) How many of the foreclosures in the county are a result of a one-time event (like loss of a job, unexpected medical bills, or even divorce - the reason for a large number of foreclosures) versus a personal decision to take a loan with an adjustable rate mortgage or to purchase a more expensive house than could actually be afforded?
3) How many of the $1,000 vouchers did the county give out to help people make mortgage payments? Basically, how many tax dollars have already been spent on what the Commissioners said was a failed attempt at addressing the problem? Are the recipients of the $1,000 vouchers going to be eligible to get another handout - this time up to $5,000? And, in keeping with the standard illogical actions of government - if the $1,000 didn't accomplish the goal, shouldn't more money be the solution?
4) What evidence exists to prove that handouts to these individuals will "stem the tide of rising foreclosure numbers" as Commissioner Tina Skeldon Wozniak claims?
5) How will this program avoid just prolonging the problem? Will there be a financial analysis of the individual's ability to meet their obligations PRIOR to giving them the handout? If an individual cannot meet their current mortgage obligations, will anyone actually recommend that they sell the home they cannot afford and move into housing that they can?
6) If an individual does not have the earnings or assets to continue paying their current mortgage costs, how will a one-time cash gift help them in the long-term? What long-term solutions will they be required to take? Should they have to take a second job - like so many already do - so that they can meet their financial obligations?
7) Will recipients be required to eliminate unnecessary spending PRIOR to being eligible for this handout? Or will individuals be allowed to continue to spend money on luxuries while getting taxpayer money to cover their necessities?
8) If credit counseling and other services are mandated as part of the problem, will individuals have to repay the $5,000 if they don't complete the courses? Or will they just be allowed to 'take the money and run'? If the money is to be repaid, how will it be collected?
9) How does this plan help all those who are making sacrifices in order to meet their mortgage obligations? How does this bailout encourage responsible citizens to continue to be responsible? Doesn't government spending - at all levels and for all things - drive up the costs for everyone, including those who are struggling, but are still able to pay their bills ... pushing those who are on the brink into the situation this program is trying to avoid?
Here's the problem: if the Commissioners were really interested in a long-term solution to the high costs of home ownership, they never would have voted to put increased - and new - tax levies on the ballot - as they have done every time they were asked.
If they were really interested in 'helping' people afford their homes, they wouldn't have spent 8% more in 2007 than they did in 2006 - or plan for another 2% increase in county spending in 2008. They'd actually reduce the cost of county government so they could reduce the amount of taxes (property and sales) it costs to pay for it.
If they were really interested in solving the problem, they'd work on creating a business-friendly environment so that companies would be profitable here, and would expand and grow, providing good-paying jobs for county residents.
However, all those things require hard work and making difficult decisions - including telling people 'no' when they ask for funds. And it's so much easier to just give out money to a few eligible families, get a bunch of headlines and then campaign on how you 'helped' people in need.
Here are some questions I think should have been asked prior to them making such a decision - though I doubt they even thought about most of these. Primarily, they've got a lot of TANF money ($400,000 by news accounts) that they need to spend by the end of June or it goes back to the state and federal governments. So I'm sure this 'program' makes perfect sense to them.
1) How many foreclosures are there in Lucas County and how does this number compare to the past 30 years, especially to years when there were similar difficult economic times and downturns in the housing markets?
It's one thing to say we have some of the highest foreclosure rates in the country - it's another to look at the historical foreclosure rates within the county. Nationally, the foreclosure rates in the 1980s were higher than now - and yet, we somehow managed to survive without such programs. Why is that?
2) How many of the foreclosures in the county are a result of a one-time event (like loss of a job, unexpected medical bills, or even divorce - the reason for a large number of foreclosures) versus a personal decision to take a loan with an adjustable rate mortgage or to purchase a more expensive house than could actually be afforded?
3) How many of the $1,000 vouchers did the county give out to help people make mortgage payments? Basically, how many tax dollars have already been spent on what the Commissioners said was a failed attempt at addressing the problem? Are the recipients of the $1,000 vouchers going to be eligible to get another handout - this time up to $5,000? And, in keeping with the standard illogical actions of government - if the $1,000 didn't accomplish the goal, shouldn't more money be the solution?
4) What evidence exists to prove that handouts to these individuals will "stem the tide of rising foreclosure numbers" as Commissioner Tina Skeldon Wozniak claims?
5) How will this program avoid just prolonging the problem? Will there be a financial analysis of the individual's ability to meet their obligations PRIOR to giving them the handout? If an individual cannot meet their current mortgage obligations, will anyone actually recommend that they sell the home they cannot afford and move into housing that they can?
6) If an individual does not have the earnings or assets to continue paying their current mortgage costs, how will a one-time cash gift help them in the long-term? What long-term solutions will they be required to take? Should they have to take a second job - like so many already do - so that they can meet their financial obligations?
7) Will recipients be required to eliminate unnecessary spending PRIOR to being eligible for this handout? Or will individuals be allowed to continue to spend money on luxuries while getting taxpayer money to cover their necessities?
8) If credit counseling and other services are mandated as part of the problem, will individuals have to repay the $5,000 if they don't complete the courses? Or will they just be allowed to 'take the money and run'? If the money is to be repaid, how will it be collected?
9) How does this plan help all those who are making sacrifices in order to meet their mortgage obligations? How does this bailout encourage responsible citizens to continue to be responsible? Doesn't government spending - at all levels and for all things - drive up the costs for everyone, including those who are struggling, but are still able to pay their bills ... pushing those who are on the brink into the situation this program is trying to avoid?
Here's the problem: if the Commissioners were really interested in a long-term solution to the high costs of home ownership, they never would have voted to put increased - and new - tax levies on the ballot - as they have done every time they were asked.
If they were really interested in 'helping' people afford their homes, they wouldn't have spent 8% more in 2007 than they did in 2006 - or plan for another 2% increase in county spending in 2008. They'd actually reduce the cost of county government so they could reduce the amount of taxes (property and sales) it costs to pay for it.
If they were really interested in solving the problem, they'd work on creating a business-friendly environment so that companies would be profitable here, and would expand and grow, providing good-paying jobs for county residents.
However, all those things require hard work and making difficult decisions - including telling people 'no' when they ask for funds. And it's so much easier to just give out money to a few eligible families, get a bunch of headlines and then campaign on how you 'helped' people in need.
Tuesday, January 22, 2008
UPDATED - County mortgage bail out?
See update at the bottom of the post.
Walter Williams, the John M. Olin Distinguished Professor of Economics at George Mason University, is one of my favorite columnists. He and Thomas Sowell have a way of making economic information seem simple - and understandable.
As I was reading his column on the subprime bailout, I couldn't help but think that our three County Commissioners should have a conversation with him.
When the commissioners meet today in their regularly-scheduled board meeting, they will approve a bail-out plan for local residents facing foreclosures, which includes a payment of up to $5,000 to help with their mortgages.
As Williams points out, President Bush's plan to 'help' people facing foreclosure "is a wealth transfer from creditworthy people and taxpayers to those who made ill-advised credit decisions, and that includes banks as well as borrowers. According to Temple University professor of economics William Dunkelberg, 96 percent of all mortgages are being paid on time. Thirty percent of American homeowners have no mortgage. Delinquency rates were higher in the 1980s than they are today. Only 2 to 3 percent of all mortgages are in foreclosure. The government bailout helps a few people at a huge cost to the rest of the economy.
Government policy got us into the subprime mess and government's measure to fix the mess is going to create more mess."
The Commissioners plan to use TANF monies for their local bail-out plan. TANF (Temporary Assistance to Needy Families) rules are extremely lenient, allowing local governments huge leeway in how they choose to allocate the funds. So, while we can debate the logic of such assistance, it is allowable. In this case, though, the eligibility will be up to 300% of poverty level (higher than for some other assistance which is capped at 200% or 250%), which is about $57,000 for a family of four. And TANF only applies to families, meaning that you must have a minor child residing in the household.
(Aside - in constantly increasing the eligibility requirements, government officials do two things:
1) they increase the numbers of individuals actually participating, earning them votes from a wider group and making more people dependent upon government for such 'help.'
2) they use more of their allocation which, if not spent, is returned to the state or federal governments for redistribution - meaning that they'll continue to qualify for the same or more funds in the future due to total use of current monies. The 'use it or lose it' mentality is what contributes to the never-ending government program and the lack of any return of unspent funds to the taxpayer who provided such funds in the first place.)
The way TANF works, the Commissioners will probably take proposals from local agencies who will then screen/qualify applicants and provide the actual assistance. Participating agencies will be allowed to take a portion of the funds for their administrative costs. As part of the requirements, the Commissioners will mandate recipient attendance at comprehensive credit counseling and financial literacy courses to "ensure their long-term financial health." (as if any government program or training class could 'ensure' such a thing...)
TANF funds come from the federal government, through the state, down to the counties. But it's not some nebulous account earning monies that are then distributed around the country. TANF comes from the taxes we pay, with both the feds and the states taking a share of it off the top to 'administer.'
And all of us who also face tight budgets, but who made good financial decisions, will be paying that $5,000 the others will receive.
As Williams says, this is nothing but "a wealth transfer from creditworthy people and taxpayers to those who made ill-advised credit decisions, and that includes banks as well as borrowers."
And I, for one, am tired of it.
This isn't about helping those who are less fortunate. This is about making them face the outcomes of their own decisions. When you make a bad decision, you learn to not make a similar bad decision by actually having to suffer the consequences. Sometimes, those consequences can be pretty severe - like losing your home. In many instances, this is the best way for an individual to learn a lesson - and the most memorable lessons are primarily those that came as a result of severe consequences.
And how, exactly, will a $5,000 gift of my tax dollars actually help a family facing foreclosure? It won't - all it will do is prolong the inevitable. When a family cannot afford the house they are in, giving them a gift of other people's money will only allow them to stay in the bad situation for a bit longer. After utilizing the $5,000, they will still be in a house they cannot afford and some will then expect that future 'bail outs' will be available when the situation again results in the potential loss of their home.
Before everyone starts off on evil predatory lenders, remember that the government is the one who mandated that banks give out loans to individuals of questionable financial means in the first place. And as this New York Times story details, predatory borrowing may have been the bigger problem.
And this fact brings up the next concern - how, exactly, will the rules of this new handout be written? Will the focus be on finding ways to keep people comfortable in their inability to make their financial obligations? Or will the effort be to get such eligible families into living accommodations that they can actually afford - even if it means an apartment instead of their current home?
The current plan for this assistance will include mandatory credit counselling and financial literacy courses - which is a good thing, even if it is after the fact. I just wish it wasn't accompanied by the carrot of up to $5,000 cash. But that's how government gets individuals into such 'training' - by offering them cash in order to 'learn' what they should already know.
(I once had a county employee tell me that if we didn't offer people money to participate, no one would actually be in a certain program. My response, of course, was that this was evidence we didn't 'need' the program in the first place and maybe we could then give the funds for it back to the taxpayers. My suggestion was seen as sacrilege and was immediately dismissed as terrible for the individuals because, whether they knew it or not, they did 'need' this government assistance.)
In the end, I think many Lucas County residents will feel like I do ... if my tax dollars are going to go toward anyone's mortgage, it should be my own.
UPDATE: From the actual resolution passed by the Commissioners today:
Lucas County Department of Job and Family Services is seeking provider(s) to provide a full range of housing assistance to TANF/PRC (Temporary Assistance to Needy Families/Prevention, Retention and Contingency)-eligible Lucas County homeowners by way of a multi-faceted approach, including, but not limited to:
* Client education and training services
* Counseling on loan payment delinquency and mortgage foreclosure
* Client advocacy and one-time cash assistance
* Case management and follow-up services
Services are to be provided from approximately April 1, 2008 through June 30, 2008 with a twelve month renewal option of July 1, 2008 through June 30, 2009.
Can someone please explain to me why this area needs 15 months of such 'service'??? Seems to me that the 'crisis' will be over way before then! And if I understood correctly, the cost of this is about a half a million dollars!
Walter Williams, the John M. Olin Distinguished Professor of Economics at George Mason University, is one of my favorite columnists. He and Thomas Sowell have a way of making economic information seem simple - and understandable.
As I was reading his column on the subprime bailout, I couldn't help but think that our three County Commissioners should have a conversation with him.
When the commissioners meet today in their regularly-scheduled board meeting, they will approve a bail-out plan for local residents facing foreclosures, which includes a payment of up to $5,000 to help with their mortgages.
As Williams points out, President Bush's plan to 'help' people facing foreclosure "is a wealth transfer from creditworthy people and taxpayers to those who made ill-advised credit decisions, and that includes banks as well as borrowers. According to Temple University professor of economics William Dunkelberg, 96 percent of all mortgages are being paid on time. Thirty percent of American homeowners have no mortgage. Delinquency rates were higher in the 1980s than they are today. Only 2 to 3 percent of all mortgages are in foreclosure. The government bailout helps a few people at a huge cost to the rest of the economy.
Government policy got us into the subprime mess and government's measure to fix the mess is going to create more mess."
The Commissioners plan to use TANF monies for their local bail-out plan. TANF (Temporary Assistance to Needy Families) rules are extremely lenient, allowing local governments huge leeway in how they choose to allocate the funds. So, while we can debate the logic of such assistance, it is allowable. In this case, though, the eligibility will be up to 300% of poverty level (higher than for some other assistance which is capped at 200% or 250%), which is about $57,000 for a family of four. And TANF only applies to families, meaning that you must have a minor child residing in the household.
(Aside - in constantly increasing the eligibility requirements, government officials do two things:
1) they increase the numbers of individuals actually participating, earning them votes from a wider group and making more people dependent upon government for such 'help.'
2) they use more of their allocation which, if not spent, is returned to the state or federal governments for redistribution - meaning that they'll continue to qualify for the same or more funds in the future due to total use of current monies. The 'use it or lose it' mentality is what contributes to the never-ending government program and the lack of any return of unspent funds to the taxpayer who provided such funds in the first place.)
The way TANF works, the Commissioners will probably take proposals from local agencies who will then screen/qualify applicants and provide the actual assistance. Participating agencies will be allowed to take a portion of the funds for their administrative costs. As part of the requirements, the Commissioners will mandate recipient attendance at comprehensive credit counseling and financial literacy courses to "ensure their long-term financial health." (as if any government program or training class could 'ensure' such a thing...)
TANF funds come from the federal government, through the state, down to the counties. But it's not some nebulous account earning monies that are then distributed around the country. TANF comes from the taxes we pay, with both the feds and the states taking a share of it off the top to 'administer.'
And all of us who also face tight budgets, but who made good financial decisions, will be paying that $5,000 the others will receive.
As Williams says, this is nothing but "a wealth transfer from creditworthy people and taxpayers to those who made ill-advised credit decisions, and that includes banks as well as borrowers."
And I, for one, am tired of it.
This isn't about helping those who are less fortunate. This is about making them face the outcomes of their own decisions. When you make a bad decision, you learn to not make a similar bad decision by actually having to suffer the consequences. Sometimes, those consequences can be pretty severe - like losing your home. In many instances, this is the best way for an individual to learn a lesson - and the most memorable lessons are primarily those that came as a result of severe consequences.
And how, exactly, will a $5,000 gift of my tax dollars actually help a family facing foreclosure? It won't - all it will do is prolong the inevitable. When a family cannot afford the house they are in, giving them a gift of other people's money will only allow them to stay in the bad situation for a bit longer. After utilizing the $5,000, they will still be in a house they cannot afford and some will then expect that future 'bail outs' will be available when the situation again results in the potential loss of their home.
Before everyone starts off on evil predatory lenders, remember that the government is the one who mandated that banks give out loans to individuals of questionable financial means in the first place. And as this New York Times story details, predatory borrowing may have been the bigger problem.
"As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study. The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006. Applications with misrepresentations were also five times as likely to go into default.
Many of the frauds were simple rather than ingenious. In some cases, borrowers who were asked to state their incomes just lied, sometimes reporting five times actual income; other borrowers falsified income documents by using computers. Too often, mortgage originators and middlemen looked the other way rather than slowing down the process or insisting on adequate documentation of income and assets. As long as housing prices kept rising, it didn’t seem to matter.
In other words, many of the people now losing their homes committed fraud. And when a mortgage goes into default in its first year, the chance is high that there was fraud in the initial application, especially because unemployment in general has been low during the last two years."
And this fact brings up the next concern - how, exactly, will the rules of this new handout be written? Will the focus be on finding ways to keep people comfortable in their inability to make their financial obligations? Or will the effort be to get such eligible families into living accommodations that they can actually afford - even if it means an apartment instead of their current home?
The current plan for this assistance will include mandatory credit counselling and financial literacy courses - which is a good thing, even if it is after the fact. I just wish it wasn't accompanied by the carrot of up to $5,000 cash. But that's how government gets individuals into such 'training' - by offering them cash in order to 'learn' what they should already know.
(I once had a county employee tell me that if we didn't offer people money to participate, no one would actually be in a certain program. My response, of course, was that this was evidence we didn't 'need' the program in the first place and maybe we could then give the funds for it back to the taxpayers. My suggestion was seen as sacrilege and was immediately dismissed as terrible for the individuals because, whether they knew it or not, they did 'need' this government assistance.)
In the end, I think many Lucas County residents will feel like I do ... if my tax dollars are going to go toward anyone's mortgage, it should be my own.
UPDATE: From the actual resolution passed by the Commissioners today:
Lucas County Department of Job and Family Services is seeking provider(s) to provide a full range of housing assistance to TANF/PRC (Temporary Assistance to Needy Families/Prevention, Retention and Contingency)-eligible Lucas County homeowners by way of a multi-faceted approach, including, but not limited to:
* Client education and training services
* Counseling on loan payment delinquency and mortgage foreclosure
* Client advocacy and one-time cash assistance
* Case management and follow-up services
Services are to be provided from approximately April 1, 2008 through June 30, 2008 with a twelve month renewal option of July 1, 2008 through June 30, 2009.
Can someone please explain to me why this area needs 15 months of such 'service'??? Seems to me that the 'crisis' will be over way before then! And if I understood correctly, the cost of this is about a half a million dollars!
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