Disaster area?

A Florida county that has been particularly hard-hit by the housing crisis is seeking “disaster area” status.

In St. Lucie County, thousands of homes stand vacant or unfinished. A  county commissioner believes the crisis has reached disaster proportions. If the county is declared a disaster area, it could receive money from the government’s fund dedicated to providing relief in areas hit by hurricanes and tornadoes.

What constitutes disaster?

Instead of waiting for cash advances from the government, County Commissioner Doug Coward is pushing for the disaster area classification so his county can get some help.

“This is a man-made disaster,” County Commissioner Doug Coward acknowledged. But he said that is why “we’ve got to do something. Clearly, the economic crisis of the country far exceeds the ability of local governments to solve it, but we’re trying be a part of the solution.”

Why make declaration?

Doug Coward

In addition to being eligible for the disaster relief funds, the declaration would let the county sidestep the usual bidding process for construction projects. Then the jobs could go directly to local contractors.

Advocates are hoping that if more locals are put to work, they’ll be able to pay their mortgages and avoid even more foreclosures in the area.

Rise and fall

Port St. Lucie was the fastest growing large city in the United States just five years ago. However, the rapid growth led to a rapid decline.

Affordable housing, open space and a laid-back lifestyle drew residents to Port St. Lucie by the busload. But despite the seemingly low home prices, many people soon realized they couldn’t really afford their homes. They found themselves swept up in the nationwide mortgage crisis.

Hard facts

In St. Lucie County, 10,000 homes were foreclosed last year — more than double the amount of the year before. Unemployment is 10.5 percent, significantly higher than the nation’s 7.9 percent.

Martin Eakes of the Center For Responsible Lending recently distributed a press release in which he reacts to President Obama’s plan to fix the housing crisis that plagues America. Nothing like damage control for the image after your business was directly involved in causing the subprime mortgage crisis to begin with.

Let’s assume Mr. Eakes is generally contrite about his past dealings in the subprime market that former associate Herbert Sandler knows too well. Unfortunately, he has nothing to say about it in his most recent press release.

Give credit where credit is due

Eakes begins by riding the wave like any good politician:

The housing plan announced today represents a huge step forward for the entire country, and includes responsible and effective actions to reduce the massive foreclosures that triggered today’s economic crisis. It represents an essential and overdue investment in correcting the results of bad lending and poor risk management. And it will benefit households from across the economic spectrum, providing new hope for a future with stronger communities and a stronger economy.

The foreclosures that triggered today’s economic crisis? No, the foreclosures are the effect of the real cause. Mind you, foreclosure in turn serves as a cause themselves which produce a spiderweb of other negative economic effects. But let’s not forget the initial cause of this American Real Estate blast crater. That would be the subprime lending in which ACORN, Self-Help, Inc. (Eakes’ organization) and the Community Reinvestment Act blackmailed banks into participating. That’s bad lending and poor risk management, plain and simple. Racism had nothing to do with it. Racism was their cause celebre; such political correctness destroyed America’s economy and put people out of their homes. Not payday loans, Mr. Eakes. CLICK HERE for more on Martin Eakes in Wonderland…

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Obama hopes to help homeowners avoid this fate.

A mixture of bad credit and personal loans has caused millions of Americans to face foreclosure on their homes. Now President Barack Obama has revealed his plan to help up to 9 million Americans keep their homes.

Obama will use money from the $700 billion Troubled Asset Relief Fund that the Bush administration approved last fall. He will dedicate $75 million to keeping Americans with mortgages from having to turn into their keys.

Keeping families off the streets

Many homeowners are facing the reality of having bad credit because their personal loans have gotten too expensive for them to handle. Many also now own property that is worth less than the amount they owe on their mortgage.

Obama’s new foreclosure prevention plan will help about 4 million Americans who are facing foreclosure. His plan is to offer incentives to banks so they will refinance loans to get monthly payments down to manageable levels.

Property values

The plan will also help 4 million to 5 million people who are paying mortgages that are now worth more than their property, if their loans are through Fannie Mae or Freddie Mac. Because of the steep depreciation in housing values, nearly 14 million people are currently paying mortgages that are worth more than their property.

Because the government now owns large stakes in Fannie Mae and Freddie Mac, Obama says mortgages through those companies will be easier to refinance. People who aren’t behind on their payments but are paying mortgages on low-value property can refinance their total mortgages.

Warming  up cold credit market

Obama’s hope is that the plan will get credit moving, and he says relief will come to homeowners in just a couple of weeks. He plans to have the new rules in place by March 4.

Because banks are so leery of lending, people now must have immaculate credit to secure a loan. Obama’s hope is that if banks have enough incentive to lend, even people with bad credit can get personal loans.

As demand for payday loans continues to rise, demand for houses continues to fall.

Home prices are sinking lower and lower, and for some people that might make the “buy low” part of the old investment adage ring in their heads. However, MarketWatch has come up with a list of pretty compelling reasons why you shouldn’t buy a house in 2009. Here are a few.

Uncomfortable without a cushion

For any average American, the down payment on a house and other costs associated with buying will wipe out their savings account. MarketWatch argues that now is a dangerous time to be left without some extra cash.

“Given the recession and the fragile economy today … it’s wise to have a cushion to land on in the event you get hit with a financial broadside,” MarketWatch says.

You don’t want to end up needing payday loans in a financial emergency later because you spent your financial cushion.

Job insecurity

We have all seen the headlines every day announcing big layoffs at big companies as well as smaller ones. Perhaps you feel secure in your job because you are protected by a union contract or because the company you work for is doing well financially.

However, union contracts can change. As the recession deepens, more companies are being affected every day. Buying a home is an extremely long-term commitment. At this point not even experts know where the economy will be in a year or two years or even five years. Having a mortgage to pay off is not an ideal situation to be in if you lose your job.

Prices are still dropping

Home prices have been on the decline for some time now, but there is no sign of them leveling off yet. If you buy a home this year chances are it will depreciate even farther in value after you buy it. Granted, there is a good chance it will go back up later and you will end up making money in the long run. However, if you are looking at buying a home as an investment opportunity, it is best to wait  until prices are at their absolute lowest.

So don’t run out and get payday loans to cover your fees so you can shore up a mortgage; wait it out.

History tries to repeat itself

The Federal Housing Authority says it doesn’t have the resources to police predatory lenders. Officials from the Department of Housing and Urban Development say the FHA needs more staff, better technology and added legal authority if it is going to stop another wave of shady lending practices from hitting the country.

The Troubled Asset Relief Program, which so far has spend $350 billion, was put in place to aid lenders by giving them federal funds. The FHA is charged with screening people who apply for bailout money or otherwise try to get involved with federally backed loans. However, recent examples have shown the FHA is ill-equipped to do so. Too bad a payday loan can’t help.

Finding ways around the law

The first example seems to be simply of slipping through the cracks. An FHA lender in New York was debarred five  years ago. That lender was somehow able to go back into the business, and it continued using the same fraudulent practices that got its license taken away in the first place.

A lending company in Arizona had its license suspended and then filed for bankruptcy. The company promptly resumed operations by putting the company under a different owner’s name.

Evaluating evaluators

The FHA isn’t just in charge of screening lenders. It is also responsible for screening appraisers, people who assign value to homes or property. Right now the government’s list of appraisers still names 199 who have been disciplined by the states. The list also includes 3,480 with expired licenses.

As home prices continue to fall and property taxes continue to rise, homeowners are challenging the appraisal value of their property. Appraisers are being overloaded with requests for re-evaluating a home’s worth. The more appraisers are hit up with these requests, the more bogged down the FHA will become.

Get on the right track

In my opinion, it is imperative that these organizations immediately get the staff and the technology they need in order to be able to properly screen requests for federal funds. Obama has requested access to the remaining $350 billion in TARP funds. If the FHA’s problems aren’t fixed before the government starts handing out money again, Americans will be vulnerable, once again, to predatory lending practices. And this time it’ll be our own government paying those shady lenders.

The first step toward fixing these problems comes with double benefits: Hire people! If some bailout money is used to pay more staff it will have the added affect of giving jobs to part of the 7.2 percent of the population that is unemployed right now. Add that to preventing more of the same mistakes that caused the mortgage crisis in the first place, and we have a winner. I think getting the proper technology for these organizations would be a worthy investment, as well.

This article was brought to you by your payday loan source.

The Troubled Asset Relief Program was meant to aid homeowners in avoiding preventable foreclosures, the panel says, and there is no evidence that the bailout money went toward that effort.

Poor bookkeeping

The $700 billion program, TARP, was approved in mid-October. The oversight panel, headed by Elizabeth Warren, says the Treasury hasn’t even released a strategy for stabilizing the financial system.

“Treasury needs to be clear as to what, if anything, it has done,” Warren said.

Warren says Congress gave $350 billion to the Treasury and specified it was meant to help borrowers refinance their homes. The Treasury set up the system and did not put in place a tracking mechanism to monitor whether it was meeting Congress’ requirements. Homeowners, with mortgages that exceed the value of their homes, may still be taking out payday loans to pay their mortgage so they don’t get thrown out of their houses.

The other half

In order to access the other $350 billion, the Treasury needs congressional approval. Whether the Treasury requests these funds remains to be seen. And whether they receive the funding will be up to the discretion of President-elect Obama’s administration. Obama’s economic team is now overhauling the remaining fund to speed the flow of credit to consumers.

The initial deadline for approval for bailout money was Dec. 31. The Treasury has extended the deadline to Jan. 15, five days before Obama’s inauguration. This gives regulators extra time to process and approve requests, and it potentially gives more financial institutions time to apply for funding. So it will likely be a while before we find out just exactly what the Treasury did with the money.

Hello? Anybody home?

To aid in drafting its report, the panel had submitted 45 questions to the Treasury. Several of the questions were not answered, according to the panel.

A Treasury spokesman gave no comment in response to the panel’s report, which was released today. He said he had not seen it.

Keeping an eye out

The Treasury apparently has nothing to say in response to the report at the moment, but sometimes these things take time. I’ll be watching the news for a response, so check back for updates.

My thoughts? It may be too late for the bailout funds to help average Americans keep their homes. Sure, home foreclosures have gone down since TARP was approved, but is that just because so many people have already been kicked out? The funding still may be able to help some people, but now that the deadline to approve institutions for funds has been extended, there are probably some panicked homeowners out there taking out payday loans so they can pay their overpriced mortgages.