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Washington is in a dilemma. Unemployed people are being thrown out of their homes. Are they to be defined as homeless or are foreclosure evictees to be considered homeless?

For 20 odd years according to the federal law those living in streets and shelters were termed as homeless. But now the House and the Senate are considering the use of the term in a wider context. Anybody who is in jeopardy of losing his or her house that is the home to be considered as homeless. This will mean those who have been hit by foreclosure and are camping with friends and relatives or somehow passing days in motels as homeless. They are living a hand to mouth existence waiting for the little cash they have to run out.

The House will vote on this matter in September. It will expand the term homeless to embrace another million extra people. Within this group will be added more numbers when children are included. People running away from homes because of domestic violence will also come under its gambit. Anybody who can prove that their homes will be lost within the next fortnight will come under the category of homeless. It is the foreclosure crisis with its socio-economic ramifications that has primarily led to the swelling of the numbers of homeless.

The Senate wants to narrow down the extension by suggesting that only those who have had to move out three times in a single year, or once in three weeks will be termed homeless. The debate of expanding or contracting the connotation of the term will continue and it is doubtful if any decision will be taken this month.

In all likelihood some sort of expansion of the term is inevitable. This will put an additional burden on the services provided by HUD. It will require an additional sanction of $1.7 billion for the homeless. The Bush government understandably is not too keen on further expansion of the term and strain on the budget. Meanwhile foreclosures continue to push the people onto the streets. Some are even living in their cars and vans. Unfortunately none of the bills are attached with provisions for extra funding.

The Democrats have always boasted for being the champions of the poor. But even they are bemoaning the fact that the money is not there to back up the expansion of the meaning of homeless in real terms. The Republicans are taking this opportunity of accusing their rivals of turning away from the thousands rendered homeless by foreclosures.

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No matter what the pundits say the dramatic jump of foreclosures in June points to recession. Bush, Bernanke and Paulson know it but will not admit the truth. Foreclosure activity has reached record heights since the 1930’s Depression. The trio thinks that by ignoring facts and looking aside they can roll on till the November elections. The hard harsh fact is that America is in recession and the Bush government is trying its level best to cover the tracks. They refuse to go beyond admitting that the economy is slowing down. Periodically announcements are being made of the foreclosure cloud clearing allowing the economy to bounce back again. It all sounds like a cock and bull story.
There is no denying that millions are without jobs although Washington claims that the numbers are low. Billions of new dollars are being created to bail out the lender group including banks and brokers. Yet Washington says that money supply is at low ebb.
Washington’s statement about inflation seems to be blatantly erroneous. It says that inflation rate is 4.2% but one has to go to the market to find out first hand the reality of things. Each month the price of things are rising rapidly.
Adding insult to injury are foreclosure woes. The average family in the country owes $119,173 in loans (mortgages, credit cards, car loans etc.). The average saving rate is only 0.4%. There is no way these figures can be swept under the carpet.
The world is intently watching the plight of USA. Agence France-Presse from Europe reports, “A downward spiral for mortgage giants Fannie Mae and Freddie Mac was unabated” despite assurances from treasury secretary Henry Paulson. Fears centred around trillions of dollars in the housing system.
Bloomberg bluntly states foreclosure facts “The foreclosure problem is getting worse and will stay with us well into the next decade. Mark Zandi of Moody’s Economy commented that since the 1930 Depression foreclosure activity has never been as strong and intense as it is today. ReltyTrack predicts that before this year draws to an end there will be 1 million foreclosed houses taken over by the bank. It will amount to about one fourth or one third of all the houses for sale in the real estate market. Seizures by banks have tripled. The sharp drop in property value is forcing many people to succumb to foreclosures and lose the houses that are their homes.

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Most of the Republicans headed by Bush seriously believe that they have Time on their side and that things will solve itself out by allowing foreclosures to follow the course of classical economics. Many opine that they are wrong.

The river of sorrow will not dry up as it regenerates itself – clouds become rains and rains become clouds. Foreclosures are leading to real estate price decline and real estate price decline leads to more foreclosures. As such the river is spilling its banks and foreclosures are now tainting prime loans. The impact of floundering traditional loans made to credit worthy people is yet to be gauged. The terms of these loans have been tricky and the interest rates too will start to climb.

The Senate Banking Committee continues to make empty noises despite this grave situation.. As yet no bill has been passed to help foreclosure victims thanks to the objections raised by Republican Richard Shelby. The House passed a tentative measure with the support of a mere 39 Republicans. The White House has to yet come forward with a clear-cut step – it continues to sow confusion with its humming and hawing. The net result is delay and delay translates into inevitable foreclosure.

Meanwhile the economy continues to be mauled. The housing balloon has burst causing real estate prices tumble. From the first quarter of 2007 to the first quarter of 2008 the price of single-family houses fell by 7.6%. This is the largest year-over-year fall since 1982. It is apprehended that 2.2 million houses will most probably be foreclosed before this year draws to an end. Another nine million are at risk because of their zero equity. This means they have nothing to fall back on if recession or inflation hits hard. This will make it impossible for them to continue with regular mortgage repayments.

According to theory fall in prices should lead to rise in consumer demand. This rise in demand will send prices upward again. Republicans accept this formula for remedy without demur. This is at the root of their inaction. But the reality is quite different. In many cities the fall in real estate is so grim that buyers are shying away afraid of another tumble. This puts on hold any prospect of recovery.

The housing market affects everybody. So long as it is troubled the entire financial system will be unsettled.

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Foreclosures continue to rule the roost despite much talk and hype about solutions. But what is self evident from numbers pouring in is that the Bush administration has failed to rein in the galloping foreclosure horse. Like myriad other problems this all-important one about foreclosures is going to be dumped on the new President and the succeeding Congress.

The lax lending of the previous bubbling years continues to ferment trouble and spread the rot. In May foreclosures were again on a running spree with many default numbers tagging behind, ready to be foreclosed. The pain today is not only the tears of individual families. It has spread its tentacles wide. House prices are falling, tax collection is declining while credit remains tight fisted. This is creating a vicious circle of continuation of the slump in the real estate market that is in turn telling on the general economic slow down. Lenders, borrowers, the ordinary citizen and politicians are now all boiling in the foreclosure stew. So far nothing positive has come forth from the Bush administration.

The sitting Congress may succeed in passing a foreclosure-help bill before 4th July. At best it will stop 5,00,000 foreclosures covering the forthcoming years. If it sees the light of day it will be something to trumpet about. But there are many ‘ifs’ – it has to be passed and then it has to be signed by Bush. Even then the weight of foreclosures that will be legated to the next administration will be gigantic.

At this juncture it is relevant to note what noises the two presumptive nominees, John McCain and Barack Obama are making on this all important foreclosure issue. Last March McCain had tagged along with those who blamed the borrowers for taking more loans than they could afford. He argued that they were not deserving of help. This led to a barrage of criticism. McCain came to be termed mean and ignorant of economic points. The argument was that there was no reason to make the entire economy suffer for the failings of few borrowers. From April, McCain began to sing another tune and supported administrative steps being taken to halt foreclosures.

Obama has more broad suggestions to offer – allowing bankrupt borrowers to have their loans modified via court protection route. This has been categorically dismissed by Bush group and the mortgage companies. Obama is also for local bodies to purchase foreclosed properties and thus help in easing the market.

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With much fanfare housing relief has made its debut but too many conditions will help too few foreclosure victims. The sponsors say that about 500,000 will be helped but what about the cut off date of 1st October excludes many? The Senate Banking Committee passed a housing bill and panel chairperson Dodd was euphoric in claiming that many will benefit. It is however most unlikely that the magic figure will touch 500,000. Experts analyze that at the most 325,000 will be helped. It would cut down the apprehended number of future foreclosures by 8% for the forthcoming years, says analyst Alec Phillips of Goldman Sachs.

The key clause of the bill permits the Federal Housing Administration or FHA to insure new loans up to a limit of $300 billion. This is dependent on a condition – the lender will have to write down a part of the loans and bring it at par with the current appraised value of the units. The official version of bill has not yet been released.

The enforcement of the bill will take off from 1st October although previously it was assumed that 1st June would be the cut off date. The bill is connected to political expediency. The four-month pause will flush out a 1.5 million borrowers who had taken sub-prime loans and whose loans are geared to increase. By the time 1st October comes, many houses would have been swallowed up by foreclosures. Thus those whose rates went up from 1st January 2008 would not benefit from the bill but would be sacrificed to the wolves. The bill will help those whose rates will rise from the third quarter. In May the maximum resetting takes place. They too will not be able to avail of the opportunity of saving their houses. In those states however where the foreclosure process goes on for about a year the bill will help some.

If the Congress had addressed the problem before the massive numbers had reset, a substantial number of foreclosure victims would have been helped and the foreclosure numbers contained. There were however explanations Jaret Seiberg an expert from Stanford Group (Washington research firm dealing with policies) said “there’s upfront planning that needs to occur for this to be successful.”

Political heat is on with heated arguments between Democrats and Republicans. This has largely led to the delay in putting into action positive thoughts of help.

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More than $3 million has been sanctioned by the Ohio Housing Finance Agency. It will enable counseling agencies to operate with counseling through 18 centres across the state. This $3.06 million grant emanates from the National Foreclosure Mitigation Counseling Program and it is part of $180 million action taken by the Congress in its fiscal 2008 appropriations bill. The programme funding is being activated through NeighborWorks America based in Washington DC dealing with housing matters.

How much each organization will get is not being specified until finalization of contracts. One of the beneficiaries will be Mid-Ohio Regional Planning Commission based in Columbus. In south east Ohio, the Corporation for Ohio Appalachian Development was declared qualified for the federal grant to serve the people of that region. Also on the qualified list was Community Action Commission of Fayette County southwest of Central Ohio. More than half of the agencies selected are concentrated in and around Cleveland. Foreclosures have been the highest making it rank sixth in the foreclosure race amongst all the metropolitan cities in the country.

The country is in the grip of a foreclosure tsunami. Although the primary accused is the sub-prime floating interest rate mortgage there are many other factors at play that have aggravated the situation – a situation that has caused whispers of recession being heard. Since 9/11 the stock market has been wobbly. There have been job losses. Detroit is one of the worst hits with the automobile industry floundering. Population levels have also gone down. Together with this medical bills have gone up and divorces being rampant have caused instability in the social structure. To add fuel to the fire a loan culture came to be aggressively sold via the credit card craze. It was thought that with money being pumped into the market by consumers, it would give the flagging economy a kick. Nothing happened. People kept on taking loans to get out of other loans. Into this mess crept in sub-prime loans meant to cater to those who could not qualify for prime loans because of modest income and shaky credit. The loans were aggressively peddled lured by commission and investment hopes. The general public were made pawns to snap up loans they could not run. The scheme backfired with lenders having taken on more foreclosures than they could digest. Foreclosures now dot the desolate land. No remedy has been found – only short term palliatives are being introduced.

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The hunting instinct has not gone out of vogue – is very much there with outward cosmetic changes. Today busloads of hunters are on a foreclosure safari – trying to target sitting ducks. It is a common scene now – also in Prince William County.

Real estate companies chartered a bus carrying 25 prospective buyers to view the thousands of houses afflicted by foreclosures. This was the first tour of its kind in the region. Mortgage attorney Art Grace told the hunters that they have a great chance to snap up a deal. The public here are not even aware of the gold mine they are sitting on. The bus touched on nine foreclosed units in Gainesville and Haymarket within three hours. There were town-houses and stand-alone houses with price tags ranging from $200,000 to $600,000. One house was practically brand new.

The idea of bus tours is catching on across the country with similar buses rolling in California, Nevada, Michigan and Illinois. These states have been worst hit by the foreclosure crisis.
The spokesperson of the tour operator (Long & Foster Realtors) in Prince William, Eileen Durkan said that hearing about similar hunting parties in California she decided to set the wheels rolling here also. California ideas always run eastwards. She decided to pick it up fast. Compared to other areas in the D.C region Prince William has been severely mauled by foreclosures. In Washington, Arlington and Alexandria metro zone there were 28,455 foreclosure postings in 2007 making it rank 41 amongst the top 100 metros of US. The leading cities were Riverside, San Bernardino, California with 102,506 listings. Los Angeles, Long Beach recorded 93,696 foreclosures.

Amongst the hunter tourists were novices, investors and people who were just curious and interested. While on the bus the passengers were given information about foreclosure hunting by a house inspector, house warranty agent and a loan officer. Information brochures were distributed together with water bottles labeled ‘Foreclosure Tour’. One participant commented that the idea was great and would have been greater if it had started earlier.
Experts feel that if somehow the market is made to turn around things will improve. Right now there are too many units and too few buyers. With more foreclosures in the offing more houses are expected to roll in. Buyers are in a fix sans loan facilities. So it is a no go situation.

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The Democrats have brought in a bill that if made effective will curb further foreclosures by changing laws related to bankruptcy. This was the opinion given by Senate majority leader, Harry Reid, Democrat from Nevada last Thursday. He apprehended that in all likelihood Republicans will block the bill. The test vote might extend up to Friday latest. If the Republicans stall the limited debate Reid will try to bring it back to the Senate floor the following week. He said that he would permit amendments to the bill that White House has threatened to veto.

He qualified his statement by adding that the amendments would relate to the present housing problems that has entangled 2 million house owners who are all set to face foreclosures and will not include other red hot issues like estate taxes. The Republicans in the Senate are scheduled to present their own interpretations of the housing bill on Thursday.
The clause in the bill that is causing controversy is about allowing judges to cancel bankruptcy debts.

If the bill is blocked by the Republicans Reid will manage to bring it back to the Senate floor sometime late the following week. By then the Ohio and Texas presidential primaries will be completed and the two senators, Clinton and Obama, backing the bill will return to Washington to give support to the legislation.

The criticism leveled by the Republicans is that the bill is actually a bail out to the lender’s lobby. The bankruptcy reform provision will give the right to judges to modify the principal of the mortgages on first time residences. The new measure is more bold than the economic stimulus package signed by Bush last Wednesday. This bill termed Foreclosure Prevention Act of 2008 includes many items that the Democrats had wanted to be incorporated in the original package related to economic stimulus. The Democrats in the Senate are keen to see the bill bypassed in the usual committee review process so as to fast track it for consideration when the Congress returns after the recess. The bill plays up to the popular sentiments of voters and there are many members seeking re-election. As such the bill must be enacted into law – opines many. Reid feels that in the face of an uncertain economy the bill is the right dose of medicine. The bill should be carefully considered so that those seeking help are nothurt by it.

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