Uncle Sam Throwing in the Towel?

The current administration has tried several measures to help get the housing industry back on track. Some programs, such as the HAMP never gained steam as hoped, and have had minimal impact. Other programs, such as the tax credit for first-time and move-up home buyers were widely utilized, but ultimately cost the government lots of money and did relatively little to spur sales activity. So with housing appearing to continue on its course unimpeded, the government appears to be at a bit of a crossroads.

To interfere, or not interfere? A difficult question indeed. While just about any effort will likely be accused of being a futile waste of resources, doing nothing will draw the ire of others for, well, doing nothing. “There is no money and, to some degree, we have run out of ideas. I have seen them all,” said Mark Zandi, chief economist of Moody’s Analytics. “I don’t think there is something grand that could make a big difference.”

So there you have it. According to Mr. Zandi, nothing more can be done, and nobody has any good ideas. Yet on the flip side, there was a report last week from Nick Timiraos at the WSJ: “The Obama administration is ramping up talks on how to revive the housing market”. So perhaps they aren’t quite ready to wash their hands of the housing market entirely.

One new idea that has been floated out there makes some sense. A program could be developed to convert some delinquent homeowners to renters using a deed-in-lieu of foreclosure, then placing the property under the current REO Tenant-in-Place Rental Policy – and finally selling the property to investors with tenant-in-place. This program is unique in the sense that it could hold appeal to both distressed homeowners who would prefer to stay put, and investors.

While there might not be any programs out there that could put any kind of meaningful dent in the housing crisis, there is definitely legislation in the offing that could hinder recovery. Messing with the mortgage interest deduction, or upping the down payment requirements for certain loan programs will diminish the appeal of home purchase and ownership. This, at a time when the market needs all the buyers it can get.