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Thursday, October 27, 2011

Giving Credit Where Credit's Due

I saw a brief segment on TV the other night that showed a campaign ad put out by the Democratic National Committee and being run in Las Vegas (which has been decimated by home foreclosures) that featured a clip of Republican presidential nominee Mitt Romney answering a reporter's question about the foreclosure issue.  The thrust of the hit piece was - in so many words - how could Romney be so heartless and cruel to all those people out there who are losing their homes?

I looked at Paula and said, "actually Romney's right; Obama trying to "help" those homeowners who are "under water" with their mortgages has only prolonged and worsened the problem."

The Wall Street Journal, as it turns out, agrees with me this morning:
Romney's Finest Hour
He speaks the truth about housing and foreclosures.

A friend of ours quipped recently that Mitt Romney could do his Presidential candidacy a lot of good if he took even a single position that is unpopular in the polls. Well, we can report that he has done that on housing policy, that he's being pummeled for it, and that it may be his finest campaign hour. It also contrasts favorably with the latest temporary, ad hoc and futile housing effort from President Obama.

Campaigning last week in Nevada, the epicenter of the housing bust, Mr. Romney was asked by the Las Vegas Review-Journal editorial board what he would do about housing and foreclosures. His reply:

"One is, don't try and stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up. Let it turn around and come back up. The Obama Administration has slow-walked the foreclosure processes that have long existed, and as a result we still have a foreclosure overhang."

How's that for refreshing? After five years of politicians trying without success to postpone disclosures and levitate the housing market, Mr. Romney dared to tell the truth. Parts of the U.S., including Nevada, still have too many homes, and that supply needs to be sold off and fixed up so the market can find a bottom before home prices can start to rise again. The faster that process proceeds, the faster the recovery will take hold.

For this apostasy, Mr. Romney is getting whacked by the Democratic National Committee in a 30-second TV ad that first aired Tuesday in Arizona: "Almost half of Arizona homeowners underwater. Foreclosures everywhere. And what's Mitt Romney's plan?" the ad intones. Then it quotes Mr. Romney: "Don't try and stop the foreclosure process. Let it run its course and hit the bottom.'"

The attack ad doesn't quote the second part of Mr. Romney's Las Vegas answer, which spoke another truth: "Number two, the credit [that] was given to first time homebuyers was insufficient and inadequate to turn around the housing market. I think it was an ineffective idea. It was a little bit like the cash-for-clunkers program, throwing government money at something which was not market-oriented, did not staunch the decline in home values anymore than it encouraged the auto industry to take off."

All of these government plans used taxpayer cash to forestall foreclosures in an attempt to stop housing prices from falling from their manic heights. How's that working out? Five years into the housing bust, the U.S. still has 10.9 million "underwater" borrowers, whose homes are worth less than the original purchase price. States like Florida, Nevada and New Jersey have long foreclosure backlogs, and home prices still haven't begun to recover in much of the country.

Mr. Romney's advice to let the foreclosure and resale process take its course as rapidly as possible until the market finds a "bottom" couldn't possibly do any worse than the Obama Administration and its frenetic attempts to "save" homeowners have done. To the extent that it encourages a faster recovery it is also more compassionate. As the nearby chart shows, while the fall in home prices has been painful for current owners, it has also made housing far more affordable for new buyers. [link]
As it turns out, Obama's "help" has greatly hurt millions of homeowners in this country as property values continue to decline and home values become worth less than the amounts owed on them.

Obama and his ilk score big points by attacking smart policy.  As the country - following his policies - will soon be into its fourth year of massive unemployment, economic stagnation, and crushing debt.

If Obama wins in 2012, it won't be because he did anything right.  It'll be because he came up with nice attack ads.

As the United States of America slowly sinks into third-world status ...