Although unfortunate, it should surprise no one that the government will do absolutely nothing to provide help directly to homeowners in trouble with their mortgages. They do not have the authority to do so under our system of government, but that has never stopped them in the past. No, this is due to the problem of spending public money on public projects, instead of corporate welfare schemes. So there will be no answers from Washington on how to use tax money to keep people in their homes. Foreclosures will keep increasing.
Congress will pass a few token pieces of legislation that are said to help homeowners while actually helping banks enrich themselves while impoverishing homeowners. Hope Now and Project Lifeline are completely voluntary for the banks to participate in. The new proposed $7,000 tax credit for buying foreclosed homes will go to banks who purchase properties at sheriff sales and get $7,000 for stealing millions of homes from people. All of these plans were sold to the people as helping them stop foreclosure and combating the foreclosure crisis.
In the meantime, while Congress debates what to do with homeowners and what bill will "go far enough," they will quietly be giving bailouts to the banks, paid for by the people in foreclosure and the rest of us. The Fed has already provided hundreds of billions of dollars to mortgage lenders and other banks exposed to the mortgage crisis so that they do not go out of business. This stealing from the people, though, goes largely unmentioned in the media, and people do not put together rising prices at the grocery store and gas pump with purchasing power being stolen from them by the elected officials.
But it really should not amaze anyone with a small amount of common sense that creating hundreds of billions of dollars out of nothing will debase the currency and prices will begin to rise. Well, prices are already rising and have been for years, but they will continue to rise and do so even quicker. Food and energy will become more expensive as the dollar sacrifices its value in order to keep banks healthier for a short while longer.
By bailing out banks, two more things will happen with long-term effects in the economy. First, the debasement of the currency will mean it takes more dollars to provide for one's family and oneself. More money being spent on groceries and gas to get to work means less money available for the mortgage payment. One small hardship and even more people will be in foreclosure, which will be used as another excuse for the Fed to steal more money and Congress to debate more about what not to do.
Second, if the banks know they will be bailed out by the Federal Reserve (and they have been bailed out of every financial crisis like Mexico in the 1990's, the Asian crisis in 1997, etc.), there will be less incentive for them to work with homeowners to stop foreclosure on a voluntary basis. Why bother spending money on programs, when you can sit back and complain about defaults and get free money stolen straight from the people you are stealing homes from? Working with homeowners is hard -- stealing their purchasing power turns out to be quite easy.
Inflation, currency debasement, moral hazard for the banks, ineptness in Congress, and national bankruptcy will all contribute to more foreclosures in the short-term and the long-run. People who have mortgages much higher than the values of their homes may decide to give up on them, rather than trying to pay them off. The artificially manufactured and preserved suburbs may turn out to be the new ghost towns of the mid and late twenty-first century, unless communities come up with better plans. So maybe the current foreclosure crisis will only result in a long-term financial collapse in the real estate market.