Have you ever wondered why you’re allowed to deduct your mortgage interest on your taxes? It’s not very hard to figure out. Realtors have great lobbyists in Washington. Of course, there’s the argument that encouraging home ownership is good for the economy. Tell that to the National Apartment Association. In its perfect world everyone would be renting. If everyone were renting then apartment construction would be booming.
Ah, but then you wouldn’t be living the American Dream. The American Dream has been sold to us as home ownership. The insinuation is anything less is the American Nightmare. That’s how we find ourselves in the middle of perhaps the largest real estate bailout in our nation’s history.
Don’t get me wrong. I very much look forward to my mortgage deduction each year. Any time the government lets me keep more of my money you’ll get no argument from me. But, I’ve been paying my mortgages on time. I was offered an adjustable rate at one point and I did the math. I figured I couldn’t afford the mortgage if it topped out so I chose a conventional fixed rate. Now those who didn’t choose as wisely are being given a second chance.
The new housing rescue bill just passed by Congress and signed by President Bush, in short, rewards stupid behavior. This new bill helps up to 400,000 people at risk of losing their homes. The government is stepping in to guarantee the loans of at-risk mortgage holders but the lenders have the discretion of being able to keep the better mortgages and throw the dogs to the government. If these people weren’t going to repay the lenders, what makes us think they’ll repay us?
Part of the bill gives a tax incentive to first-time buyers. This sounds all warm and fuzzy, but it seems to me we should be making it a little more difficult for people to buy, rather than easier. The reason we’re in this mess is because we lowered the standards and allowed too many people to buy houses who had no business owning them. I’ve read stories of homeowners who were six or eight months behind on their payments before they answered any of the inquiries from the mortgage company. I can’t imagine missing one payment without communicating with my lender, much less six or eight.
What happened to the days of living in an apartment for several years until you saved enough for a down payment on a house? In our microwave world we don’t want to wait. However, waiting separates the responsible from the irresponsible. Some people will never save enough for a down payment no matter how long they rent. I suspect they make up a large portion of those who are now going to benefit from this bill.
We hear a lot about the bill stabilizing the real estate market. The real estate market is stabilizing itself. Newscasters gloomily report that housing prices are down. Can you imagine the same dire tone taken with news that grocery prices are coming down or gas prices are dropping? If home prices are coming down that means more people will be able to afford one. Foreclosures mean more bargains. It’s the way the real estate industry cleanses itself. It’s not all bad if we learn our lesson from it. Sadly, Congress and Bush are dooming us to repeat it.
Phil Valentine is an author and nationally syndicated radio talk show host with Westwood One. For more of his commentary and articles, visit philvalentine.com.
