If you thought you were mad before....When President Obama discusses his $275 billion mortgage bailout, he talks as if it was a national problem, caused by a national decline in home prices. "We must stem the spread of foreclosures and falling home values for all Americans," he says. But there is no national market for homes and no national price for homes. Instead, most of the United States will pay for the folly of few.
The beneficiaries of taxpayer charity will be highly concentrated in just five states - California, Nevada, Arizona, Florida and Michigan. That is not because the subsidized homeowners are poor (Californians with $700,000 mortgages are not poor), but because they took on too much debt, often by refinancing in risky ways to "cash out" thousands more than the original loan. Nearly all subprime loans were for refinancing, not buying a home.
It turns out that the five states with by far the highest foreclosure rates have some things in common with each other, but very little in common with most other states.
(Main body of editorial somewhat technical, though fairly easy to understand. I won't try to excerpt it - click the link for more.)
On the contrary, federal subsidies for over-indebted homeowners will not often involve helping "neighbors" but rather those who live thousands of miles away, mainly in just five states.
In reality, the "Homeowner Affordability and Stability Plan" compels taxpayers in most states to help those in just a few. Aside from Michigan's unique dependence on autos, the other four states' problems are already being solved the old-fashioned way: If something becomes too expensive, cut the price. Or move.