Freezing in NH

There’s an interesting article on Slate: The Case for Foreclosures: One Family’s Sorrow is Another’s Joy.

If you’re facing foreclosure, Treasury Secretary Henry Paulson wants to help. “If someone is willing to make a call to reach out,” says Paulson, “there’s a chance we can save their homes.” But Paulson can’t save these homes because the homes are not endangered in the first place. They stand to change hands, not to vanish.

None of these foreclosed houses is going to disappear. After a foreclosure, one family moves out, and another moves in. We see the sad faces of the people moving out, but we don’t as often see the happy faces of the new homeowners moving in. Nevertheless, those happy faces are out there, and we should not discount them.

I kind of want to quote the whole article, it’s worth reading.  And there’s a point that’s not really made in the article that I’ve been thinking about.  My thesis is thus: The bottom of the housing market is a relatively fixed place, where all the people who can’t afford a house have been tossed out, and the rest of the people feel that things are stabilized enough to get back into the market and buy a house.  Since I think this point is a fixed value, I think it’s better to get it over quickly like ripping off a band-aid.  Let the banks foreclose on everyone who can’t make payments, sell those houses at auction, let the auction determine the new price, and move on.   The longer we sit in this place of uncertainty, the longer it will take to get people moving and buying houses again.

One of the few things that’s been proposed that I actually agree with is the plan to freeze payments for people who can afford their house at the current payment level and cannot if it increases.  I think it makes sense for the banks, since at this point foreclosing is probably not going to bring in any extra cash.  Folks have gotten HELs and such and have little if any equity, so the bank should prefer a person in the house making payments to an empty house they can’t get rid of.  But these are the folks that banks have always been fairly willing to work with, if only they contact the bank before they stop paying.   I must admit feeling a little jealous since my loan will eventually adjust (7/1 ARM here) but I will be able to make the increased payments, and the fewer houses in foreclosure around me, the better.