Monday, December 29, 2008

UNCLE SAM’S BAILOUT BILLIONS NOT TARGETED TO OUR HEARTHS AND HOMES

What ever happened to Uncle Sam’s goal of saving the American Dream—our hearths and homes?

Here we are with one foot into 2009, and very few dollars from the Troubled Assets Relief Program (TARP), the Bush Administration’s $700 billion bailout master plan, have made it to my block on the North Side where more home-for-sale signs are popping up every day.

If you will recall, the TARP bailout plan was designed to pump billions into three sectors of the economy—banks, troubled home loans and mortgage-backed securities.

So far, experts say most of the $350 billion in committed taxpayer dollars has been used mainly to recapitalize ailing banks. That’s why many members of Congress are howling because they thought the goal of the TARP bailout was to buy troubled assets such as foreclosed mortgages, and not pump billions of bucks into banks.

On the positive side, the Federal Reserve Board has pushed down the federal funds rate to a range of zero to 0.25 percent from 1 percent—its lowest level in history. And, benchmark 30-year-fixed home-loan rates also have tumbled to the low-5-percent range, and some Chicago developers are offering buy-down 30-year loans ranging from 4.5 percent to 4.99 percent.

So, 2009 is going to be a great time to buy a home. Too bad more banks aren’t lending to eager borrowers despite the attractive rates. Instead, weak financial institutions are hoarding cash and building their balance sheets while avoiding the risk of new loans, analysts say.

In Chicago, Trump International Hotel & Tower and several other major downtown condominium projects, including a few with more than 70 percent of the units already under contract, are seeking extensions on construction loans while they continue to market remaining residences.

Unfortunately, several well located and architecturally attractive condo towers that have posted substantial sales but have not broken ground are hard pressed to attract construction financing as lenders pull in the welcome mat, reports Appraisal Research Counselors Ltd.

Experts say if American homeowners are going to benefit from the government’s relief program, billions of TARP bailout dollars now must be targeted to reducing foreclosures.

Homeowners who are saddled with high-rate adjustable subprime loans are simply asking: Why can’t interest charges be adjusted downward to lower payments and let us stay in our homes?

If bailout dollars were pumped into these troubled home loans instead of being targeted to the recapitalizing of ailing banks, the pain of wide spread foreclosures likely would be eased and that would help boost the value of homes across the nation, economists say.

Home-loans funded by troubled mortgage-backed securities also are clogging the bleak financial pipeline. If government dollars were used to buy these securities thousands of mortgages could be refinanced.

The Fed already is accelerating the purchase of mortgage-backed securities issued by Freddie Mac and Fanny Mae, home-loan giants that earlier were seized by Uncle Sam.

With all these economic storm clouds on the horizon, President Barack Obama and his cabinet will have their hands full in 2009. Obama says he is planning to unveil a massive stimulus package when he takes office on January 20th. Let’s hope Timothy Geithner, the new U.S. Treasury secretary, covers us all with the TARP.