Georgia Has Opportunity To Demand Solutions On Housing

Today’s Courier Herald Column:

Super Tuesday will be Georgia’s brief moment on the national stage with respect to Presidential politics. Though the stage will be crowded, Georgia’s delegate count and the fact that polls show Newt Gingrich may not have his “home” state locked up should give the state its fair share of attention over the next few weeks.

During the early part of Presidential campaigns, each early state gets to make the candidates make pledges on issues that are near and dear to the hears of those state’s voters. Iowa is famous for making candidates pledge to defend ethanol subsidies. South Carolina had the contenders promising to defend a non-union Boeing plant and talk about the need for deepening Charleston harbor.

Georgia remains mired in a housing problem more than three years after the 2008 housing collapse. A new RealtyTrac survey indicates that one in 328 Georgia homes were involved in foreclosure during January alone. The Atlanta region, a leader in population and job growth for decades, has remained stagnant in both areas.

Georgians now rank dead last in financial security largely due to falling home prices and homeowners owing more than their homes are worth. An estimated 60% of homes in metro Atlanta remain “underwater”, with nearly one third of Georgia homeowners owing more than their home is worth statewide.

Georgia’s community banks are the most stressed in the nation, with Georgia losing more banks to FDIC takeover than any other state since the bust began. Federal policies that favored the largest banks appear to have penalized the smallest, with one in four Georgia banks receiving the death penalty.

Congressman Lynn Westmoreland who has held hearings on the subject of changing FDIC regulations and how loss sharing arrangements have negatively impacted Georgia’s remaining banks, would probably be a good source of information from Presidential candidates needing to understand effects of federal action and inaction at the micro level.

Georgia Attorney General Sam Olens recently announced Georgia’s share of a landmark settlement with 5 large banks, with Georgia and Georgia homeowners receiving $814 Million of a total estimated $25 Billion agreement. Georgia’s share was based on the number of mortgages originated by those five banks. Georgia is in negotiations with 9 other banks using this settlement as a pattern.

Under this settlement, some homeowners will receive principal writedowns, some will get lower interest rates, and some already foreclosed on will receive about $1,800 as a settlement, all paid for by the banks. The state will also receive about $100 Million directly to Georgia’s treasury.

But customers who took out their mortgages from these banks whose loans were underwritten by Fannie Mae or Freddie Mac are ineligible, as the state has no jurisdiction over federal entities. And once again, this illustrates why there must be a federal role in the cleanup of the current mortgage and foreclosure mess.

Candidate Mitt Romney has stated repeatedly that the market must be left alone and allowed to work, declining a federal role in addressing the problem. With more than 70% of outstanding loans held by the federal government or a government backed institution, the recent mortgage settlement demonstrates why the feds must look at how to handle the problem loans currently on the books.

Furthermore, the only reason there currently remains a mortgage market is federal programs. FHA, Fannie Mae, Freddie Mac, and the VA account for more than 80% of all mortgages currently originated. Thus, the federal government – and all rules and regulations it makes or doesn’t make – IS the current market. Stating the government must stay out of the way and let the markets work themselves out is willful ignorance of an obvious and ongoing problem.

Gingrich, for his part, has indicated that he would repeal Dodd-Frank and is open to reinstating the Glass-Steagall act, which separated FDIC insured banks from the more risky, highly leveraged investment banks. Yet most questions posed to Gingrich are not about moving forward, but about his past consulting contract as a “historian” for Freddie Mac. That ground has already been plowed, and Georgians must press for answers on how to move forward.

Santorum will likely spend his Georgia time searching for the plentiful bounty of evangelical votes. Yet if Santorum is to morph into a candidate with broad support of the party’s base and establishment, he must demonstrate a bigger range of issues. Again, understanding the causes and potential solutions of the state and nation’s housing crisis would be a good place to start.

Each of the three leading candidates will be in Georgia between Friday night and Sunday. Georgia voters as well as local press must demand specific answers that address the candidates’ outlook on how to move forward. Georgians need to hear how to restore home ownership as an individual’s largest investment, not remain their largest liability.


  1. SallyForth says:

    Good column, Charlie. Since we regular people won’t likely get to actually ask the candidates these important questions, how do we get the press to do so?

  2. gcp says:

    “This illustrates why there must be a federal role in the cleanup of the current mortgage and foreclosure mess.” They tried HAMP, HARP, Homebuyer Tax Credit and nothing worked. Romney is correct. Let the market work and get government out of the real estate business. And these FDIC banks, including some larger banks that were based on a booming real estate market should fail. Compare Regions to BB&T. Regions was heavily in residential real estate and it should have failed. BB&T was not as heavy in residential real estate and it’s done much better. No more rewarding the losers whether its “underwater” borrowers or underwater banks.

    • Charlie says:

      Please read for comprehension next time. The government “IS” this market. If you want the government out, please specify what your plan is to accomplish this, the steps it will take to unwind its current positions, the timeframe over which it will occur, the consequences to people who own property that played by the rules, and how the system will work without government assistance.

      Or, just continue to spout “government is bad”, listen to a few more hours of Neil Boortz tell anecdotes of when he was a closing attorney 30 years ago as if that’s relevant to the current situation, and continue to believe that the housing and mortgage markets are in any way, shape, or form “free”, or that the people who bought homes in good faith 5 years ago, even those with 20% down, are now “deadbeats” because their house is worth half what they paid, with values still falling.

      • gcp says:

        I realize government “IS” the market and it will continue to be the market. That’s the problem; government continues to be the market. FANNIE/FREDDIE already got over 170 billion. Where has is gone? Time to pay off the bondholders and end FANNIE/FREDDIE. For HUD owned homes, continue to sell as they do now until inventory is depleted. And please no more FHA/VA loans. “Bought their homes in good faith” If you bought your home in “ good faith” you put significant money down, you were sure you had sufficient income to pay the mortgage and you did not buy beyond your means. In that case you stay where you are and don’t “short sale” simply so you can get out of your obligation. A home is a place to live, not an ATM, piggybank that you borrow from, or stock that you can buy/sell quickly and make a lot of money. I realize politicians and some unscrupulous business folks encouraged this market but that does not excuse individual decisions. Boortz? I quit listening to that guy in the nineties for a lot of reasons.

        • seenbetrdayz says:


          The days of homes being even being considered quick-flip investements are gone. But there are multitudes of people trying to bring those days back, and at a great expense. It has come to the point where there is so much government involvement in the housing market that it is nearly impossible for the government to assist one group of people without demanding sacrifices of others.

          For example, I ALSO played by the rules. Unfortunately, I played by the rules which dictated that a person should save their money before taking on huge expenses. Unfortunately, that’s a foolish way to survive in an economy like the bastardized one we have today. So, I rented for a while, and now I’m back living at mom’s home (yeah it sucks, but hopefully a nursing degree will help when I’m finished). Home ownership is a distant dream for me, and not because I won’t work for it, but because I’m one of the few who will, and there are no rewards for us in the system we have today. Gotta help those over-mortgaged folks first; which of course hurts those who are searching for homes. Like I said, there’s so much intervention at this point that the government can’t actually help one group without hurting another. (let’s be honest, the government doesn’t give a sh** about homeowners; they’re there to help the banks and the realtors who have money, and if they can dupe some of us little people into thinking we’re being helped too, then that’s just icing on the cake for them)

          I think ultimately the government WILL get out of the housing market, and it will be very ugly when it happens, because it will happen when Uncle Sam’s checks start bouncing and people are going to be blindsided.

          The excuse continues to be that since there is already government involvement, we need continued government involvement. —And we wonder why these things happen over and over again.

          If you’re being hung with a noose, cut the rope. Don’t worry about the fall. You’re being hung!

  3. OleDirtyBarrister says:

    How about we start by flogging the developers, builders, buyers, mortgage brokers, underwriting lenders, secondary buyers, ratings agencies, investment banks, Fannie and Freddie execs, and politicians that all combined efforts to create the damn mess? Do we know anyone around here that might be due a turn at the whipping post?

    Zeal for government involvement in housing was a large component of the problem, and to ignore that is to engage in willful ignorance. A future real estate market with less federal govt is more desirable than one with persistent fed involvement. Fannie and Freddie et al were so bug before the collapse that they were term setters for the marketplace–when politicians pushed them to adopt stupid practices like lo doc liar loans with interest only reverse amort others in the market would do it to keep up with the competitive forces in the market.

    The Congress critter commission sometime back recommended eliminating the deductibility of interest expense as part of tax reform. That would be painful and foolish. Tax policy effects real estate, just look at what happened after Tax Reform in 1986.

    The private sector is using institutional money to buy distressed real estate and re-sell it to consumers with seller financing. There is concern about the reach of Dodd-Frank Act. That legislation needs to be pared down because it went too far and is adversely affecting bank credit for smaller businesses. Big companies can still get credit from capital markets and big lenders. There is a big disparity.

    The credit rating culpability in the mess is still unvindicated and the barriers have not been sufficiently removed to allow entities like Egan Jones to emerge and compete with S&P, Moody. and Fitch.

    The writing above does not account for stupidity in banking in GA. The bankers were lazy and sat back taking the A&D loans that came to them and were easier than going out and hustling business among a variety of businesses. They became almost entirely reliant on real estate at their peril, and ignored all the other hard earned lessons in banking and real estate.

    Ultimately, time, and improved economy, and absorption are the things that are going to fix real estate values.

    • seenbetrdayz says:

      How about we start by flogging the developers, builders, buyers, mortgage brokers, underwriting lenders, secondary buyers, ratings agencies, investment banks, Fannie and Freddie execs, and politicians that all combined efforts to create the damn mess?

      I wish. Unfortunately, we’re going to ask them to fix the mess they created, first. Which means, it’ll get worse. It’s like being pick-pocketed, and asking the thief how he did it, and having him show you, and getting robbed again . . . and then being surprised that it happened again. Duh.

  4. SallyForth says:

    Good discussion, guys – glad I’m home sick this afternoon, with time to cruise P/P. To my original question, do any of you have suggestions for how we get the candidates to address the problem, see if they have any new ideas about this quagmire?

  5. saltycracker says:

    Expectations that our stocks, cars, boats, homes will appreciate to dollars and/or provide pride of ownership is what brokers and salespeople are all about. They were seduced with easy money.

    The abandonment of sound lending principals and responsible ratings when more money became available than borrowers will not be an easy mess to clean up.

    Fannie/Freddie should set refi rates at 4% for those paying their upside down mortgages faithfully.
    From a recent Fortune article: A mass mortgage refi solution is getting support from both sides of the political aisle. And it wouldn’t cost taxpayers a dime.

    For the non-performing assets the banks are sitting on, give the banks a scheduled increase of the interest to borrow money from the Feds and they will begin to take action. It can be closely monitored to watch potential failures.

    Right now the preferred course of action for banks is to sit on them with the cheap money and for both banks & debtors to use all influence to get the legislators to come up with a solution with other people’s money – taxpayers.

    Piecemeal legislation with selective beneficiaries of taxpayer monies increases the gulf between winners and loosers, increases public debt and drags out the recovery.

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