BLOG VIEW: A Handout Or A Necessity?

Written by John Clapp
on December 04, 2008 No Comments
Categories : Blog View

No more than three weeks ago, a new billboard popped up alongside a road that I routinely travel. I'm usually pretty skilled at ignoring these giant advertisements, as I'm generally happy with my cell phone service, more or less pleased with my car insurance, and constantly appalled by – but acceptant of – my heating bill.

What drew my attention to this particular ad, however, was its simplicity. The bright, neon-green billboard states the following: "Foreclosure affects the whole family." Beneath that is the now-familiar HOPE NOW phone number and, in the corner, the NeighborWorks America logo.

I realized then that despite reading about foreclosure prevention efforts on a daily basis, I had never seen any such examples in my hometown. I live in a small Connecticut city, and my local paper rarely runs stories about foreclosure that have any kind of regional focus (although that changed with news of Gov. Jodi Rell's recent proposal for a foreclosure moratorium).

The presence of NeighborWorks' billboard on one of my city's busiest roads was a welcome sight. That changed, however, in a period of about four days. That's how long it took for a local hooligan to spray paint the board, tagging it with an indecipherable symbol. This got me wondering: Why would this new, snazzy-looking sign receive this harsh treatment, when other nearby billboards were left unharmed?

Sure, the first guess as to why NeighborWorks was targeted is because the sign was, in fact, bright and snazzy and eye-catching. Is it possible, though, that the mischievous artist committed the act to make a statement? Perhaps in opposition to preventing foreclosures?

It seems more than a little unlikely that the graffiti was inspired by a staunch protest against loan modifications. But upon further consideration, I have not ruled it out.

When it comes to "bailing out" noncurrent borrowers via loan modifications, opinions vary widely. A quick scan of foreclosure-related news items and message boards will illustrate this point.

"I wish I would have known about these "modifications' a couple of years ago," reads a comment beneath a recent Wall Street Journal article. "I would have bought a house, too, if I would have known someone would come along and modify it so I could afford it even more."

"Screw this crap," wrote another commenter. "Now I'll have to stop paying my mortgage, so I can get back the tax money these irresponsible fools STOLE from me with the help of their pal "Uncle Sam.'"

There is, of course, a large segment of the population that feels this way. Aiding borrowers who have ill-fitting mortgages does inarguably present a moral hazard. If a precedent's been set allowing borrowers to fall behind and then receive a handout, what's to stop borrowers from taking that into consideration when they shop for a mortgage in the future?

The blame game has been in play for well over a year now, and the general consensus is that blame can be spread all around. There were borrowers who knew what they were getting into and were hoping to flip a property before values tanked, and there were uninformed borrowers who were targeted by predatory lending. Because there are many parties to blame, is it any wonder that any proposed solution to our current mess will be met by at least some criticism?

To this extent, I think there is one message that loan mod advocates have been unsuccessful in conveying to the general public: If your neighbor's house is foreclosed, the value of your home will drop, plain and simple.

Perhaps no one has vocalized this point as succinctly as Federal Deposit Insurance Corp. Chairwoman Sheila Bair did in her interview with NPR last month.

‘I think that I would say to those neighbors â�¦ I want my neighbor's mortgage fixed because, yes, I do have some compassion for that person, but I also realize that it's in my economic self-interest to get this situation stabilized," Bair said. "This relentless procession of foreclosures is creating havoc with our housing market, and we need to get it stabilized.’

Bair's message is one worth repeating, and it's a message that is supported by plenty of research. If I ever get a chance to chat with the person responsible for defacing the NeighborWorks billboard, at least I know what I'm going to tell them.

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