Last week, a proposal was placed before the Michigan state Legislature to implement a 90-day moratorium on residential foreclosures. The focus of the legislation is strictly on delaying foreclosure procedures – it does not take into account the systemic problems facing that state, especially the new round of layoffs in the automotive industry.
Last week also saw a proposal offered by New York City Mayor Michael Bloomberg to spend $45 million to retrain investment bankers and other Wall Street professionals who found themselves out of work when the financial services industry collapsed. The Bloomberg plan is designed to attract financial services companies from overseas to open New York offices and to encourage entrepreneurial endeavors from those currently without job prospects. However, the Bloomberg plan does not take into account the housing problems facing the unemployed Wall Street crowd – and that's not easy to overlook when you consider a recent survey by the Center for an Urban Future determined the average New Yorker needs to earn $123,322 a year just to be considered middle class.
Both plans, on their own merits, deserve some degree of praise. Michigan's housing crisis is at red alert – the January foreclosure rate for the state's Oakland County, which encompasses the Detroit metropolitan area, increased 102% from the same month a year earlier. New York is expected to see the loss of 65,000 Wall Street-related jobs, which will have an incalculable damage on the city's revenue stream for years to come.
Yet the politicians in Michigan and the mayor of New York are overlooking the obvious: Housing and economic development are not standalone issues anymore. People cannot keep their homes if they don't have jobs, and in today's crisis environment, it makes no sense to keep these issues separate.
In many ways, both locations have been problem spots that were never properly addressed. Michigan's economy has been in decline for years, and belated attempts to attract new industries, such as renewable energy manufacturing, have never truly taken root. New York, for its part, has ignored the issue of affordable housing for decades – according to the Center for an Urban Future, the average rent in New York is $2,800 a month!
If the cities and states are going to move out of the ongoing miasma, there needs to be a fuller plan that addresses the proverbial bigger picture. Foreclosure moratoriums are not effective if homeowners find themselves in the same financial situation 90 days from the start of the freeze – especially if those homeowners are out of work. That may have worked last year, before the huge layoffs started to convulse the country, but in today's environment, another answer is desperately needed.
For their part, many companies in the financial services industry are voluntarily hitting the brakes on foreclosures – PNC Financial Services Group, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo have already announced their own foreclosure moratoriums. Michigan's Independent Bank also joined this wave last week, which will clearly provide a reprieve for its local borrowers.
Now it is time for state and local governments to come up with solutions that will address their distinctive needs. It is incumbent for our industry to weigh in on these measures, since a vibrant housing market is crucial to any healthy economy. The piecemeal examples we are seeing in Michigan and New York are inadequate for their specific challenges – something more is needed, and quickly.
– Phil Hall, editor, Secondary Marketing Executive.
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