Paul Kanjorski, Chairman of the House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee, announced yesterday he has inserted a provision in law to require real estate appraisers to be independent and not tied to mortgage lenders or real estate agents. This is a good step forward. The overheated real estate market of the last few years resulted in many homeowners now residing in homes that aren't worth what is owed on them. These folks are "upside down" in their homes and are unable to sell them and pay off the balances of their mortgages (yes, some have multiple mortgages).
People bid up prices on homes to get their "dream house" and now they are living in a nightmare. Appraisers contributed to this by inflating the appraised value of these homes so they brokers and agents could close their deals and laugh to the bank. Now many people are in tears from the irrational exuberance which was fueled by greed and the lack of regulation.
In their desire to settle these deals apraisers were used with ties to those profiting from the deals and told what value to put on the properties so the 95% or 100% mortgages could be approved. Unfortunately people who bid well over asking prices and then borrowed that entire amount were, essentially, defrauding the banks. The banks didn't care because they packaged and sold the mortgages to securities firms who packaged them with other mortgages and traded them through unregulated hedge funds.
These financial markets have now collapsed. The repercussions are also affecting municipal bond insurers and even corporate bonds as banks teeter on the brink of collapse. Some radicals are proposing the federal seizure of banks, something which is simply insane. What we need is proper government regulation and oversight. Republicans failed miserably in this regard because of their ideopogical hatred of "big government." Every time you listen to a presidential candidate rail against "big government" and governmental intrusion in business run away as fast as you can. These are the people who are bought and paid for by greedy business interests responsible for the destruction of our economy.
Guess who winds up bailing things out after their unbridled greed drives us over the brink? You, the taxpayer. You spent over $100 billion bailing out their savings and loan debacle under Ronald Reagan. When you hear a GOP candidate worshiping at the Reagan altar remember how many of your taxes were spent bailing out the banking industry one before and how many more are going to do it again.
The CEO's have their golden parachutes and are bailing out with multi-million dollar severance packages. They aren't hurting. If your neighborhood collapses as home after home forecloses you will hurt though. Your local taxes will go up as that real estate tax base shrinks as home after home goes vacant. Paul Kanjorski is correct: none of us is an economic island, this will affect all of us and all of us must do what is necessary to fix the broken system.
Rebate checks are not the answer. Debt is what caused this mess and invoking another $150 billion in federal debt for a short term stimulus is not the solution. We have to fix the system. That means regulation and oversight.
Congressman Paul Kanjorski announcing the funds for mortgage counseling: