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The federal role in reducing the inventory of foreclosed houses currently held by lenders is as challenging as searching for the cartoon character “Waldo” in the popular puzzle game, “Searching for Waldo.” Waldo is hidden in a mass of people, places and things that are so cluttered with obstructions that finding him takes time, perseverance, and patience, lots of patience.
As a by-product of the subprime lending bust, there is such a large inventory of foreclosed properties now weighing down the nation’s economy and hampering a sustained economic rebound (some $10 billion, an estimate by the Federal Reserve Bank).
In order to discuss possible solutions to the foreclosed properties inventory problem, one must accept certain economic assumptions. Namely, that the economy is not increasing in vital sectors to sustain increased growth, and that the housing industry is being hampered by the weight of the inventory of the foreclosed properties
What I mean by comparing “Finding Waldo” to finding a solution to the foreclosed housing inventory, is that foreclosed inventories are masked by the lack of accurate, consistent information on specific properties, cluttered by needless red tape, and obstructions produced by the lack of institutional advocates and key housing industry interventions.
I must note, however, with great interest, the recent Federal Reserve Bank’s Report to Congress urging action in the housing market. The Report gives cover to the Administration and Congress and related governmental entities to move on creative actions and to support a more aggressive approach to depleting the foreclosed inventory.
From my point of view, some of the actions that should be considered are: make selling foreclosed properties by realtors easier by drastically cutting “red tape” (specific red tape ideas is for another blog but ask any realtor); providing tax incentives and discounts for investors to purchase large blocks of properties for quick resale and possible use as rentals; create a national clearinghouse and centralized disposition entity for all foreclosed properties much like the RTC, which was created during the savings and loan debacle; increase interagency coordination of resources for distressed and foreclosed properties. According to a recent Wall Street Journal Editorial (January 10, 2012) there are some 16 federal programs that are currently available throughout the federal government dealing with the distressed housing issue; and, finally there needs to be a renewed effort at housing counseling, especially if foreclosed actions start rapidly moving through the system. The human aspect of this mess should not be treated like static while searching for “Waldo.”
Frank J. Vaccarella is President of Vaccarella & Associates, Consulting, LLP
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