Charlotte city councilman James Mitchell is out of his mind for suggesting that local taxpayers attempt to bailout bad real estate deals. There is absolutely no upside to that — for anyone.
If there are people in homes they have no hope of being able to afford, then they need to get into a situation they can afford — not become wards of the state. Or city, in this case.
And let’s be honest, the bailout would benefit the builders, brokers, and banks — not so much the people currently in the homes. There is a market-clearing price for these assets. Banks could go to borrowers on these under-water homes and level with them.
“Look, we know we lent you $154,000 for a $155,000 home and you have no hope of paying that back. Plus the house is probably worth about $70,000. How about we keep the title and you try and pay us back $50,000?”
Ugly. But honest. However, if the banks opt for foreclosure, that’s on them. They get the house and all that comes with it. Johnny, tell them what they’ve won.
It is bad enough we have the federal government trying to actively short-circuit the real estate correction with a bat-guano insane mortgage-rate freeze idea. The last thing we need is local governments trying to use scarce public dollars to prop up bad real estate deals.
Do not forget that it was the banks who got into this mess by lending money to people who — the available evidence suggested — were at risk for going into foreclosure. Now that that is happening, no one should be tempted to let the banks off the hook.
Bonus Observation: If Mitchell and his fellow council-people were interested in getting ahead of this process instead of pandering, they would start right now — today — identifying items in the city budget which could be cut or eliminated. Should property tax revenues be destined to take a hit as a result of the real estate correction — and I think it very possible — we need to be prepared for that.
