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While the Senate has fast-tracked legislation that would offer assistance to thousands of families in danger of foreclosure, local bloggers and self-proclaimed housing nerds are putting up a fight.
Garnering thousands of supporters across the nation, some bloggers have launched a campaign based on a moral argument that irresponsible borrowers should not receive taxpayer-funded aid.
"A major issue is the equitability of it all. Someone can get a cash-out (refinance), buy a boat with the money and then get his principal written down," said Rich Toscano, a financial adviser with Pacific Capital Associates in San Diego and founder of the housing analysis blog piggington.com.
And Toscano is far from alone. His blog links to another site that aggregates like-minded dissidents under the tell-all name; stopthehousingbailout.com.
So far, it links to 35 blogs against legislation aimed at helping families facing foreclosure.
For now, it looks like the bloggers are losing the fight.
Several senators have vowed to get the legislation to the president's desk by July 4. Still, President Bush has threatened to veto the bill.
The legislation allows for a government agency to insure up to $300 billion in loans that would reduce the amount cash-strapped borrowers would have to pay, as well as broadening counseling programs and allocating $4 billion to communities to buy up foreclosed properties.
Along with the bloggers, some North County politicians have not been keen on other versions of foreclosure assistance legislation. Reps. Duncan Hunter, R-El Cajon, Darrell Issa, R-Vista, and Brian Bilbray, R-Solana Beach, all voted against a predecessor to the Senate bill.
"It's not just bailing out irresponsible borrowers, it's also bailing out irresponsible lenders," Bilbray said. "That's a big one. You don't want to put the burden on those of us who have been responsible and didn't bite off more than we can chew."
On the other side of the argument are local housing advocates. They argue that lenders would need to take significant losses, so the bill would not count as a bailout. Further, they say, something needs to be done to save thousands of families from entering foreclosure and further deteriorating the local housing market.
"We're seeing a lot of people who are a good case for a fixed-rate mortgage and are willing to take a renewed responsibility," said Sue Reynolds, executive director of Community HousingWorks, a San Diego nonprofit that counsels families facing foreclosure. "They're good risks, and if they stay in their homes, we'll put a tourniquet around the hemorrhaging in the market right now."
Let the bleeding continue, bloggers say. For some, recent massive home-price declines have been a boon, making homes more affordable. Allowing home prices to fall is key to reviving a healthy market, they argue.
San Diego County homes are down 28 percent from a peak in November 2005, according to a recent report by Standard & Poor's Case-Shiller Home Price Index.
"It (the housing legislation) directly harms us in a big way," said Patrick Killelea, the San Francisco founder of housing blog patrick.net. "We've been waiting for years for affordable prices, and they're saying, 'If you made a really bad financial choice, not only are we going to pay for it, but we're also going to keep prices high.' "
He said his site regularly gets 15,000 hits a day. He said he is used to policymakers not listening. Killelea, as well as Toscano, predicted home prices would tumble more than a year before they started to dip.
Killelea, and others, argue that portions of the bill would prop up artificially high home prices.
Beyond keeping families in homes, the $4 billion fund could allow state and local governments to purchase foreclosed homes. Therefore, the bill would theoretically increase demand for housing.
In addition to preventing a correction, bloggers argue that the legislation might encourage poor financial behavior.
"I've got no problem with profiting. People who take smart risks deserve to prosper, and people who take bad risks deserve to fail," Toscano said. "If you short-circuit that feedback system, it really threatens a smart capitalist system that encourages a smart allocation of resources."
Further incensing visitors of stopthehousingbailout.com is the sentiment that bank lobbyists have crafted the legislation -- an opinion fueled in part by revelations of favorable loans for the senators who authored the bill.
And at least one economist agrees that the legislation is favorable for the banking industry though lenders will have to eat losses on the mortgages.
"It's kind of a joke to say they're taking a haircut. They're acknowledging a loss they would have had to take anyway," said Dean Baker, co-director of the Center for Economic and Policy Research, a Washington, D.C., think tank.
Though the Senate appears poised to push through the foreclosure prevention legislation, the opposition says all has not been lost.
Baker will continue to push for his "own-to-rent" proposal that would allow a homeowner to remain in the house as a long-term tenant. And the Los Angeles founder of stopthehousingbailout.com, Morgan Ward Doran, expects many more bailouts coming soon that will require his fervent opposition.
Further, Ward Doran feels he has played a role in toning down the legislation's language.
"There's a spectrum of win-lose. It's not like the Celtics winning Game 6," he said. "It's an ongoing battle, and this is somewhere in the middle. It's probably closer to the lose, but we've had an effect."
To see more of the North County Times, or to subscribe to the newspaper, go to http://www.nctimes.com. Copyright (c) 2008, North County Times, Escondido, Calif. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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