Doug Smith has a good piece over at Naked Capitalism about the $88 million budget cut for HUD housing counselors, calling it “a stiletto in the back of sane housing markets”:
Do the math. The market has too much supply and too little demand. The trends point to even worse un-affordability down the road – meaning more supply and less demand. So, as said, even the empirically wrong-headed extend and pretend strategy requires efforts aimed at reversing instead of exacerbating this picture.
Among other things, reduced housing supply means, as Yves has repeatedly pointed out, doing principal modifications that are actually affordable – which, in turn, requires a new, separate underwriting effort. And, the same applies on the demand side: only careful underwriting leads to affordable, sustainable purchases – and the asset values that go with that.
The banks do not know how to do this work. Nor, as long as they seek usurious rents, will they ever learn.
But non-profit affordable housing groups do know how to do this work. They know how to prepare people to buy homes that will remain affordable. They know how to help people find affordable solutions to avoiding foreclosure and staying in homes. And, finally, the dedicated, professional foreclosure counselors know how to help people who cannot afford to stay accept that reality and find the most humane route out of their homes.
Efficiency, as we’ve come to learn, is not part of the efficient market hypothesis. Unsustainable and predatory returns grounded in ignoring the balance sheet not to mention tail and even non-tail risks – yes, those are part of the efficient market hypothesis. But efficiency itself? Not so much.
But the self-serving proponents of this false theory remain in control. So, instead of rational, efficient capital finding its way to high performing organizations who know how to prepare and underwrite home ownership that avoids a plague of delinquency and foreclosure, our purveyors of capital prefer the casino, come what may. As a result, high performing groups like the excellent non-profit housing counselors –groups with strong track records of low delinquency and foreclosure — depend on government funding and private charity. Yet, the grown ups in government now stupidly endanger many of these groups instead of providing even more support for their economy-saving efforts. It is an upside down world.
Apologists for Obama and the Congress often speak soberly about taking scalpels to budgets as part of shared sacrifice and tough decisions. In this as so many other cases, that is arrogant and ignorant nonsense. These decisions affecting less than one one-thousandth of one percent of the federal budget are not ‘tough’ – at least on those who make them. Which means there’s nothing shared by the decision makers in the sacrifices that will now get worse. Finally, these are most certainly not scalpels. They are stilettos in the backs of everyday Americans and the people of good performing organizations who serve them — who see and treat them as customers instead of income-and-asset targets to be strip-mined. But, then, the ill-got profits from strip mining are more likely than the meager, shrinking resources of everyday consumers to find their way into the political war chests of a post-Citizens United oligarchy.