September 8th, 2010



Scanning... well, there aren't enough, when there are five applicants per job. And the further trick is that many jobs are in other areas of the country, and a housing policy that makes it easy to buy a house means that many people are stuck where they are, and not moving toward jobs.

And that problem is easy to fix. Several states have done it, some use other anti-deficiency rules, but the rule becomes that mortgages on residential properties are "non-recourse" -- that is, the bank is lending on the value of the property, because the property is all the bank gets if it forecloses. It would have the virtue of making the banks look harder at what they're lending on, and also free up people who need to get out of the houses they bought at the top of the market and let them go to where they can get better jobs.

Yes, putting it in would cause a loss to banks that had taken a flyer on residential property. But those who had taken a flyer on property shouldn't be banks. Buyers put money down, speculators put money down in the vast majority of these cases, and have made repairs: that money is lost (their loss rate: 100%). The bank's loss rate in the worst markets is 50%, but generally is less. Because such a change would advance national purposes (getting people back to work), as well has having national costs (FNMA would have to make up slack, and yes, that is the government), it's the kind of thing that Congress should consider carefully.

Not that I see any Congressmen thinking carefully these days. Sigh.