Regulators in various states have hit upon a new idea for helping out underwater homeowners, and as best we can understand it, the idea is basically to turn it into a lottery.
Louise Story at the New York Times describes a single street in Arizona where various homeowners have found themselves in various states of financial disarray. Some folks are completely in over their heads. Others are still making payments. All are suffering to varying degrees.
Who will get aid from the government is basically being left up to the judgment of one guy:
Under a new, federally financed pilot program for the hardest-hit housing markets, state officials will decide who will get a homeowner bailout, and who will not.
The idea is as controversial in Washington as it is here. Do the neighbours next door who lived beyond their means — the ones who, say, bought that house they could not afford, or who binged on home equity loans to buy new cars and flat-panel TVs — really deserve to be bailed out with taxpayer dollars? Do they deserve to have some of their debts forgiven? And is that fair to the cautious ones who paid their mortgages?
For the people of Cave Creek, the answers will fall to state officials like Michael Trailor, the director of the Arizona housing department.
The program is only happening in Florida, Arizona, California, Michigan, and Nevada (all so-called “swing” states, with the exception of Arizona), and in sum it’s just $1.5 billion, so we’re not talking a huge amount. But it’s a pilot program, and so perhaps it could expand to where homeowners in more states basically have their fate tied to one top regulator who decides who wins and who loses. It’s not any worse than most of the other ideas we’ve heard.