How About a Bailout for Homeless People?

Financial Bailout of the Banks

Wow, what a week. While we have been out registering and encouraging homeless people to vote this week, it seems as though our financial system crumbled. What are we going to do with all these “toxic assets” in our community? I have a great idea: how about ending homelessness in America, by placing homeless people into these places as soon as they are vacated in order to keep them from depreciating and transitioning former home owners into renters while these assets are in the hands of the US government? What is toxic to a banker is gold to a person living in a shelter. My big worry is that this happened so quickly that it will create a large number of unintended consequences which will hurt poor people.

My biggest concern is that banks will have no incentive to refinance these loans and it will accelerate the foreclosure crisis. I mean, a bank may get only 50 cents on the dollar from the federal government, but they may be spooked by this crisis to take a sure thing from the feds rather than hope that the current homeowner will be able to pay a restructured loan. There will be a great deal of pressure to get rid of potentially bad assets from the balance sheet. I fear that some of these households may be able to pay at a lower interest rate, but will not have that opportunity in the rush to show an improved bottom line by banks.

The other concern is that once the property is owned by the federal government it is difficult or impossible for the municipal government to enforce local housing code violations. A property cannot be turned over to the municipality until it sits for six months. By that time, it has depreciated to the point that it is nearly worthless in the City of Cleveland. We need to press the Treasury and the federal government to keep homeowners in place and move those in need of housing into some of these vacant properties.

Brian
Posts by Northeast Ohio Coalition for the Homeless staff and Board.