Editor's Notes: Housing crisis creates desperation, some opportunity

The worst economic conditions in more than 30 years have created chaos for thousands of homeowners and opportunity for hundreds of investors to swoop in and buy empty homes at an extreme discount.

With a Republican in the White House, homeowners who fall behind on payments face little compassion and find few allies willing to fight for their cause. President Bush seemingly would rather see homeowners evicted than use his political clout to force his friends in the banking industry to rewrite loans, lower interest rates and save millions of lives from financial ruin.

Bush and Arizona Sen. John McCain, the likely GOP presidential nominee, think a “market correction” — basically forcing people from their homes into lower-price housing — somehow will help the economy rebound.

A foreclosure forum Saturday at the Tucson Convention Center was one of the saddest sights I’ve seen in 30 years as a journalist. Somehow, I knew I would not see McCain or any of his representatives in attendance.

The atrium near the Turquoise Room was filled with desperate homeowners waiting to discuss loans and refinancing with lenders. Many were 30 or 60 days behind on payments. They’re prime candidates for foreclosure instead of refinancing because of poor credit scores.

Dozens asked so-called experts about their situations, wondering why banks would rather repossess their homes than rewrite mortgages to bring them current. Foreclosures cost banks thousands of dollars. They should assign the risk to the homeowner instead of their stockholders by rolling overdue payments back into the principal.

Banks and other lenders made bad loans to sell houses and collect billions from high interest rates. They cheated homeowners who tapped into home equity by setting them up with high adjustable rates and by charging them outrageous loan origination fees. Stories of homeowners being promised no closing costs, only to be hit with last-second fees at closing when they could not afford to pull out, are legendary.

If you and I bilked friends or neighbors out of thousands of dollars, we’d go to jail. Unfortunately, I have heard of no push to investigate the unseemly banking practices of some lenders.

On the other end of the spectrum, speculators and investors were out in droves Saturday afternoon in Green Valley. A local builder, Hughes Development, was having trouble moving inventory. It decided to auction nine homes, with bidding ranging from $152,000-$192,000 for Las Campanas Village homes that would have fetched $270,000 two years ago. Savvy buyers walked away with incredible bargains.

Certainly, I have no problem with entrepreneurs taking risks and expecting rewards. It’s the American way. Foreclosure bus tours are now all the rage. I just hope the market rebounds quickly for the seller's and the buyer's sake.

The contrast between haves and have nots are as stark as during the Great Depression, when Republican President Herbert Hoover's inaction paved the way for Big Government. Democrat Franklin Roosevelt was elected and led this country through its most challenging moments since the Civil War.

In ignoring the plight of millions, Hoover and the Republicans delayed recovery and destroyed the party for decades. With the approach of Bush and McCain, I see the GOP heading down a similar path to self destruction. They cannot afford stay above the fray and adhere to a set of principles that ignore the misfortunes of the middle and lower class.

McCain reminded me of Hoover when he was in California last week, talking about the housing crisis.

“I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers,” McCain said. “Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.”

Wrong answer. McCain has difficulty connecting with ordinary folks on economic issues. This crisis is about saving the financial future for a generation. Big banks will nickle and dime customers with higher service fees and higher interest rates. The pain for them will subside quickly.

To solve the crisis, the federal government should focus on stabilizing families, not just financial institutions. Congress should move quickly to establish a 90-day moratorium on foreclosures. States should be loaned money to help homeowners avoid default. Adjustable-rate mortgages should be frozen at their lowest rates for at least three years.

One other aspect really bothers me about the crisis. Who’s being an advocate for homeowners? Lenders can foreclose with a decision made by an accountant in some back room. I wish a legislator would introduce a bill requiring a court hearing before anyone could be thrown out of his home. If judges can hear thousands of traffic cases per month and oversee hundreds of bankruptcy cases, why can’t they ensure homeowner rights by reviewing foreclosures on a case-by-case basis?

Bush, McCain and other lawmakers should have seen the sad eyes and tired faces Saturday at the foreclosure wake. It was distressing for some and overwhelming for others.

This country’s greatness depends on how well we protect the weakest and most vulnerable. Politicians will continue to turn their backs on the afflicted at their own peril.

Contact Editor James Bennett at jbennett@gvnews.com. Respond by e-mailing letters@gvnews.com. Comment online at www.gvnews.com.