At the peak of the housing bubble, a number of reality shows appeared on cable television that featured real-estate speculators who bought distressed properties and made enough improvements to sell them quickly at a sharp profit.
Called “flipping,” the entertainment industry glamorized the quick-profit practice that helped fuel a spectacular rise in housing values – and made the crash worse than it otherwise might have been. Flipping has since become a reviled practice, a symptom of an irrational and irresponsible market, not to mention the negative political connotations of speculators in general as gas prices rise rapidly yet again.
So why has the Obama administration decided to bail out the speculators in his latest iteration of a housing policy? Bloomberg reports that the White House, obviously frustrated with the lack of success from their Home Affordable Modification Program (HAMP), has expanded the latter to include real estate consortiums for the first time.
This coming May, owners can apply for relief for up to four mortgages by either having the loans restructured or principals reduced with taxpayer subsidies to sweeten the deal for lenders. This represents a sharp change from the Obama administration’s original political justification for continuing intervention in housing markets, which rested on the need to reduce the pain felt by Main Street after having spent so much bailing out Wall Street.
What is the new rationale? Timothy Massad, Assistant Treasury Secretary for Financial Stability, told Bloomberg that the White House now wants to take a neutral view on owner profiles in favor of a policy that focuses on reducing vacancies. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.” Perhaps that may be the publicly offered reason, but the likely motive is the continual drop in home values – and the desire to position Obama as the man who “fixed” the housing crisis in the next election.