Follow ‘cash for clunkers’ with dough for dwellings

This new prime mortgage foreclosure crisis has exploded in the last year. As recently as January 2008 the share of prime mortgages (adjustable and fixed-rate) in foreclosure or in serious arrears was little more than 1 percent. By the end of the first quarter of this year about 15 percent of prime adjustable-rate mortgages and about 3 percent of prime fixed-rate mortgages were in trouble.

The “cure rate” — the percentage of delinquent loans that catch up on their payments in a given month — dropped to 6.6 percent for prime loans in July from a 2000-’06 average of 45 percent, according to Fitch Ratings Ltd.

Many formerly gainfully employed homeowners are unemployed or underemployed today. Economists predict that economic recovery, whenever it comes, will be relatively jobless. There is little hope therefore that new jobs will slow prime-rate mortgage foreclosures. The $8,000 first-time homebuyers tax credit has played a major role in stabilizing the housing market recently, but it expires Dec. 1. Because it takes at least 60 to 90 days to find and settle on a home purchase, its influence in stabilizing home prices and increasing sales has largely already run its course.

It is unlikely that the financial services sector can absorb such large and growing amounts of bad debt. We believe that another collapse of housing prices will drive our economy back into a more serious recession unless Congress quickly acts. The most logical place to intercede is in the housing sector, which is where recession started and which is poised for a reversal.

There is pending federal legislation with potentially broad and deep enough economic impact to stave off this threat. The American Homeowners Grassroots Alliance has urged the chairmen and ranking minority members of the congressional tax-writing committees to quickly pass S. 1230 and H.R.1245. These bills will nearly double the 10 percent first-time homebuyer’s tax credit limit and expand the eligibility to any homebuyer. The legislation would also extend the expiring tax credit for one year and eliminate the income eligibility caps. If the homebuyers’ tax credit is expanded and extended, it could counteract the severe economic threat of the new prime mortgage crisis, continued rapid growth in foreclosures, and the serious threat that both pose to economic recovery.

Arlington, Va.

AHGA is a lobbying organization representing homeowners. It accepts no corporate or institutional funding from real estate or mortgage banking interests, though some of its individual members may work in those industries.

Legalizing drugs is not the answer

From Calvina L. Fay, executive director, Drug Free America Foundation Inc.

In response to J. Morton Davis’s “A winning healthcare solution” (July 31), an op-ed that makes an irrational attempt to solve some of America’s problems through the legalization of prostitution and drugs, I would like to correct some of his most egregious remarks. First, the fact that approximately 75 percent of children in foster care are there because of parental substance abuse does not make drug use a victimless crime.

Second, an estimated 25 percent of state and federal prisoners report committing violent offenses while being under the influence of drugs. Violent crimes include such offenses as rape/sexual assault, aggravated assault, and murder, which represent the most costly of all crimes with an estimated cost per offense ranging between $127,000 to over $8 million.

As for gambling, legal gambling fosters the business for illegal gambling — the same would hold true for legalizing drugs. Illegal drug pushers would increase their supply of more potent drugs outside of the taxation/regulation of the legal drug trade. You cannot possibly believe that organized crime cartels will just give up their multi-billion-dollar business and get legitimate jobs!

Lastly, Mr. Davis had to bring up the “P” word — prohibition.  Yes, let’s compare prohibition to drug legalization. If drugs were legalized, use would increase in a similar way to how it increased with alcohol.  In the United States today, there are approximately 127 million current alcohol users compared to the 20 million users of all illegal drugs combined.  As a society, we have suffered many negative consequences of alcohol and tobacco use because of the health risks associated with these substances. Does it really make sense to legalize more harmful drugs and put our communities in similar jeopardy?

St. Petersburg, Fla.