No Government assistance to homebuilders–Letter to LA Times

 

There is no way that I will support government assistance to home builders. Let me give you some reasons why.
 
First, there is a glut of homes on the market already. This inventory, mainly of foreclosed houses(many never lived in), will take several years to clear away.  The last thing we need is more new homes fueled by taxpayer funded projects.
 
We do need infrastructure, we do not need more houses. Also, it was builders who shouldered a major part of the blame for the housing bust. Let me explain why. We purchased two new homes, two years apart, from a large national builder operating in the Las Vegas area.
 
This builder today has pulled in its horns in the Las Vegas area–not much is being done by them at all. Let me first say that this builder produces a fine quality home, and has an excellent customer service organization. That being said,  they are presently sitting atop a billion dollars in cash, and in my opinion helped to fuel the overbuilt nature of the market by overselling to investors.
 
This same builder also, in my opinion, contributed to the mortgage default crisis in the housing market. This is the way that happened. The builder owned its own lending entity, and financed many of  the houses that it built through its captive mortgage entity. The builder offered buyers major incentives to finance their house purchases through this captive lender that the builder owned. Many of these loans were made to investors who never would occupy these homes, and the terms of the loans were usually very favorable, low initial interest, with increases later in the interest rates–creative loans.
 
Shortly after closing, the loan was offloaded to another lending institution for servicing.  The builder received its money right away, leaving the servicing institution with the liability for collecting payments against the mortgage.  Shortly afterward many of the loans went into default–these today make up a part of the "toxic" paper that is flowing throughout the mortgage market.
 
There is no place in my opinion for any home builder to receive one dime of taxpayer money–not only is this an inequitable outcome, it would unduly exacerbate the very problems that we face in the current housing market crisis.
 
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