Times Redefines "Homeowner"

No matter how hard you ignore them, unsigned newspaper editorials just linger on: regurgitating factoids, disgracing the newspapers they appear in, falsely claiming to speak on behalf of institutions that are themselves no longer coherent, vanishing unmourned up the cavernous wazoo of their own stare decisis, but somehow appearing again the next day, unbidden, unwelcome, unread.

Before "Foreclosures: No End in Sight," one of today's proems from the seventeen good people who collect paychecks on the New York Times editorial board, fades away, it's worth dissecting, just to see the fungus of dissembling and illogic that infects it like mold in an REO property:

Since [the Obama administration's anti-foreclosure plan]  went into effect in March, some 100,000 homeowners have been offered a modification, according to the Treasury Department, though a tally is not yet available on how many offers have been accepted.

That's a slow start given the administration's goal of preventing up to four million foreclosures. It is even more worrisome when one considers the size of the problem and the speed at which it is spreading. The Mortgage Bankers Association reported last week that in the first three months of the year, about 5.4 million mortgages were delinquent or in some stage of foreclosure.

The problem, says the ed board, is that 15.4 million "'undwerwater' borrowers" are "at risk of default" due to "a lack of home equity." Thus these folks have "no cushion to fall back on in the event of a setback, like job loss or illness."

It's good that some relic of shame still keeps even the Times from using the word "homeowner" in a paragraph that describes people who do not own so much as an eight-penny nail of their homes. But think for a second about what that "cushion" is: a home equity line of credit or refi to pay for immediate living expenses.

Given the fiscal performance of the papers' finance reporters, this view isn't surprising. But as a personal finance curative, this is pure Ebola. Your house is not a credit card. The last 36 months should have made this clear. Even if they hadn't, a house owned by somebody else is really not your credit card. The ed board "has long argued" that we can get around this second situation by "reducing the loans' principle principal balance," a move that would "restore some equity to borrowers" and "give them further incentive to hold on to their homes."

Never mind that this "incentive" is already gone, per the ed board's own scheme. If you've borrowed against your equity for life emergencies, you're back in the same boat, only deeper in debt. Can the same value (in a declining asset) be spent twice?

More to the point, why isn't the ed board objecting because renters (I hear there are one or two of those in the Times' hometown) don't have any positive equity in their properties? Renters have to make tough monthly payments too. Renters are equally subject to the vagaries of job loss; that's why the ed board, elsewhere in the same editorial, calls on the government to "make far more aggressive efforts to create jobs." So why should lenders have to give the gift of home equity to borrowers, when landlords are not required to give their renters ownership stakes in their apartment buildings? Why is an unemployed borrower-resident entitled to a "temporary program of loans or grants" when an unemployed renter is out of luck?  

I weep not for the renter. But it's worth noting that there are still millions of renters in this country: Renters are 30 percent of the population – far more numerous than the four million or even 15.4 million deadbeats who claim the ed board's sympathies. Many of these people could become homeowners too, if the market dropped another 30 percent or 50 percent. Is there some reason (other than that declining is clearly what the market wants to do and thus is unacceptable) that the interests of 30 percent of Americans don't figure into the ed board's calculations?

It's not surprising that the ed board chooses to avoid the moral implications of its own claims. But the Times is also wrong in its utilitarian arguments. "There will be no recovery until there is a halt in the relentless rise in foreclosures," the editorialists inform us. That's not true. Real estate values have remained relatively flat during some periods of prosperity in the past. During the boom from 1960 to 1966, the median home price increased cumulatively by less than 10 percent, while the Dow nearly tripled. Homeownership would not be the norm in America if homes were never relatively cheap.

So why is The New York Times opposed to affordable housing? And why can't 17 people make an indefensible point more persuasively than they have here?