In Housing Bailout, Look At The Fine Print

(CBS)
When President Obama announces his administration's plan to limit future foreclosures on Wednesday afternoon, he's expected to encourage lenders to lower monthly payments perhaps through lower interest rates and principal reductions.

The goal of this plan -- call it the Housing Bailout of 2009 -- appears to be to use money already approved by Congress as part of last October's Troubled Assets Relief Program to slow the pace of housing foreclosures.

"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," Mr. Obama said on Tuesday.

The fine print is what really matters. It's one thing to say that borrowers whose house prices are underwater or lost their jobs through no fault of their own should receive taxpayer aid -- but another thing to write the regulations in a way that helps the innocent while rejecting those who fibbed about their salary or bought more home than they could actually afford. (For the apotheosis of such speculators, see the case of Sacramento's Casey Serin.)

Another point to keep in mind is that not all metro areas have experienced a housing bubble. The S&P/Case-Shiller Home Price Indices show that for the decade ending August 2008, house prices in the New York and Washington, D.C. metro areas leapt by around 2.2 times, while non-bubbly areas like Cleveland saw an increase of a mere 1.17 times.

Any housing bailout of coastal properties raises the obvious question: Should taxpayers in the non-bubbly heartland be required to bail out those living in coastal states? And is it fair for renters or those who lived within their means to bail out those who didn't?

Mr. Obama may not divulge enough detail on Wednesday to let these questions be answered; the details may not be released until later. When that happens, be sure to read the fine print.
  • Declan McCullagh On Twitter»

    Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.

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