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Commanding the waves to recede

Will the Obama housing plan become a classic case of false compassion that leads to more bureaucracy and more despair?

Issue: "Ghost streets," Feb. 27, 2010

FORT MYERS, Fla.-The Fort Myers metropolitan area, lapped by the waves of the Gulf of Mexico, is neck and neck with desert-clime Las Vegas in a race to become the abandoned home capital of America. Almost one out of every eight households in those two areas received foreclosure notes in 2009. When President Obama in his State of the Union address on the evening of Jan. 27 pledged to "step up refinancing so that homeowners can move into more affordable mortgages," people here listened.

Earlier that day, though, the complexities of coming through on that pledge were becoming apparent. The Harborside Event Center here filled up with 1,000 mortgage-troubled homeowners who came for a HUD-sponsored workshop on "making home affordable." Counselors from the Home Ownership Resource Center, a Fort Myers nonprofit that offered individualized help to 711 homeowners last year, spent the day prepping 78 distressed residents on how to talk to lenders. They saw that some may get help, but reported that others have homes far, far "underwater"-worth far less than they paid for them-and "they're extremely angry."

Five days later Eddie Felton, the Center's executive director, showed me around the two hardest-hit areas of the Ft. Myers metropolitan area, Lehigh Acres on the east and Cape Coral on the west: "That house is empty . . . that house is empty . . . that house was robbed . . . someone set that house on fire." Felton, a 26-year Navy veteran who started offering counseling about housing two years ago, said people are calling and saying "Obama promised" this or that: "But he can't come through without wrecking the whole system. Seems to me, if you can't produce, don't give people false hopes."

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We drove by blocks with abandoned homes purchased several years ago for $250,000-$300,000, three times what they sell for now, if they sell at all. Those homes are magnets for criminals who steal refrigerators, ovens, air conditioning systems, and copper pipes. Residents who keep up their payments see the value of their homes decline further as their neighborhoods become depopulated. Felton said, "I think Obama's sincere, but I wish his people would come out from behind their desks, see what's going on, and listen to people who know something besides theories."

We drove through sections that are ghost towns for human beings but not for weeds, which in this climate grow quickly and in a year can make a suburb look desolate. Felton noted, "The president gets up on TV and says his program will help people stay in their homes. It won't. It's up to the lending institutions. People who want to refinance need some equity, but most of the people in need have no equity in their homes. Should the banks just hand out money?" The New York Times on Feb. 2 reported that it would cost $745 billion to bring underwater homeowners to a break-even point.

The suburbs have been hit hard, but many purchasers of prime spots are also in trouble. Felton pointed out one high-rise condo on the Caloosahatchee River near downtown Fort Myers: Five units occupied, and the other 95 of them might as well have "welcome, thieves" doormats. He says more people are just walking away from their investments, breaking their contract and ruining their credit rating but saving money that they can then use for rent. "That's tough, but it wouldn't help for the federal government to force the lenders to write off every debt. The banks would be bankrupt. Besides, you'd have a lot of people taking advantage. Next time there'd be even more recklessness."

We peered into one gated community where most houses have five bedrooms, four baths, and no people. Felton is not a fan of one-size-fits-all approaches where Washington dictates-in the latest formulation-that people should not pay more than 31 percent of their income for housing: "Here, we do face-to-face. Everyone's unique. . . . We tell homeowners to bring their financial statements-check stubs, W-2s for the last two years, everything, and work out with them ways to cut expenses. We find out what's feasible for them to pay each month, and then they request forbearance from the lenders' loss mitigation departments."

We stopped in front of a Bank of America branch (see sidebar below) where Felton said he tries to "establish a trust factor with lending institutions. We're the third party: We work both sides of the street and try to help both sides arrive at a solution that helps both." He doesn't demonize lending institutions: "They don't want to foreclose homes or hold onto a bunch of them. They know it's better to have someone living in a house than to have it abandoned. . . . They're overwhelmed. Everyone's overwhelmed. In Fort Myers 26,000 people in some form of foreclosure are waiting to see the judges-they're overwhelmed too. . . . Obama? He's trying to do the right thing, but he needs guidance."

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