acting-man.com / By Ramsey Su / December 27, 2012
What is the Hidden Housing Subsidy? This is a subsidy that is available to all borrowers that have no economic reason to own their home anymore. The subsidy consists basically of free housing. The subsidy can begin at any time, by simply not making any more payments to the lenders, and in most cases, the local property tax collector. There is no application, no processing and no approval required, one just stops paying.
Once you stop making payments, all kinds of good things happen. You will receive phone calls, letters, and emails from all types of agencies offering to help you lower your payments, modify your loan, or even pay you agree to a short sale of your home. This process will take a long time and you won’t have to worry about paying that mortgage anymore.
I first wrote about this hidden subsidy back in April of 2009:
Hope Now reported for April 2009, there were 2.98 million mortgages that were 60 Days+ delinquent and 249,000 in the foreclosure process. There are probably at least half a million that are less than 60 days delinquent. All together, I estimate that 4 million households currently have no housing expenses…
… Assuming the average housing expense (mortgage, tax, insurance, HOA dues etc.) is between $1000 to $2000 per month, the actual subsidy to this select group is $4 billion to $8 billion per month, or $48 billion to $96 billion per annum. The delinquency to eviction time line easily exceeds a year in most states, in some it takes a lot longer. For households with a $200,000 mortgage, this subsidy can amount to over $30,000, far exceeding the $1,200 tax stimulus or the $250 social security stimulus.
Fast forward to today, LPS just released their “First Look” Mortgage Report for November. 5,350,000 households are receiving a free housing subsidy today. Out of the 5 plus million, only 1.7 million are actually in foreclosure, the rest still have many months of free housing ahead.
The hidden housing subsidy is higher today than it was in 2009, and that is after monumental intervention efforts in the form of QEs, HAMPs and HARPs. The cumulative amount of this subsidy could easily exceed $500 billion since the bursting of the sub-prime bubble – click for better resolution.