Are we on the right path, Part 2?

As discussed in part 1 of this article, the real question is - Are we on the right track?
Since the publishing of Part 1, the $8,000 credit has been extended and expanded. And that is a great news for many buyers. But the question remains - will this fix it?
As an industry, we do believe that this will help with sales. As an individual taxpayer, I am concerned! Why, because while the money is being given, there are no checks and balances. We are doing many of the same things that got us in to this mess. And if this continues, we will most likely be in this mess again, perhaps even worse.
Problems:
1) Thousands and thousands of fraudulent cases are under investigation. Many people abused the system. We MUST have a way of punishing those who cheat!
2) A huge one - we are still lending to those who can't afford it. We want to encourage people to be homeowners and that is EXCELLENT! Every one should own if possible. But do they know how to take on the responsibility? Are they putting down enough to know that they can't just walk away? Do they have a good credit indicating atleast a good past history?
Even today, we are seeing programs with 3.5% down (money that can be borrowed from friends and relatives) without a perfect credit. Is it too hard to figure that these will most likely result in a default, if circumstances change even a little? Put 3.5% down, get 10% back (up to $8,000) - what are we thinking? What is the motivation to keep the home when things or circumstances change? Atleast I can't figure this out! The real sad part of this is, these homeowners will have to go thru more hassles, if and when things change, making it even harder for them to recover later. Why put them in this situation knowing that the odds are not in their favor?
3) While we are too liberal in some cases, the lending is still an issue where banks are not lending to those even with good credit, and with good down payments. And that slows down sales unnecessarily. Bringing back lending programs that lend to those who have enough vested of their own is crucial. What's wrong in lending to someone who is putting 25% down and has good credit? We don't need this person to provide many documents, his/her own money is at risk!
4) Bad appraisals can be a huge problem. We need to make sure appraisals are done by local people who understand the local market. And there should be some way of a random checking to make sure these appraisers are following proper rules and appraising right! A lot has changed and the appraisers are careful now in making sure they are not part of any fraudulent activity that appraises the property higher than the market. There should be penalties for those who don't follow the rules.
We need to do what is right, instead of doing what serves a segment. We need to look at long term consequences, instead of short term fixes. And biggest of all, we need to reward right behaviour.
Imagine this - send a check to all those who act responsibly and encourage them to do so! Novel idea, least popular perhaps, but one that will stop many on the edge to make a wrong decision. And thank those who act responsibly.
All this said, we must not walk away from those who became victims of the market conditions. But let's do this right in the beginning so that there are less victims when things change.

Sanjeev Aneja, CRS, Broker/Owner
sanjeev@ontrackrealty.com