Opinion: One answer to the foreclosure mess: More immigrants

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Money manager and influential financial blogger Barry Ritholtz was one of the few people on Wall Street to predict the subprime meltdown, so it’s worth listening when he talks about how to fix the lingering problems in the housing market. On Yahoo’s Daily Ticker program Friday, he offered this suggestion for clearing out the backlog of homes in foreclosure: Offer permanent resident status to any highly trained immigrant who buys a repossessed house within two years of arriving in the United States.

It’s not a new idea -- Ritholtz included it in his 2009 book ‘Bailout Nation,’ which examined the regulatory and policy-making failures that led to the housing market’s collapse and the subsequent credit crunch. But it’s a more creative response than the Obama administration’s latest proposal, which invited the private sector to come up with ideas for converting government-repossessed homes into rental properties. Here’s Ritholtz:

You want to get rid of the problem of excess supply, the way to do it is create more demand. Bring 2 or 3 million engineers, PhD’s. You come into the United States, you buy a home or start a business within two years, you get a permanent green card. I think this is a nation built by immigrants. I have no problem enhancing our brain trust in the United States by bringing some very talented people here....

That to me makes much more sense than getting into the business of being landlords. Listen, the federal government has subsidized and built low-income housing and rented it. It hasn’t really been a successful program for them over the decades. I would hate to see them go back down that road.’

Ritholtz sees many more foreclosures to come as housing values continue to drop. Unless banks are willing to write off a significant amount of what is owed, borrowers will keep defaulting -- and some by choice. The ‘line in the sand’ for borrowers, he said, gets crossed when a home’s value is 25% less than the outstanding mortgage debt. ‘Once they’re more than 25% under water, they tend to walk away, they tend to default,’ Ritholtz said.

That’s a rational response to a long-term investment that has little chance of breaking even, let alone making a reasonable amount of money. And houses are the most important long-term investment many Americans make.

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-- Jon Healey