Washington has chosen the homebuilders over homeowners, Cramer said Monday, and the decision is causing far more foreclosures than any government program could ever prevent.
Tucked away in last November’s extension of the first-time homebuyer tax credit is a provision that lets the homebuilders use any losses incurred during 2008 and 2009 to retroactively offset the taxes they paid on profits earned over the past five years. This has turned companies once on the verge of failure into profitable institutions, and they’re using the money to build more houses.
That’s wrong, Cramer said, because we need fewer new homes right now, not more of them. The increased supply is hurting prices overall, and that’s keeping a huge number of mortgages underwater. In effect, this homebuilder bailout is making it virtually impossible for homeowners to get back on their feet.