PhillyDeals: Renewed interest in stemming foreclosures

Mark Zandi

of

Moody's Economy.com

and

U.S. Rep. (and would-be U.S. senator) Joe Sestak (D., Pa.

) joined yesterday to revive interest in a plan for the government to bail out unlucky Americans who bought houses during the inflationary years 2003-07.

Sestak's Homeownership Vesting Plan Act (H.R. 1356) would allow borrowers whose loans are worth more than the current depressed value of their houses to get a new Federal Housing Administration mortgage at a little below the appraisal value.

The government would pay the original lender the difference between the old and new loans over the next five years, so long as the homeowners make their new payments. Zandi told me this would cost taxpayers about $50 billion.

The idea is to stop foreclosures, which keep rising with the unemployment rate, and to prevent home prices from falling any more than the 32 percent they've already dropped, according to S&P/Case Shiller Home Price Index data cited by Wilmington Trust Corp. strategist Adrian Kronje in a meeting with clients in King of Prussia.

Banks would get paid what they originally lent, ahead of schedule. Mortgage servicers would get a $1,000 bounty for each loan they agree to convert. Borrowers would get a cheaper rate on a smaller loan and would keep their homes.

And taxpayers who didn't want or couldn't afford to pay inflated prices would get to bail out those who did.

Zandi says much of that cost could be funded with unused TARP money already set aside for less successful home-loan bailout programs.

Sestak got little support when he wrote the bill in March. But as foreclosures keep rising, "there's a recognition" among House leaders "that we have to do something," said his spokesman, Jonathan Dworkin.

"Sounds good to me," said veteran Chester County banker Jim McErlane.

"I'd rather see rate concessions," said Gerry Cuddy, president of Philadelphia-based Beneficial Bank.

With its higher jobless rate, New Jersey is suffering more than Pennsylvania from the weak economy.

But Gov. Corzine, in the heat of a tough reelection fight, yesterday celebrated Franklin Electric Co.'s move out of Philadelphia and into a formerly vacant 44,000-square-foot building on six acres in Moorestown last year.

Family-owned Franklin got a $424,508 Business Employment Incentive Program grant from the New Jersey Economic Development Authority to help pay for moving operations and 49 jobs across the river.

The company's "relocation" from Philly "is evidence that even during a global economic recession, New Jersey remains a desirable location for business growth and expansion," Corzine said in a statement."

If you can't build 'em, buy 'em.

The average small business sold in the Philadelphia area over the summer went for just 84 percent of the asking price, down from 87 percent last quarter and more than 90 percent a year ago, says

LoopNet Inc.'s BizBuySell.com

, which surveys brokers who sell "Main Street" businesses with yearly sales below $1 million.

The good news is more business are changing hands as prices drop. Sellers are "becoming more realistic," general manager Mike Handlesman told me.

It is a national trend, he said, but it is extra pronounced around Philadelphia, where 44 small firms changed hands this summer, up from just 23 in the previous quarter, and 40 a year earlier.

Jeremy Siegel,

the Penn stock market scholar who markets himself as the

"Wizard of Wharton,"

weighed the claims of liberal Keynesian economists vs. conservative monetarists in his

Yahoo Finance

column yesterday and split the difference:

"Both the Keynesians and the monetarists are right.

"The Keynesian emphasis on unexpected fluctuations in spending did the best at explaining how we got into the crisis.

"But the monetarists' claim that preserving the banking system is critical to prevent a recession from becoming a depression is also right."

If all the economists are right, why are so many people out of work?

Economist and politician team up to push mortgage bailout plan.

PhillyDeals, C3

.