Obama’s Housing Plan: Government Will Decide If You’ve Been “Responsible”
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Barry revealed his plan to socialize the housing market today in front of an adoring audience of Arizona homeowners, while 500+ people protested outside the school hosting the Messiah. The $75 Billion dollar plan is an effort to prevent up to 9 million Americans from losing their homes. It, of course, will cost much more…in dollars AND in privacy invasion, if you want to play in the government’s sandbox.
The plan is for those who have been “responsible” in dealing with their mortgages. Those who didn’t bite off more than they could chew financially. So exactly how will this be determined? What is the definition of “responsible”? What if the government thinks you spent too much on cable, or organic food, or gave too much money to your church? Like most of Obama’s plans, this one is long on hope, short on details, and will require a careful reading to ferret out the devils. Of course, “complete details on the plan will not be released until March 4th when the program starts.”
The plan uses up what is left of TARP 1, and is more expensive than initially billed. One part of the plan is that the Treasury Department will double the size of its safety net to Fannie Mae and Freddie Mac. The government seized them both last fall, and Barry said it will eat up to $200 billion in losses for each by purchasing mortgage-backed securities from them. Brilliant. Good luck producing the notes on those babies! Incredibly, Obama says this will not cost taxpayers a dime. WTF?! I have some oceanfront property, coincidentally in Arizona, for you believers. Drop me a note.
The plan aims to help borrowers who are upside down in their mortgages and owe more than their homes are currently worth. It also wants to help those who are on the verge of foreclosure. It will do a cram-down of home asset values, via resets. Of course there will be MASSIVE amounts of transparency and openness.
The government will probably use an automated computer program called “Mo-Mod” to modify the millions of mortgages involved. Of course, this makes the program ripe for fraud…it doesn’t use original W-2’s or 1099’s. Experts in mortgage lending say that anywhere from 30-70% of all mortgages inked in the last few years were based on fraudulent claims of assets or income.
The plan will allow judges to reset the asset values of the homes whose mortgages are re-worked. Any institution that wants to play with the “government’s money” has to follow guidelines which will be in place in 2 weeks. GOP House Reps Cantor and Boehner wrote a letter to the administration today asking for clarification on the plan, particularly these 6 points:
• What will your plan do for the over 90 percent of homeowners who are playing and paying by the rules?
• Does your plan compensate banks for bad mortgages they should have never made in the first place?
• Will individuals who misrepresented their income or assets on their original mortgage application be eligible to get the taxpayer funded assistance under your plan?
• Will you require mortgage servicers to verify income and other eligibility standards before modifying mortgages?
• What will you do to prevent the same mortgages that receive assistance and are modified from going into default three, six or eight months later?
• How do you intend to move forward in the drafting of the legislation and who will author it?
Remember, children, whenever you hear the words “government’s money”, the truth is that it’s YOUR money. At the end of the day, this looks to greatly benefit…the banks. We’ll be attempting to perform due diligence on the latest beast, and will fill you in on all the great news! The stock market seems fairly unimpressed. Here’s the White House “Executive Summary” on the plan and here is it’s FAQ.
Obama is considering the use of celebrity endorsements to sell this crap! PLEASE, let this happen! It may be the pitchfork moment. Dig a trench, gang. The forest is on fire, and we need to get out of the way. Wait for the COMMERCIAL real estate bailout. OY.
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February 18th, 2009 at 6:03 pm
The stipulations in the portion for the “responsible” homeowners state that this will be limited to those with conforming loans, making this a regional support bill.
If you live in my area that means you either live in a small box or you bought your home before the massive rise in home values. If it’s the latter then you have no need for this as you won’t be “underwater”, unless you took out non-”responsible” equity loans and shot your LTV.
It also seems that your loan must be currently held by Fannie or Freddie, according to the FactSheet pdf.
February 18th, 2009 at 11:04 pm
The potential asset value resets are particularly troubling…what is the incentive for the guy who’s paid on time, but has lost 30-40 percent in mkt value to keep it up, while his neighbor gets a judicial workout that reduces his principal owed down to a much lower number? And won’t these downward revisions cause lenders to just jack a premium onto future mortgages in fear of Uncle Sam doing it again? Also, they plan to pay the banks a fee per mortgage that they modify, $1500? Shouldn’t they already be doing this under the current plan (Bush)? I still have even more questions….
February 19th, 2009 at 9:31 am
I prefer the suggestion of stretching out loans to 40 years for someone who can no longer afford their 30 year loan. That way the monthly payment drops considerably, the banks still get their money, the borrower remains on the hook for what they agreed to pay, and Johnny TaxPayer doesn’t foot the bill.
February 19th, 2009 at 12:06 pm
Yes, that’s a better idea. There’s something in there about the government’s ability/option to do a half-ownership of the property with the mortgagee. I’m still trying to figure out how this is supposed to work…I can definitely see how this would complicate things, though.
July 14th, 2009 at 9:54 pm
I would be interested to know if anyone has tried making biodiesel from wasteoil and one of those additives that you can find on a few sites out there. I am looking to try it.