February 19, 2009
Help For Those Who Need It Some
The centerpiece of Barack Obama’s housing foreclosure program (full outline here) is the $75 Billion "Homeowner Stability Initiative" that finally addresses the tragic situation of homeowners who find themselves, through no fault of their own, paying their mortgage.
Yes, even as you read this, millions of such homeowners are completely up to date on their mortgages. Barack Obama intends to tackle this growing problem by using your money to help lower these homeowners’ payments to 31% of their monthly income and in so doing, ensure that banks receive mortgage payments from each homeowner according to their ability and that each homeowner receives a house according to their need.
Wait, that sounds familiar…
Anyway, in addition to using your money to lower mortgage payments for people still paying their mortgages, the government will also be using your money to pay for an extra $1000-a-year bonus to these homeowners “to provide an extra incentive for borrowers to keep paying on time.”
That would be in addition to the increasingly obsolete incentive of “not getting your ass thrown out on the street” (which has in the past really worked for us).
To make sure lenders and servicers are properly motivated, the government would give them $2000 of your money as an additional bonus for finding homeowners who are current on their mortgage payments.
That may sound easy, but keep in mind that this program is only available to people who live in bigger houses than you do.
These efforts will guard against further declines in the price of housing because if there’s one thing you want to avoid, it’s allowing the market to adjust naturally, bringing down the prices of homes, making them more affordable and in so doing, dramatically increase sales, as that would create an alarming situation in which Barack Obama wouldn’t get to say who gets your money.
In addition to this “Stability” initiative, President Obama will also commit resources to an “Affordability” plan that will allow people to refinance their homes for more than they are actually worth. Under current rules they don’t let you do that. (What’s up with that?)
Finally, the plan includes a provision that would allow judges to rewrite mortgage contracts for people who declare bankruptcy making these not so much “contracts” as “suggestions” which will make the mortgage business a lot like lending money to your brother-in-law. (And your wife is the judge.)
While that would in all likelihood make matters worse and compound the housing crisis, that's not what is important right now.
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