The White House just released the dirty details of Obama’s massive mortgage entitlement program.
Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affordable
A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac
In addition, there will be forced mortgage modifications (bad idea when GOP pitched it, bad idea now) and unprecedented new meddling in private loan contracts, including a $10 billion “insurance fund,” $100 billion more for Freddie and Fannie (rewarding failures again), and a provision to “Allow Judicial Modifications of Home Mortgages During Bankruptcy for
Borrowers Who Have Run Out of Options” (pushed by Dodd and the Dems for more than a year now).
“Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration — together with the FDIC — has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.
Now, before we get to questions about O’s plan, let me remind you of the basic questions I had when Mitch McConnell proposed the GOP’s moronic mortgage entitlement plan two weeks ago:
Question: Why should government be guaranteeing mortgages? Isn’t that what got us into trouble in the first place?
Question: Why should government be setting mortgage rates? Aren’t those supposed to be set by the market?
Question: How can Republicans on the one hand argue that Fannie Mae, Freddie Mae, and other interventions in the housing and mortgage markets were bad and then at the same time propose a doomed policy along similar lines?
Question: Have Republicans learned nothing from the housing meltdown? “Credit-worthy” borrower = anyone with a pulse. Who will pay when these borrowers default on their loans? Taxpayers will.
Question: Who will sell these mortgages? Probably the banks. What incentive do they have to ensure the credit-worthiness of borrowers, since they will bear no risk if the borrowers default? Sounds like a formula for another mega-subsidy to the banks…to go along with all the others.
Question: Why do Republicans continue to believe, as Democrats do, that the number one goal of economic policy should be to prop up housing prices? (Recall McCain’s moronic $300 billion mortgage plan.) Why not let the market determine the correct level of housing prices? Clearly, in many parts of the country, housing prices are still too high.
The proper response by government is to let the market allow prices to decline.
The problem is too much borrowing, too much artificial inflation of home prices.
On what planet should the Republican/conservative alternative be to encourage more borrowing and to prop up prices so they don’t fall “too much?”
This is more of the same old, same old: Kicking the can down the road. Real change — fiscally repsonsible change — means sucking it up, allowing housing prices to fall, and getting the government out of the home-lending business.
What a disaster and — coming from Sen. McConnell — how sadly, utterly predictable.
More than a year ago, I called for the GOP to distinguish itself from the Big Government Democrats running for president and demagoguing this issue. Remember?
The bipartisan meddlers in Washington are going to make the housing “crisis” drag on for a decade when, if they had adopted the suck it up plan in the first place, it would have been over by now.
You remember what the response from Senate GOP staffers was to my questions? They rationalized their support for this disastrous “solution” by explaining to me that Republicans needed to be “for something” because they didn’t want to look obstructionist.
Now, just as I warned, Obama has picked up the mortgage entitlement ball and run with it — with the muscle of ACORN thugs behind him. How is the underlying premise of his plan any different than what Senate Republicans foolishly championed two weeks ago?
At least the House Republicans seem to have a clue. Here are questions about O’s plan they’ve released this morning:
1. What will your plan do for the over 90% of homeowners who are playing and paying by the rules?
2. Does your plan compensate banks for bad mortgages they should have never made in the first place?
3. Will individuals who misrepresented their income or assets on their original mortgage application be eligible to get the taxpayer funded assistance under your plan?
4. Similarly, will you require mortgage servicers to verify income and other eligibility standards before modifying mortgages?
5. 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?
6. How do you intend to move forward in the drafting of the legislation?
Chris Kinnan of Freedomworks adds a few more questions:
Will people who cashed out their equity with a refinancing be eligible?
Will borrowers who never had any equity in their homes be eligible (people who financed 100%)?
What is the upside for taxpayers if housing prices recover? Who gets the gain?
How is this fair to renters and home owners who had the foresight to take on loans they could afford?
Will illegal aliens be eligible for the program?
Why is it government’s role to take my money to fund someone else’s property value preservation?
Obama says “all of us will pay.”
No, not all of us.
Question from commenter sonofdy: “Why should I pay my mortgage this month?”