Govt. to Cut Foreclosures by 75%!

Barack Obama - wikipedia

After the government’s massive stimulus spending plans, the Obama administration is probably disappointed with the continuing and escalating home foreclosures. Yesterday the Obama administration announced that they have conceived a new program that would convert potential foreclosures into rentals. A spokesman said it’s reasonable for policymakers to consider options for loan forbearance — allowing borrowers to delay, defer or skip payments — that are more effective than those currently available in the private sector.

The idea is to turn mortgage defaulters into renters. Such a plan would let borrowers who have fallen behind on their mortgage payments, avoid eviction by renting their homes. They’d give up all their equity (what equity?) and future claims on the equity, in exchange for getting to stay in the home.

How brilliant! I can see the headlines now: Foreclosures Cut 75%  – Obama rescues troubled Homeowners  – Obama Cures Foreclosure Problem.  Perhaps the real benefit of such a program will be the banks.  Banks, now showing these homes as non-paying liability, would be able to show them as a paying asset. Plus, tens of thousands of troubled homeowners would now be assured of voting for Obama’s re-election so they can insure their handout-living continues. Depending on how the plan works, the government would establish a rental Czar and thousands of government jobs in the new government rental management program. A real win-win situation for everyone  . . .  except for the taxpayers.

It was also reported that officials are creating a “housing stipend” added to unemployment benefits of homeowners. The hope is that by paying this additional money to the un-employed, it would lessen the chance for additional foreclosures.  What about additional money for existing renters? This could be considered discrimination against those renters.

In my opinion, what needs to happen, what must happen, is the flushing of bad debts once and for all, massive bank losses, and a return to reasonable living and lending. Handing out ever more exotic loans on ever expanding time horizons is a bad choice, whether or not it will work.

If you try and rig the market to give benefits to people who don’t pay their mortgage… don’t be shocked when less people stop paying their mortgage. When you change the rules in the middle of the game… don’t be shocked that the prudent people get angry.

Another way to look at this plan is it basically makes government REITs. This new deadbeat homeowner rental program could be known as: Shared Homeowners Assistance Management; SHAM for short.

Our government now controls banks and car companies, and will soon control health care and energy/utilities. Then, rents and whatever else they can decide. Your costs will be going up, but your income– should you be lucky enough to have income that is not provided via government check– will not be increasing.  I hope all the people that voted for Obama because Bush was in the pocket of the banks are happy now.