Lafayette

No one can puzzle out whether or not homeowners facing foreclosure or owing more than 125% of what is now the current value of the house would be allowed to refinance, thereby making their homes affordable again.  I suspect not.  This would knock too hard on the door that the banks have continued to fortify which would involve writing down the value of the properties to the market, rather than continuing to pretend to modify at the wildly inflated pricing.  The Times article in its last line importantly noted:  “American homeowners currently owe some $700 billion more than their homes are worth.”  My god in heaven until that issue is addressed there is no plan for beleaguered homeowners facing the threat of foreclosures.

A refinancing program that focuses on other homes than represented by that $700 billion problem would give banks and the housing industry a shot in the arm on closing costs and fees in the moribund housing market.  This is all window dressing, not housing policy!

A Treasury Department official was quoted revealingly that Treasury was now hoarding more than half of the money allocated by TARP for foreclosure relief (almost $25 billion!) which has been an abject failure on all counts saying they wanted to save it to help pay down the deficit.  What patsies:  this is more chicken feed for the chickenhearted!

As a footnote to all of this we have to read about Warren Buffett being a “white knight” trying to prop up Bank of America still wallowing in its mess, and a new debate over whether or not Capital One might be getting “too big to fail.”  These are not the real issues, friends.

The other proposal has to do with renting out homes facing foreclosures but that would require some money to operate, some concessions from the banks which have not given an inch yet, and some recognition that tenancy is part of the future paradigm of citizen wealth, just as home ownership has been in the past.

Unfortunately no political or financial figures have been willing to walk that bridge to the future yet, so we’re still all falling into the ravine.

New Orleans

Make no mistake though.  This program is basically another $15 billion bank and Wall Street investor bailout.  The best that one could pretend about this program is that with 6+ million homes facing foreclosure and almost double that many (11.3 million!) underwater that it might prevent the “500,000 to 1, 500,000” the government is spinning who might be miraculously helped by the program avoid foreclosure or maintain their existing modification, if lightening had struck them and they had been able to win one.

I say miraculously, because there is no indication that this program will work any better than the other loan modification disasters the President has had to bless, except that since this is once again a Geithner and Treasury bailout, maybe the banks will actually do some mods in order to actually get the cash.  Only banks and investors are eligible for this bailout program, and once again, repeating the mistake they have made in every other loan modification effort, participation is 100% voluntary.

More than half of the country’s existing mortgages are secured by Fannie Mae and Freddie Mac, which is essentially to say the government, and these new mods will be on Federal Home Administration (FHA) standards, which is pretty much required of all loans now that subprime is dead, but that also means that few, if any, of these loans will include the millions that were Alt A or subprime originally.

A Wall Street Journal piece was even skeptical despite the Wall Street bailout for their buddies:

“But that could be hard to do because mortgage servicers, which handle loan payments and decide which loans should be modified, are overwhelmed. And some borrowers might be discouraged from taking part because receiving a principal reduction will show up on their credit score.”

If anyone needs more evidence of this disaster due to the incompetence of mortgage servicers and the banks, look at the report from Phoenix done by Advocates & Actions here (website under construction).

Luckily for Obama and Geithner the Republicans and Tea Party folks are either clueless about housing financing and the mortgage crises or are so conflicted by courting Wall Street and the donations that they are not raising the issue and making hay of this being another bailout and TARP disaster.  Evidentially people are going to catch on as the pickups and U-Haul trailers continue to relocate working families from their homes into apartments and streets.