New Program: More Bailout, More Drowning

Advocates and Actions Financial Justice Foreclosure

geithner-protest_1389447cNew Orleans President Obama, Secretary Geithner, and the rest of the hapless pickup crew that flubs around in the housing and foreclosure crises came together to “repurpose” yet more of the TARP money that was set aside for home mortgage modifications that might prevent foreclosures and threw $15 billion of the total at some homeowners whose houses are underwater, meaning they owe more than the value of the home.  These homeowners are a rarefied bunch.  They are underwater, but still up to date on their mortgage, bailing the water out of the bottom of their houses.

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.