Obama rolls out 75 billion home foreclosure prevention

Yesterday Obama’s foreclosure plan was unveiled and today House passed a bill that allows bankruptcy judges to modify loans . As of now Harry Reid plans to pull over spineless liberal GOP members to shove another travesty upon responsible Americans.

If you are wondering why anyone would oppose a bill that apparently helps the housing a crisis, a leading catalyst of our current financial malaise, let me explain.

First of all, despite all of Obama’s lies as of now it does not appear that any programs or any provisions reward people who were responsible. He has said on multiple occasions that his plan will not only help struggling homeowners, but in the spirit of equality our dear leader indicated that the rest of us will not be left in the dust. As of now, we are left in the dust and worse yet, we are on the hook for all the unfortunate souls who were too stupid to read English language of the mortgage terms they were signing. Meanwhile because my CC company lost my payment and my credit score is an embarrassing 680 the best mortgage I could get on my townhouse was 6.125%? I am strongly contemplating in stopping my mortgage payments and become eligible for a government program.

So what does Obama have in store for the 2% of the people in this country who used subprime mortgages to refinance their homes (not buy their homes, refinance!)?

First, the legislation just passed, the loans and terms will be rewritten to satisfy a new rule; Mortgage payments cannot exceed 31% of their monthly income. First of all, I have no idea what this means for those that are currently unemployed. Second of all, this allows the judges to lower the rate on the loans to levels that do not actually exist in the market. Loans could go as low as 3% and why not? Of course you cannot get a 3% loan, because the current mortgage rates that are available to the public are just below 5% assuming you pay closing costs AND points.

Second, someone will be losing money on this transaction. When the original terms of the mortgage was signed, both the lender and the borrower assumed certain responsibilities. The lender will now be taking a loss on these loans, given the payments that the lender once relied upon will now shrink. Unfortunately all losses must be absorbed one way or another and it will be translated upon the taxpayers as costs go up for refinancing.

Thirdly, there are absolutely no precautions taken to avoid delinquencies after re-financing. According to OCC.gov, a program designed to refinance struggling home owner’s loans fell delinquent with half a year, in fact more than 50% of these new mortgages failed. Where are the precautions?

Lastly, as of now it appears that after the delinquent borrowers get refinanced and stay in their home, they are not obligated to refund the losses of the lender provided the homes go up in value! So basically we are asked to fund people’s mortgages for houses they do not deserve to live in and if by some chance house values recover, these delinquents can sell it – collect profit and move on with their lives.

What
the
hell!?

Wall St. versus Obama, Rick Santelli calls for action!

My heart has always been with Wall St. as it represents to me the quintessential free market enterprise. Anyone can participate, rich or poor, you can be in or can be out, all you have is your money and your wit. You can prosper with everyone, be broke with everyone or any combination of the four, the world is your oyster.

The market is also a fantastic fortune teller, for it’s entire purpose is to predict and anticipate and so far it has been predicting and anticipating the worst for the Obama administration. Sure the market over reacts, is subject to insider trading, corruption, etc, but so is human nature and human nature is precisely what makes the market tick.

CNBC is not my favorite station, but it is one of the most popular cable stations for financial needs and though they typically discuss trivialities, they do interview capable and intelligent traders. Every day they also have a segment where they discuss different sectors including happenings in Chicago where the commodities are being traded. One regular member of the team is Rick Santelli who reports directly from the pit. Today he broke with his usual calm demeanor and did something I have never seen on CNBC. Blasted the administration and called for a revolt. Absolute must see:

The people who wish for this country to prosper are getting sick and tired of the government using their money to bail out every single company, foreclosure and individual that screwed up in the past. This is not a recipe for this country to move forward, but a recipe for disaster.

Obama’s foreclosure plan questioned by the loyal opposition.

I must say that the GOP has been a massive disappointment for the past 8 or so years, but they are really impressive recently and much of the thanks can be given to Obama whose magical powers include spinal reconstruction.

Specifically Eric Cantor the Republican whip, credited with rallying the House GOP against the Stimulus bill, has with John Boehner posed several questions for Obama. I personally see this bill flying through as too many Republicans are obsessed with stopping the housing meltdown at whatever cost, but I am happy to see them get vocal. Aim is to spend 75 billion to shore up 9 million mortgages in an effort to thwart our country from the continuing housing meltdown.

Courtesy of CNN, here are the questions.

• What will your plan do for the over 90 percent of homeowners who are playing and paying by the rules?

• Does your plan compensate banks for bad mortgages they should have never made in the first place?

• Will individuals who misrepresented their income or assets on their original mortgage application be eligible to get the taxpayer funded assistance under your plan?

• Will you require mortgage servicers to verify income and other eligibility standards before modifying mortgages? Watch more on the home foreclosure crisis »

• 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?

• How do you intend to move forward in the drafting of the legislation and who will author it?

Those are all excellent questions and my particular favorite and something that I have been whining about – what about the rest of us? If stupid people unable to read mortgage rules and cannot understand what an Adjustable mortgage does (it adjusts), then why OH WHY should they be bailed out? As my previous post on the matter pointed out, a majority of the refinanced loans fail and the GOP is curious as to why this time it will be different. Lastly, after the latest partisan boondoggle they are asking if any Republicans will be invited to participate and I am sure they will.

Obama has made the following process and I will be watching very closely to see how quickly he will go back on his words.

“It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans. It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell,” Obama said Wednesday. “It will not reward folks who bought homes they knew from the beginning they would never be able to afford.”

Really? He wants to save 9 million mortgages, but it does not include speculators, irresponsible or unscrupulous individuals? Where is he getting 9 million from then, because that is higher than any estimate I have ever seen.

Obama to stop foreclosures and help the housing crisis

Today is the much anticipated unveiling of the Obama’s administration to stem the foreclosures, a development I will be watching very closely. As of now the price tag is coming in at 75 Billion, which after the gargantuan pork monstrosity does not seem like a high number.

The basic principle is to save people who are now holding mortgages they can no longer pay, most likely ARMs whose rates have jumped. Due to housing values dropping and equities vanishing a lot of the people are stuck in houses and have no ability to refinance.

The plan as of now calls for 50 Billion from existing bailout money, although it is unclear as to which bailout we are talking about. For example the stimulus package allocates over 13 billion to section 8 housing, public housing and low-incoming housing, so will this be an additional 50B more? Or will this be coming from TARP? If it’s coming from TARP, then this certainly violates the original principle behind the program – that is to shore up banks and provide liquidity. Unlike the stimulus package, TARP was originally a loan that the banks were going to be paying back at a hefty rate.

Another $25 will be coming from Freddie and Fannie, aka the taxpayers considering neither Freddie or Fannie are solvent without taxpayer money.

This money will then be used to refinance loans of those individuals who did not read the rules and terms before signing their ADJUSTABLE rates. Why? Because people were greedy and assumed that house prices will continue to rise indefinitely. As previously discussed, responsible individuals will be paying for the mistakes of others.

Specifically the plan is to reduce monthly payments to a certain percentage of one’s income and the rest will be subsidized. Somehow Obama claims that his plan will help those who “played by the rules and acted responsibly”. Really? You mean, I stand to gain from this somehow?

DOUBT IT.

In my previous rant about the middle class being screwed, one particular fact stood out. According to our gov’t those mortgages that were adjusted, more than half failed within half a year. Going to be a long 4 years.