Posted on 01/02/2010 12:15:09 PM PST by American Dream 246
The only surprising aspect of this story is the fact that it still surprises people, including the New York Times, apparently. When Barack Obama announced a $75 billion program to have everyone else in the country subsidize foreclosure protection from homeowners who got themselves in over their heads, his allies hailed it as a compassionate program that would allow those who made poor decisions with their money a chance to avoid the normal consequences of those decisions. Now it appears that the program not only failed in its mission, but actually made the situation worse for those in danger of foreclosure:
The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.
Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.
As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.
Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.
“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.
Gee, who could have predicted this? Oh, yeah … me, and plenty of other people who wondered how a temporary modification would solve the permanent problem of living with a loan that one could not afford. At the time, the Obama administration heard many voices advising them to stay out of the mortgage business and let the system work out the problem on its own. It would have been painful, but it would have brought equilibrium back to the market and allowed investors to move ahead with greater confidence.
Instead, people on the cusp spent eight months paying into mortgages they will still eventually lose. The danger of foreclosures will be extended, and now people have fewer resources with which to recover. The only option left for government intervention is to buy the mortgages and forgive part of the principal, which essentially means that all of us will wind up paying for homes we couldn’t afford, either — and which we were smart enough not to buy. That will also encourage more irrational risktaking in the future, as people will assume that the federal government will once again pick up the tab if failure looms again.
Just like Cash for Clunkers and the homebuying credit, the Obama administration did nothing but kick the can down the road. Rather than addressing the real problems of the economy, Obama attempted to mask the symptoms. Even the New York Times has noticed that Obamanomics is nothing more than smoke and mirrors, only really, really expensive smoke and mirrors. In the end, we will all pay.
New York Times has noticed that Obamanomics is nothing more than smoke and mirrors, only really, really expensive smoke and mirrors. In the end, we will all pay.
Wow if the NYT prints the truth you knoe Obama sucks even the progressive liberals have to see the facts.
I would expect by now that there would not be any surprise coming from o-bow-man when he speaks.
HIS LIPS ARE MOVING IS ALL THAT NEEDS TO BE KNOWN.
[Gee, who could have predicted this? Oh, yeah … me, and plenty of other people who wondered how a temporary modification would solve the permanent problem of living with a loan that one could not afford.]
Exactamundo. UNEXPECTED my rosy red a$$.
Home prices are going to continue to decline until supply meets demand, meets a price that the average person can afford, meets a consumer who can qualify for a loan under much stricter mortgage guidelines.
There is not a mortgage modification scheme known to man that can stop millions and millions of additional foreclosures from happening.
Excessive debt of ALL types is going to make 2010 a nightmare. Until we understand the scope of this debt crisis, we are not going to be able to deal with it... assuming there is any way to deal with it at all... it is exponentially bigger than people realize.
This crisis is NOT a crisis caused by one particular type of loan/debt... it was caused by a TSUNAMI of ALL types of debt... IE: mortgage debt, home equity debt, consumer credit debt, credit card debt, auto loan debt, commercial real estate debt, municipal debt, corporate debt and on and on... whether they were prime, subprime, alt-a or XYZ-type loans, they ALL contributed to the tsunami of debt.
In the U.S., consumers owe over 11 TRILLION dollars in 1 - 4 family home mortgage debt and 2.6 Trillion in other consumer credit debt... for a total of around 14 Trillion.
One Trillion (ONE) is $1 per second for 32,000 years... without interest! Noodle that one for a minute.
People are screaming about the Fed Gov’t owing 12 Trillion... at least the gov’t can tax and they have a printing press... consumers owe more than the Fed Gov’t and many consumers have lost their only source of income... a job!
Subprime was simply the first link to break in an extraordinarily over-stretched chain of debt. Alt-A Option ARM loans are now defaulting at the same rate or at an even higher rate than subprime.
Prime loans are not far behind... we’ve only seen the tip of the iceberg in prime foreclosures. Commercial real estate loans are expected to implode in 2010... so are municipal bonds due to collapsing tax revenues.
ANY loan that was taken out when the market was grossly over-valued was a bad loan. If a “prime” borrower with perfect credit, full income documentation and a 20% down payment bought a house or a commercial building that was 40% over-priced, then that TOO was a bad loan.
Americans took out and spent HUNDREDS OF BILLIONS of dollars in home equity loans from 2000 - 2007. They spent it on clothes, cars, boats, RV’s, 2nd homes, nannies, private schools, fine wine, fabulous vacations, etc.
That home-ATM has been cut off... which is playing a huge part in unemployment, because those debt-fueled jobs are not coming back any time soon. Tragically, higher taxes, Obamacare, Cap and Trade and Card Check will only make unemployment worse!!
Individuals are broke, cities are broke, states are broke, the Federal Gov’t is broke!
If the gov’t would step back and let the free market work (IE: allow bad investments to be purged from the system and stop encouraging even MORE debt!), then we could start the process of healing... but what are the odds of the gov’t stepping back from anything??... zero! They will only meddle in the markets more and more and make it worse and worse.
BUMP!
“...would allow those who made poor decisions with their money a chance to avoid the normal consequences of those decisions.”
. So that they can make the same poor decisions over and over again.
The list, ping
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