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This is yest another aspect of incompetence that the GOP should be able to raise against Obama. If the rate is 46% re-defaulting, what are they going to do, create tertiary safety nets for those who can't afford the modified mortgage on the home they hold title to? We need to be moving real property assets from those who cannot afford them to those who are able and willing to pay for them. Back in the late 1990's the default rate overall was in the low 1% range. These re-defaulters are folks who have been given a second chance, with significant transactional costs picked up by the U.S. taxpayer.

Enough is enough.

Danville, Illinois, always has been a hotbed of failed government mortgages. Back in the days I was with the VA Home Loan Guaranty Loan division Chicago Office (1977-1989), Danville was one of the places where there was a high degree of foreclosures and turnovers. Many were turned back to the VA through what was called a “voluntary conveyance”, and the VA would in turn would sell these houses to ANY prospective buyer (not just an eligible veteran) on a land contract for deed (”vendee sale”) with a 5% down earnest money deal. Essentially all that actually paid for was the fee to the broker. VA would turn around, and “bundle” all these vendee loans, and sell them to an investor, thus providing a source of funding with which to operate the VA Home Loan program. It was a source of pride that VA Home Loan Guaranty program did NOT use any taxpayer funds to keep the program solvent, it was all done through the sales of these “bundled” loans, typically written with a 5-6% rate, which was low for the times, but entirely in line with other current home loan mortgage instruments.

If the “bundled” loan proved to be non-performing, the VA would buy it back from the investor, and under the terms of the land contract, kick out the defaulting occupant and put it up for sale again, after restoring the property to “safe, sound and sanitary” conditions, again offering the property up to any qualified buyer (again, not necessarily a veteran) that met the underwriting requirements.

Danville, as it so happened, even then had a disproportionate number of such properties, because, as a manufacturing town subject to boom and bust demand for the major local product (Diesel-electric locomotives used by the freight industry), long-term employment was uncertain, and was made more uncertain by the frequent labor strife that affected the local economy.

Danville has since diversified, as I do not believe that the locomotive assembly plant is there any more, but several other industrial firms have taken over the facilities, mostly of foreign ownership.