Is Obama about to forgive billions in mortgage principal?

Hot Air ^ | 8/5/10 | Ed Morrissey

[Daisyjane69]

James Pethokoukis hears rumors of an August surprise coming from the White House, one that will attempt to win backs the hearts and minds of voters dismayed at the failing economic policies of the Obama administration. With the government fully in control of Fannie Mae and Freddie Mac, Barack Obama may issue an order to forgive portions of underwater mortgages processed through the GSEs, where negative equity approaches $800 billion overall. Some financial houses have begun quietly preparing for the possibility:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. …

[itsahoot]

You only own it until they decide you don’t. You are temporary the government is permanent. Of course we could wake up, but not in my life time.

[Fu-fu2]

Thank you

[griswold3]

After I posted that, I noticed the others. I’m in good company.

[zzeeman]

Put hour flame retardant suit on because you are about to get it heavy.

Not sure why that would be, I was only answering a question. If it is about planning to use the equity in your home to help with the cost of living in your later years, I am in that boat as well. While I can't say that we viewed that growing pile of equity as an IRA and didn't save-invest elsewhere, I have to admit that some other purchase and investment decisions that we've made over the years was colored a bit by the progress of that growing pile of equity! At this point we are about down $300K or so from what we could have sold it for at the peak, and yeah, that fact and the strong possibility that it will sink even lower over time has certainly factored into our current spending levels and future plans. I am in the same boat as a lot of folks, and I know that some will scold us all for ever even thinking about that growing pile of equity as anything but an illusion created by an endless supply of fiat money.

[dalereed]

If they do there should be a class action suit against the government by everyone that pays their debts!!!

No reductions, throw them out in the street!

[redgolum]

Well, many of these loans will never be paid back. The banks are in a position where they can't really afford to let the foreclosed homes sell for to little, as that would make their “assets” crash. Houses are already getting foreclosed, and sitting empty. One in my area has been vacant for two years, and the bank has stopped even paying someone to mow the lawn.

This would be one way to get rid of a bunch of toxic debt on both sides of the ledger. But one way or another, much of this debt will not be paid back.

For now, deflation is winning.

[LomanBill]

>>You only own it until they decide you don’t.

 

I'm reminded of that everytime I pay my property taxes.

Wanna see what I expect to happen once the "forgiven" don't pay those?

 

Here's a preview: McFeudalism.

 

Got section 8?

[LomanBill]

[- what happens to the private property rights of those forced into accepting some form of government "forgiveness" of their debts, who will hold title to the property?]

 

Yep. That's a big curly string I see hanging out of this "free" pie. 

 

Welcome to McFeudalism.

[OldGoatCPO]

NC reminds me politically of Illinois. Republicans were strong in local politics outside Cook County. That is why there were GOP Governors and thriving collar counties around Chicago. But they became arrogant and stopped worrying about the people and the shifting demographics. NC Dems are the same they seem very arrogant and take it for granted that they will always control the State despite corruption and incompetence.