The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Foreclosure Plan:
Money to Banks, not Homeowners

Feb 23, 2009

The Obama mortgage plan is being touted as a boon to homeowners in danger of losing their homes. No – it’s really a boondoggle for banks holding mortgages through Fannie Mae and Freddie Mac.

The plan “entices” mortgage companies to rework loans. How does it do this? By giving them money, of course! These mortgage companies will get 1,000 dollars for just meeting with each eligible homeowner, and another 1,000 dollars per year for each reworked mortgage (for up to five years) after that. There are around 4 million mortgages that could be eligible for these reworked mortgages, so that comes out to a 24 billion dollar gift to the mortgage companies – just for agreeing to take the homeowners’ money more slowly. And that money can be doubled in most instances.

No actual money goes to the homeowners in danger of losing their homes. In fact, the homeowners won’t be saved any money at all. If their house is no longer worth the value of the mortgage, they still have to pay that original value. Yes, it’s at a lower rate of interest – but since they’ll be paying for a longer period of time, that interest will still accumulate. Homeowners will have two choices at the end of this three-to-four year period: pay the remainder of what they owe in a lump sum, or see their interest rate move back up to the rate it was before it was reworked! These homeowners will be trapped in a ballooning payment all over again!

Obama justifies this by saying that by that time, the housing market will have rebounded and home values will be up again. Oh really? And what if they aren’t? Those values were already hugely inflated by the real estate bubble created by the banks in the first place, with their sleazy adjustable-rate mortgages.

Why give any money to the banks that created the problem and not to the homeowners who are trapped by it? Obama said he didn’t want to “rescue the unscrupulous or irresponsible.”

What BS! That’s exactly who’s being rescued by this plan: the unscrupulous mortgagers who ripped people off. And it blames and punishes those who were duped by the fraud those mortgagers perpetrated.

If they truly wanted to get rid of the crap mortgages gumming up the economy, they could simply CANCEL the mortgages: don’t give a DIME to the people who created this problem – the bankers and investors who fraudulently drove housing prices up, and the slimy mortgage brokers who pushed fraudulent mortgages with hidden, exploding interest rates onto people who they KNEW could never pay them. Make the criminals pay, not the victims of this fraud!

The Obama plan is nothing more than a gift to the mortgage companies – a bribe to string homeowners along. If it succeeds, it will only create another real estate bubble.

After the banks get their money, homeowners will be left holding the bag – again.