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Make the Banks Pay the Mortgage

19 | By Shah Gilani

Now here’s another good idea from the geniuses that ruin, I mean run, our country.

The Obamarama administration really wants to help homeowners whose homes aren’t worth what they borrowed to buy them. In other words, they are “underwater.”

A lot of the loans to homeowners that are underwater are owned outright or, at a minimum, insured (more often both) by Fannie Mae and Freddie Mac, the government-sponsored (which means taxpayer saddled) enterprises that the government had to take over when in 2008 they lost on their trillion-dollar bets that home prices would go up forever. Geniuses!

In fact, these geniuses own or insure close to half of all home loans in the United States. Obviously, they like to bet big. But they didn’t bet alone. They had betting partners.

The casino was the whole country and the whole system. The mortgage originators, prime and subprime lenders, banks – everyone was handing out loans because, get this, they wouldn’t be responsible for the loans they were making. Fannie and Freddie were buying them all up while the guilty parties would make money as Fannie and Freddie pipelined more products to – guess what – make more loans!

In case you forgot, that’s where all the money came from in the whirling dervish derby that fed the mortgage bubble and aided and abetted Alan Greenspan’s how-low-can-you-go interest rate policies. I guess we can call him the Big Pit Boss. But I digress…

So, if Fannie and Freddie own your loan and you’re underwater, they have been cattle-prodded by the geniuses above them (yep, government geniuses) to let you refinance at a lower rate (lower than the crushing, sucker’s rate that ballooned on you). Because, as an investor (that’s what home buying really is – an investment, not a right) you made a go-for-broke bet at the table and forgot your basic math. Math that says, “One, plus the none that I have, equals three, so this is a good bet I can double down on and retire.”

What will these geniuses think of next?

Banks won’t let you borrow more from them – you’d end up actually paying them less on your underwater house. That would be stupid of them, and we all know banks aren’t stupid.

But, apparently, that’s OK for Fannie and Freddie to do. Why?

You’re just going to love this logic…

Because they aren’t taking the additional risk. They’re already insolvent government wards. See, it’s the taxpayers who are taking on the additional risk helping underwater borrowers reduce their payments by letting them refinance.

Why is that good government policy? Because if they have more shekels in their pockets, these underwater folks are going to spend it and send that money back into the economy. That’s the theory. You see, that’s how they got into this mess in the first place. Genius.

But I digress, again.

Obama and company now want to help the underwater borrowers whose loans aren’t owned or insured by Fannie and Freddie. According to their genius plan, they want F&F to buy and insure refinanced loans from the folks whose mortgages they don’t already own. Why? Because when the government geniuses asked banks to do this on their own, they heard the reply loud and clear: “Go F&F yourselves.”

Obama and company tried this back in February, when they suggested that the Federal Housing Administration take on more underwater loans so refinanced folks could have more spending money. But that didn’t happen. Someone pointed out that there was a newspaper article that the government must have missed that hinted that the FHA was about to need its own bailout. And wouldn’t you know it, they just about do.

Maybe it’s me, but if the geniuses at F&F have been saddled with so much junk that they’re wheezing along on life support, and if there’s talk – although nothing ever happens – that they should be unwound and buried, why would anyone suggest that they take on even more underwater loans and receive even less interest for the additional risk? Geniuses, right?

Look, it’s not that I have a problem helping people. I’m all for it. But I’m not for helping investors who take risks and then can’t handle the heat in the kitchen when the oven door flies open. I’m not for saddling taxpayers with higher risk loans so the folks who are underwater can get more spending money to help the economy – as if that’s a good plan in the first place.

If we want to help underwater homeowners, or folks saddled with high-interest mortgages, there’s a smarter, more humane way to do it.

We bailed out the banks that got us all into this mess. So why not make all of them offer refinancing to any homeowners who’ve been regularly paying their mortgage? These homeowners deserve some credit for doing the right thing, for dealing with a bad investment like good investors do.

And make the banks offer super low interest loans and keep the loans on their own books.

Yes, I said MAKE them. And that’s exactly what I mean.

Shah

19 Responses to Make the Banks Pay the Mortgage

  1. Michael says:

    Don’t the Fanny-Twins & the Private Hoover’s have enough Repo – inventory left?? Do they need more Repo’s to keep their portfolio’s strong?
    Must be the Blocks at the bottom of the “Ponzi-Pyramid” are getting to loose and the Pit Boss’s are nervous their actor in the Spotlight “Juggler Ben Printerman” is getting Arthritis and is down to juggling all those balls in the air with only one hand! Ah well, if you can’t beat those lazy consumers, use a bigger Club!

  2. Paul Moody says:

    Excellent points. I have a conventional loan (meaning no involvement from F and F) and do not qualify for a reduced interest loan without having at least a 90 percent loan to equity value. No breaks for those who have done the right things, but I wasn’t expecting any. I agreed to the loan terms. F and F Is another example of a government supported program that has derailed. This entitlement nation is weighing heavy on my back, and my back is getting very tired.

    • Bill Williamson says:

      Is Obama, Reid, Holder, Val the Iran Gal and the whole bunch just plain pure communist? How long do we sit back and watch the destruction of the American Government? I know, the people voted this crap in, but Hitler was good at taking advantage of people on their ass also.

      • Mike Sullivan says:

        Bus et al were in office when this “house of crds” fell apart. Their answer were TARP & other programs with NO accountability, NO restrictions, NO oversight, … and leave it for the next guy as they went out the door. Were you alive in 2007-9?

    • Kevin Beck says:

      One point needs correcting in your post, Paul: A conventional loan does NOT mean no involvement from the Failure Twins; it means that it’s not insured by a government agency program. The non-conventional loans are those written by FHA or VA.

  3. Kevin Beck says:

    I’m also not one to help investors profit from their failures. The system was corrupted when some boobs in Washington “decided” that there would be a banking system bail-out because some doofuses that failed were suddenly “too big to fail.” If capitalism is to have a chance at success, then the concept of “there’s a chance that this will fail,” needs to be re-instated.

  4. Faith La Riviere says:

    You have it right….the “investors” in a house miscalculated and lost…I agree…I help a lot of people…personally help financially and I am not rich and live in a small house which I can afford but I have a real problem with bailing people out who should have known better and deep down inside they knew better but did it anyway. No one is going to bail me out if my small amount of stocks drop, as they did, in value….no one is going to bail me out for anything and I personally am tired of hearing how we should be bailing out businesses and people with taxpayer money. I didn’t vote for him and those who did made a big mistake….

  5. Frank says:

    During the mid 1980′s, I was privy to the securitization of mortgages, because a friend of mine brought it to my attention. I was concerned about the guarantee part by insurance companies. I asked one of my friend who was working for a Wall Street firm and he said it was not his area, but send me two research done by some firm. The report said the weak link is the insurer. We know what hppened to AIG.
    Wall Street people know this problem and I am sure Govt. knows it too.
    What happened to Mortgage Promoters, especially the CEO’s of the bail out companies? Are they in the pokey? No, sir, Godzilla, is still out there!

  6. Doris Kelsey says:

    Won’t happen. Your solution is too logical and sane. Besides, who makes the money? If there is no money to be made, won’t happen.

  7. Joseph p bell says:

    I bet Jamie Gorelick ,911 Commissioner ,Former Freddie Mac ,26 million dollar winner could pay a lot of our mortgages with the 3 Jobs she has now .

  8. Ron-E says:

    How come we never hear anyone (underline that) in washington make a logical explaination.? MONEY MONEY MONEY. 0NE BLATANT EXAMPLE …WHERE WOULD YOU BE IF YOU INSIDE TRADED ? I SPOKE TO A COUPLE LAWYERS WHO STARTED PUTTING A LAWSUIT TOGEATHER ON INSIDE TRADING….THEY WERE ….TOLD…. DROP IT IF YOU WANT TO CONTINUE PRACTICING. NOW WQHERE DOES THAT LEAVE YOU AND I.

  9. Ed the Grocer says:

    I think that we should keep asking the one soft question. Is all of suburbia viable? We keep placing the improbable dream in front of people when there should be a desirable and affordable urban home ( yes, Smart Design ) and a supply of small rural plots for those who want a little dirt under their nails.

  10. DBH says:

    I think the situation is more nefarious. Loans sold to F & F are ultimately “owned” by the govt., including the assets they are backed by. When the decision comes to finally collapse the system, it is the govt. that owns your house…. and you will be reminded of that when in the eviction notice arrives and “redistribution of wealth” takes on a whole new meaning. I have friends from the old Soviet bloc countries shaking in their boots….they’ve been down this road before…and they recognize all the warning signs.

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