How Taxpayers are Making Your Home Affordable
The Treasury Department this week released more information about Obama’s “Making Home Affordable” program. It should be called the “The Taxpayers are Making Your Home Affordable Because You Won’t” program.
Mr. ToughMoneyLove has a few comments.
If your total debt load (including credit cards, student loans, and car loans) exceeds 55% of your income, you can still have the taxpayers rescue you. All you need to do is “promise” that you will get financial counseling. You don’t have to shed any of that other debt, You don’t have to receive the counseling first, just promise. What is the government going to do if the promise is broken – take their sweet new loan away? Please – don’t even bother with promises. This is a joke.
You do not have to be behind on your payments. You just have to show that due to lower income or increased expenses you won’t be able to pay your mortgage. That should be easy to do. Go out and buy a new car (thereby increasing your monthly expenses), then have the taxpayers help lower your mortgage payment to compensate. A fantastic way to encourage financial responsibility. Will it be long before we hear car salesman pitching this strategy in the showroom?
So how does one establish that he or she can’t afford an existing mortgage payment and needs taxpayer help? Easy – just sign an “affidavit of financial hardship.” Welcome to “Liar’s Loans – The Sequel.” Don’t tell me no one will lie about this. There are plenty of incentives, including getting $5,000 in taxpayer dollars to pay down your principal just for making payments on time. This is also part of the program.
Oh, and remember those ridiculous sub-prime loans that bubble buyers in California and elsewhere jumped all over in 2006? The loans that were interest-only and/or with 40 year amortization schedules? Lenders are free to use those loans under the program to get the payments down. Welcome to “I’ll Never Build Equity – The Sequel.”
The program guidelines state that your loan principal cannot exceed 105% of the property value. The problem is that a “broker price opinion” can be used to value the property. It shouldn’t be difficult to shop around for a real estate broker willing to give you the opinion you need. I can see unemployed brokers developing a side-income stream just providing these opinions.
Finally – this is the worst part that I don’t hear anyone talking about. The guidelines state that taxpayer money will be paid to lenders and borrowers to facilitate short sales (for those loans that can’t be modified), pay-off second mortgages and HELOCS, and compensate the lender if the property depreciates. Are you kidding me? My money to pay your HELOC? May I send a moving truck over to get you in a rental that you can afford instead?
The hard truth is that this program is even worse than I could have imagined. The fall-out from this disaster will be felt for years to come.