Irresponsible Home Buyers Reaching Deeper into our Pockets

April 29, 2009 by  
Filed under Economics

rescue_moneyHandout specialist – and professional nose wiper – President Obama has decided to toss more taxpayer money at irresponsible home buyers. (I won’t say home owners because those folks don’t own anything except mountains of debt.) I am referring to the money morons who, when lacking cash for a down payment, used a second mortgage to close the deal. 

Now those crybabies are distraught because the government’s $50 billion dollar mortgage rescue plan isn’t working for them. They can’t have their first mortgage re-worked because that mean ol’ second mortgage lender is in the way.

The Second Lien Rescue Program is in Action

Not to worry, says President Obama. We feel your pain. We definitely need your vote. So here is what we are going to do with our new “Second Lien Program”:

Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol.  Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate. 

And the money details:

Servicers can be paid $500 up-front for a successful modification and then success payments of $250 per year for three years, as long as the modified first loan remains current.

Borrowers can receive success payments of up to $250 per year for as many as five years. These payments will be applied to pay down principal on the first mortgage, helping to build the borrower’s equity in the home.

Everyone who was involved in the original mortgage silliness gets government money – lender and borrower.

When it comes to Americans who are financially reckless, it seems that the government’s largesse has no bounds. Mr. ToughMoneyLove doesn’t  want to help those people. I want them to feel pain in such a way that a lesson is learned – permanently. Throwing our money at them will not accomplish that.

I’m now waiting for the final phase federal home buyer rescue program to be announced: the “Nothing is Working with these Clueless Home Buyers So Let’s Just Pay Off their Damn Mortgages and Be Done With It” Program.

Call me crazy but before you do, consider how far down that path we have traveled already. 

Would you have called me crazy if two years ago I had predicted that the federal government would own and be calling the shots in the U.S. automotive industry?

Photo credit: Matti Mattila


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7 Responses to “Irresponsible Home Buyers Reaching Deeper into our Pockets”
  1. SJ says:

    Let’s all sign up for the brave new world. Looks exciting.

    That’s the problem w/ democrazy and regular elections. But this does beg the question, what’s a better system?

  2. This is all part of the “everyone will get ice cream” campaign promises. It’s a sure way to convince some people that their actions and irresponsibility don’t matter. And, others like me will just stop being a tax paying enabler of this insanity.

    We can’t lay all the blame on King Obama. There is a congress that supports these efforts, and silly Americans vote them into office for decades on end.

    Also, many before our current King have greased the skids of expectations. Remember the $1+ million paid out if you had a family member killed on 9/11? Thank you King George.

    Clair

  3. Roger says:

    Whenever I hear news like this, I’m reminded of Tocqueville’s comments in Democracy in America: ‘The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.’ (Or one of the many variations thereon.)

  4. kitty says:

    This is something I actually have mixed feeling about. Yes, this is all pretty outrageous. But I am asking myself what is cheaper for us and the economy? Is it cheaper to have these irresponsible buyers or is it cheaper to let all these houses foreclose? Taxpayers will not have to pay for foreclosures, but foreclosures affect responsible neighbors, drive the prices further down, lead to more foreclosures and hurt the economy. I also feel for the responsible condo owners living in complexes with multiple foreclosures, especially if buyers default on common charges too. Condo owners who are perfectly OK financially may find it difficult to pay when their common charges skyrocket or there is an assessment as the result of non-paying neighbors.

    One thing that bothers me about this program is the complete lack of conditions of what happens if at some future point the prices go up again. I don’t think it is fair that the home buyer profit from it. I think there has to be some kind of a provision that would allow taxpayers and lenders to get paid from (any) future profits.

    As to the rest – I am on the fence here because I just don’t know what will cost us more.

    @Roger – great quote, thanks. Pretty scary, though.

  5. Rick Beagle says:

    I am shocked, but I kind of agree with Kitty.

    On the one hand helping with a SECOND mortgage outrageous to me, but on the other hand – it’s a mess. Question is how do you want to clean it up?

    Rick Beagle

  6. Rob Bennett says:

    My guess is that a whole lot of us are going to end up becoming “crybabies” if the economy goes over a cliff.

    I’d rather solve the problem than point fingers.

    Rob

  7. MasterPo says:

    Why stop at a house? How about cars?

    If you buy a car on a 60 or 72 month loan and 2-3 years into ownership you can’t pay why not have the gov bail you out too?

    Afterall, you need your car to get to work, the doctor, go food shopping, take your kids to school, etc.

    So why not bail out car owners too?

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