U.S. to Increase Homeowner Aid

March 26, 2010 by  
Filed under Economics

The title of this post should probably be “Honk if I’m Subsidizing Your Lousy Mortgage – Part II.”

The idiots in our government are at it again. They refuse to acknowledge that the fastest route from a deflating real estate bubble to a normal market is to actually let the bubble deflate. Instead, they insist on throwing taxpayer money into one mortgage “rescue” program after another.

NOT ONE OF THESE MORTGAGE RESCUE PROGRAMS HAS WORKED.

How can Mr. ToughMoneyLove make this bold statement?

First, the experts are predicting 4.5 million foreclosures this year. There were 2.8 million foreclosures in 2009.  The billions thrown at the foreclosure problem in 2008 and 2009 have bought us …… 60% more foreclosures!

Second, the Special Inspector General for the Troubled Asset Relief Program has slammed the government’s Home Affordable Modification Program as a failure, and in particular the high risk of re-default by those who participate in the program. (Source) I tend to pay attention to professional critics of government programs. He isn’t trying to buy votes with taxpayer dollars.

Nothing is working, nor should we expect it to. It’s like spitting on a forest fire. Let the thing burn itself out.

Nevertheless, there is a new rescue plan brewing. This one will include government subsidies for homeowners who owe more than their home is worth. Sort of like real estate valuation insurance, except that the government is the insurance company and the borrowers didn’t have to pay any premiums. We are paying the premiums, after the loss has already occurred. Such a deal!

But wait – there is more. The Treasury is going to help unemployed homeowners reduce their mortgage payments for at least three months while they look for work. If a homeowner doesn’t find a job during those three months, or if they find a new job at a lower salary, they will be evaluated for further assistance. So now taxpayers will be providing salary continuation insurance to overstretched mortgage borrowers.

Source: U.S. Said to Widen Homeowner Aid, Subsidize Mortgage Reductions

“What about the poor homeowners, Mr. ToughMoneyLove? What will they do if we don’t help them?”

I don’t know ….hmmmm… how about they do whatever they did before they bought that house they can no longer afford?

“But Mr. ToughMoneyLove, many of these people have lost their jobs. They can’t afford a mortgage. What about them?”

How about we find them a job instead of throwing more of our money at a subsidized mortgage?

We are in a recession. Unemployment is high. Some people lose their homes. That’s what happens in a recession. Some people find bargains in a recession, buying a foreclosed or short-sale home. Good for them.

Some folks overpaid or over-borrowed during the go-go real estate years. They took a risk. They lost. That’s what can happen when you take risk. If you can’t handle the downside, don’t take the risk.

There are winners and losers in every economy. If you want to find an economy where everyone wins, move to another planet and start your own economy. Write a book about how it works out.


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16 Responses to “U.S. to Increase Homeowner Aid”
  1. MasterPo says:

    I know 2 families that almost lost their homes in 2009. Both very middle class families.

    Neither “qualified” for any government programs!! :-(

  2. Lefty33 says:

    “But wait – there is more. The Treasury is going to help unemployed homeowners reduce their mortgage payments for at least three months while they look for work. If a homeowner doesn’t find a job during those three months, or if they find a new job at a lower salary, they will be evaluated for further assistance. So now taxpayers will be providing salary continuation insurance to overstretched mortgage borrowers”

    TML you are way, way off base on this statement.

    How is it that if you get unemployed through no fault of your own and are unable to find similar employment or any employment you are suddenly overstretched?

    Here’s a real life example.
    I’ve been unemployed for about a year and have applied for over 400 jobs and still have nothing. The making home affordable plan is a joke and Chase has been uncooperative at best with doing anything.

    So if I cannot find unemployment and my UC runs out and this plan can help how again am I overstretched? My mortgage with taxes and insurance was around 26% of my income when I became unemployed so I wasn’t “overstretched” then either.

    Sometimes your broad generalizations are crass and simplistic at best.

    • I am not off base. My logic: If you are unemployed, that’s a bad situation. If you are unemployed for an extended period, that’s a worse situation. If you are unemployed such that your emergency funds are exhausted, you need to sell the house. If you refuse to sell your house under those circumstances, that should be your problem, not mine. If you cannot sell your house because you are underwater on your mortgage, you are (and were) overstretched because you had inadequate equity.

      • Lefty33 says:

        Spoken like a person who has never had to deal with anything close to the situation we are talking about, so to me you bring no perspective. Kind of like the college professor who can lecture you about how things should work but has never been in any of the situations he talks about so he has no real idea.

        “If you cannot sell your house because you are underwater on your mortgage, you are (and were) overstretched because you had inadequate equity.”

        No TML it’s because if I were to try and sell it may take 6-12 months to do it because there are no buyers unless you fire-sale your house in my area (PA).

        It has nothing to do with inadequate equity. I had more than nine months saved, which is more than most fiscal gurus tell you to have. But if you are suddenly without earning ability for twelve months or more what do you think will happen?

        In the real world these things happen to people less fortunate (and judgmental) than yourself. Not everyone is some lazy SOB looking to milk the system or is a Fool of Finance as you like to call people.

        As usual you speak with the economic elitist mentality of someone who has never had to go through anything close. Come down off your high-horse and see that sometimes government assistance is needed in certain situations for the betterment of people who truly need it.

        • Lefty: It has nothing to do with me being an elitist or you being lazy. It has to do with the proper role of government in the personal financial affairs of its citizens. If you need the money or can’t afford the payments, you sell your house for market value. You call it a “fire sale” because you have your own inflated idea of what the house is worth. The market has a different idea. You want the government to help because you and the market disagree. The government has already done too much to support inflated real estate prices. Accept what is real and move on. Don’t expect taxpayers to support your altered vision of reality.

          • avery says:

            Well said. No matter how it seems, Reality is our friend, if only we would recognize it.

            And that is a lesson I learned from going through very tough times.

          • Lefty33 says:

            “Lefty: It has nothing to do with me being an elitist or you being lazy. It has to do with the proper role of government in the personal financial affairs of its citizens”

            Sure it does TML. Anyone who you disagree with is a Fool of Finance and most of your postings in the last 12 months on government programs usually are about people being lazy and just trying to milk the system.

            Don’t shirk your own posts.

            To me the government has the responsibility, to a point, to help and assist people in times like this when they refused to regulate and effectively hold accountable the very banks and companies who were allowed to have a free for all with lending.

            So to me the government should step in to fix what they allowed to happen.
            Because clearly the free market failed.

            Also I disagree that enough has been done. Quite the contrary. Most banks and lending institutions have more or less flipped the bird at the Feds and either have not participated in loan modifications or have drug their feet so bad that it’s fairly close to not participating.

            I know that with Chase first hand.

            To do enough would be to stimulate the jobs issue but since neither the left nor right have proposed much on that other than rhetoric, to me the next best thing would have the Treasury actually step in and force the lending institutions to do what they are suppose to do and modify more loans and not just pay lip service that they are.

  3. Lefty33 says:

    I forgot to add that I do agree with your statement of:

    “How about we find them a job instead of throwing more of our money at a subsidized mortgage?”

    But so far both the left and right have failed to grasp the need of jobs over the gimmick programs.

    • avery says:

      Not real clear on what we woudl expect the right to offer right now, but I’ve been waiting and waiting for the left to make that hard pivot to jobs like they said they were going to. On the other hand, considering the track record so far it would perhaps be better if they just went golfing.

  4. MasterPo says:

    Mr. TML is correct.

    As tough as it is, if you are sitting around waiting and hoping for someone in Washington to wave their pen and *POOF* the salad days of great jobs magically re-appears you’re only fooling yourself. Get use to 9%-10% or more unemp for YEARS to come! Obama and his magic no-new-jobs recovery. (Certianly should make you stop and think: WHO is doing all this recovering if no one has a good new job?!)

    Lefty – If you’re going that route with your house, what about a car? Surely someone in your position has a tough time making their car loan or lease payments, not to mention buying insurance and gas. Expect DC to help with that too?

    Lefty, if you’ve been unemployed totally for over a year and are in such desperate financial shape they fault is yours.

    I can say that because I’ve been there. I was one of the thousands of New Yorkers who lost their job shortly after 9/11. And IT was especially hit hard! I was out of work for 8 months. Longest period in my life. Even the Bush unemployment extension was about to run out for me. So I took a crappy blue collar labor job. Nearly killed me physically and emotionally. But it paid more than Wendy’s. Worked there for nearly 4 years while still trying to find an IT job. I even moved up the ranks a bit to being a supervisor (no great promotion, trust me on that!).

    But the point is I didn’t just sit around waiting and hoping and mailing resumes.

    If you are THAT deep in a hole why haven’t you taken at a minimum a part time job? Or 2 or 3 part time jobs?

    It’s not fun I’m sure.

    But is loosing your house better?!?!

    • Lefty33 says:

      “Obama and his magic no-new-jobs recovery.”

      Let’s not revise history. Everything tanked under the watch of The Shrub and neither he nor the GOP did anything either. Sort of a Nero with his fiddle on top of the White House while watching the economy burn.

      I’m not saying that Obama has got it right, but please don’t start by mentioning Obama without bringing up The Shrub and his advisors who allowed things to slide.

      “what about a car?”

      Car is paid for. Don’t care about that.

      “Lefty, if you’ve been unemployed totally for over a year and are in such desperate financial shape they fault is yours.”
      “If you are THAT deep in a hole why haven’t you taken at a minimum a part time job? Or 2 or 3 part time jobs?”

      First of all what blue collar jobs are you talking about?
      The difference between now and ’01 is that now pretty much no one is hiring.

      No USPS jobs, No UPS jobs, No Union jobs. All of those avenues have been tried and exhausted and I’ve got a family connection that is fairly high up the Teamster food chain and the answer is no one is hiring in the PA, NJ area. Either there is nothing or places are still letting people go.

      I’ll give you an example of a current hiring scenario.

      About two months ago I go through two phone screens and two interviews with a company for a good paying white collar gig.
      Eventually on the third interview I’m seated with the hiring manager and the Director of HR. The HR guy explains that it’s me against another person and we are like two similar apples. And why would this company pay more for an apple than they have to.

      He then says that they are going to have a bid for the job. Which ever person bids the lowest will get the job. He tells me that I should start at least 10% under what we talked about for compensation and 20% below what they posted the position pays on their website.

      Needless to say, I didn’t get the gig. I guess I didn’t go low enough.

      The company was Olympus.

      So in the real world, not in TML land, companies are using shady hiring practices when they do hire and obviously most aren’t.
      And by the way Master Po, be freaking serious working at Wendy’s isn’t paying the mortgage if you live in the NorthEast.

  5. MasterPo says:

    Lefty – How about getting a job at the Post Office. Seriously. They ALWAYS need letter carriers. Starting pay is around $17/hr. The job will kill you in the longer run but it beats Wendy’s pay.

    Speaking of which, I only used that as an example. The point being to get your butt out there and start some sort of cash in flow to at least slow your financial down fall until you can find something more along the lines of what you want.

    Right now based on your posts you have ZERO cash inflows. A little is better than none at all.

    I repeat myself: If you have gone this long with out ANY job the problem is YOURS.

    I 100% agree to keep looking for whatever job your really want (what do you do by the way??). But if you have nothing now surely you can get SOME kind of job. Maybe just a night warehouse thing that will let you go on interviews during the day?

    BTW, taking a pay cut to get back into your chosen line of work – well, if that’s what you need to do…

    Remember what the Ferengi say: “Pride and an empty purse is worth only the empty purse.”

    ps- Let’s not get away from TML’s point either: If you’re sooooooooooooo deep in the hole then sell the house, move some place cheaper. Maybe even relocate to where better job prospects are. You can always buy a house again later. It’s not the end of the world. People have done far more for far less. I agree it isn’t pleasent. I’d hate to have to make that choice too. But I accept the reality of the situation.

    pps- As for Obama: Suppose you’re in a sinking boat. The Captain jumps over and starts swimming away. Someone else climbs in. You say “We’re sinking! Something has to be done!” So the new person start making holes in the bottom of the boat. You say “WTF are you doing?!?!?” and he replies “*SOMETHING* has to be done and I’m doing it!”

  6. Lefty33 says:

    “How about getting a job at the Post Office. Seriously. They ALWAYS need letter carriers. Starting pay is around $17/hr.”

    Actually no they don’t.

    First of all the USPS has a moratorium on F/T hiring for carriers. All they are for hiring for is P/T fill-ins that will get you two days a week, or three tops.

    I’ve sat for the last two tests that were somewhat close to me, 22 and 29 miles away respectively, and each had over 100+ people sitting for test for the P/T two or three day a week position.

    They start you off by telling you that this job will never go F/T and that once the USPS gets permission to drop Saturday delivery they will start cutting the P/T fill in carriers by seniority from the least experienced on up.

    At my local post office they have not hired a F/T carrier since 1998.

    It’s like any job, no F/T work and a few P/T or temp things are out their if you test with crazy amounts of people. Needless to say I didn’t get either job.

    “BTW, taking a pay cut to get back into your chosen line of work – well, if that’s what you need to do…”

    I’ve tried that too with no success yet. I’ve gotten the you’re overqualified line a lot. Or my favorite came from a large regional hospital, “We require ROI from our new hires, Lefty what guarantees can you give us that when the economy turns around you won’t bolt for a better paying position. Because quite frankly no one with your experience would stay in a job like this”.

    As for your PS, my point is still that TML is way off base in his thinking that the government has down enough to help people out of the situation that they helped to put us in with lax rules and regulations of the financial sector.

    It’s like I tell my kids, “If you are old enough to make the mess, you are old enough to clean up your mess”.

    As for your PPS, the ship had already sunk before Obama got to the scene. It would be more like the first captain fell asleep at the wheel and hit an iceberg that sank the ship.

    When the captain of the rescue fleet got to the scene he opted to give tours of the wreckage and blame the first captain instead of helping.

  7. MasterPo says:

    Lefty – I don’t know where you live. In my area they are (according to my letter carrier) firing full timers. Not at the usual career entry level, a new category, but the pay is as good just fewer bennies. But at least it’s something much more than min wage. And that was my point.

    I too have gotten the “what can you do to prove you won’t leave us for a better job” question (and that was when the ecomony was roaring!”.

    IMO, you have two choices to answer that:

    1) Say “If and when the economy does turn around significantly, and if I do choose to leave at that time, it will be no problem for you to hire a wewll qualified person to replace me. In the mean time, you know I need this job so you know I’m going to do all I can to keep it when I get it.”

    2) Say “What guarantees can YOU give ME that you won’t let me go in a couple of weeks? Or merge with some one else? Or relocate out of town? Or out source my function? It works both ways.”

    Yea, #2 is a bit more combative but if you don’t think you’re going to ge the job why not try it? 😉

    pps- If going from $8 trillion to $14+ trillion in debt and rising with no signifincant results (unemp is STILL at 9.7% even though Obama PROMISED if stimulus was passed it wouldn’t go over 8%! I have the link to the Washington Post editorial – can you imagine an American President writing a Post editorial?!?! – where he says it) is a good move, get a job teaching economics.

  8. Lefty33 says:

    MasterPo,

    Because you asked, I live in PA and I worked in the hospitality industry in a financial capacity for about 15 years before being cut loose.

    Also the USPS does not pay $17/hr to start anything.

    2nd and 3rd shift sorting and distribution jobs start at $11.
    And temp letter carrier gigs start at $12 for rural and $13 for urban all with no bennies.
    (I only know because I tested for both and tons will come out for one temp. position for $13/hr with no bennies and no guarantee of schedule or how many hours a week)

    I will continue to lurk but I doubt I will post as clearly TML has his own agenda that is not open to other opinions and has offered nothing but rhetoric on this topic.
    I still fully believe only someone who has gone through these issues or who is going through them can understand the mindset and frustration.

    Obviously he cannot seem to grasp the issue that needing assistance or help does not make someone a “Fool of Finance” or a system milker. But that is how he portrays people in these situations regularly. And it’s incorrect, biased, and bigoted.

    MasterPo thanks for you point of view.

    • Lefty – I do have my own agenda. High up on that agenda is this: personal responsibility. I understand frustration with life’s difficulties. We all have them. But that doesn’t translate to “the taxpayers should subsidize my mortgage.” That was and is the message of my post.

      No one said you were lazy or unmotivated. But I don’t want to subsidize the mortgage of anyone. Owning a home and having an affordable mortgage are neither constitutional nor fundamental human rights. Being down on your luck does not alter that. Is that so hard to understand?

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