U.S. to Increase Homeowner Aid
The title of this post should probably be “Honk if I’m Subsidizing Your Lousy Mortgage – Part II.”
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.
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.