Further reading into the President’s new and improved HARP program to help troubled, underwater homeowners refinance into lower interest rate mortgages that we touched on yesterday reveals even more gooder goodness for the banks and further proof that this is a bank bailout and not a stimulus.
The first part, and this is a biggie, is that those new mortgages with their shiny new interest rates also magically convert into recourse mortgages instead of non-recourse. That is, with a traditional mortgage today, if you default on the mortgage and the bank forecloses on your property, any deficiency between the auction price of the home and the remaining balance of the loan is eaten by the bank.
By converting these mortgages (which are already vastly underwater mind you) into recourse loans, that balance will now follow you around for all eternity or until bankruptcy court. Anyone who agrees to one of Obama’s new mortgages instead of going into foreclosure and living in the house rent free for 18 months needs to have their head examined. Anyone who does this needs to realize that they have just signed their entire life away to the bank.
The next part is no less serious, but is more of a direct gift to the banks and only affects you as a taxpayer rather than a homeowner.
FHFA moved to protect lenders from having to buy back loans if underwriting problems are later found. “Of all the barriers, this may be the most significant,” said Gene Sperling, director of the White House National Economic Council.
Basically, the banks can keep right on going with their sloppy and fraudulent mortgage writing procedures and not suffer any consequences from their actions. When the mortgage fails, the bank doesn’t suffer, we the taxpayers do.
Thankfully, so few people will qualify for these new regulations and hopefully those who do will be told by you, dear reader, that doing this is such a terrible idea that the overall impact of Obama’s new mortgage plan on the taxpayers will be minimal.