There was an article in yesterday's New York Times that explained the new mortgage relief plan, which is due to be signed today, is very close to completion.
Like so many articles that have been written about the housing market crisis, this one liberally showed how all the victims will receive assistance.
In case you do not remember, the victims of this are the homeowners who have or will lose their homes to foreclosure due to their failure to make the payments on the loan.
They are victims because the banks wrongfully forged documents to make the foreclosures happen.
Now I certainly understand why the Feds want to go after and punish the banks for forgery, but I'm having a problem labeling the homeowners as "victims" of this crime.
Have their been any cases reported where banks forged documents to foreclose on anybody who was "current" on their loan?
Everybody is lining up to take shots at these banks as if they were attacking performing loans. These are loans that are in default!
You are not going to fix the housing market by handing out money to people who are not making their mortgage payments. But apparently, the Obama Administration sees otherwise:
“This will be one of the most significant steps in the recovery of homeowners, neighborhoods and the broader housing market from the worst collapse since the Depression.” - Shaun Donovan, the Secretary of Housing and Urban Development
This makes me sick.
Mortgage Relief Plan Is Counter Productive
Let's not confuse two very separate issues that are really at play here.
- Many lenders forged documents (they broke the law) and they should be punished
- What harm has there been to homeowners, and why are we taking billions of dollars from banks and just giving them out to people who defaulted on their loans?
Maybe I'm reading this wrong, but I have yet to hear stories from the "robo-signing" scandal where people were wrongfully foreclosed upon.
These lenders (or their legal representatives) created documents to show they owned the loans (meaning so they could have the legal right to foreclose). Again, have the FBI throw the wrong-doers into jail for loan fraud.
But why take money from the shareholders of these banks and give it to people who were in default of their loans? Is this really justice for anybody, or just a re-distribution of wealth?
Mortgage Relief Plan Is Fraud
Unless I completely missed the boat on this, I would think that this mortgage relief plan is as fraudulent as the methods the banks used to foreclose on the loans in question.
The comment from the Secretary of Hud is an insult to the intelligence of the American people. The US mortgage market exposure far exceeds a trillion dollars, giving handouts of $18B to $25B to a small fraction of the market is not going to have an impact.
Think I'm wrong? I said the same thing about the Homebuyer Tax Credit when it was first envisioned several years ago. The Tallahassee housing market (as well as the US housing market) has since returned to pre-tax credit levels, and the US government is going to receive less revenues from taxes for the coming few years.
Keep the government out of the housing market recovery. The mortgage relief plan is a terrible mistake that is a clear re-distribution of wealth (which I guess is Obama delivering on his campaign promises).
Joe Manausa, MBA is a 23+ year veteran of real estate brokerage in the State of Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.