The White House is rolling out a program to fight back
against the home foreclosures that have been crippling American
communities for almost three years. The plan especially aids the
unemployed, requiring that mortgage lenders temporarily slash required
payments for job-seeking homeowners. Lenders would have to temporarily
cap payments at no more than 31 percent of the borrower's income. The
plan also alleviates payments on "underwater" mortgages, where
homeowners owe more on a house than it is worth. Is the plan any good?
- Post-Health Care Tone Shift The Washington Post's Renae Merle reports, "The measures have been in the works for weeks, but President Obama is finally to release the details days after his watershed victory on health-care legislation. Following that bruising battle on Capitol Hill, his administration is now welcoming a chance to change the subject and turn its attention to the economy and, in particular, the plight of the unemployed -- concerns that are paramount for many Americans."
- Who Will Pay For Mortgage Reductions? The Atlantic's Daniel Indiviglio asks of the plan to allow unemployed borrowers to temporarily defer or shrink payments, "Will the government be footing the bill for these altered payments or have banks agreed to temporarily defer or shrink them? Obviously, the latter would be fantastic news for both borrowers and taxpayers."
- Underwater Reforms Will Be Controversial The New York Times' David Streitfeld calls the plan to refinance "underwater" mortgages "the biggest new initiative, which is also likely to be the most controversial." There are 11 million such mortgages. "Many of these loans have been bundled together and sold to investors. Under the new program, the investors would have to swallow losses, but would probably be assured of getting more in the long run than if the borrowers went into foreclosure."
- Artificially Inflating Economy The Lonely Conservative suspects the measure is designed to make the economic situation better than it is for the 2010 elections. "That would create an image of a failed presidency. It's the same thinking that was behind food stamps. Politicians don't want images of millions of people standing in line for bread and cheese."
- Punishes Responsible Borrowers In what will surely be the first of many similar reactions, Robin Koerner balks at the plan, which she says punishes responsible mortgage borrowers like her:
If I had not been so responsible, Obama's plan (I still cannot quite believe it) would have given me (via my bank) YOUR money, humble tax-payer, as a gift to reduce my mortgage, and I would have gained to the tune of many thousands of dollars.However, because I did the responsible thing, MY tax money will be going to help those who were in exactly the same situation as I, but weren't responsible enough to live within their means and meet their obligations, perhaps because they bought a bigger car than they needed, were paying interest on credit cards they shouldn't have been using, or whatever.