Obama’s new $7.4 billion plan to let underwater mortgage borrowers bailout (refinance at investors’ expense) is likely to cause more bank bailouts.
The latest scheme will have the effect of rewarding some for buying homes than they could not really afford, with little down payment and the Federal Housing Finance Authority should have refused to go along with it, rather than succumbing to pressure from the Administration.
Lawyers are privately talking of a chaotic, de facto moratorium on foreclosures in much of the country that could threaten the long-run stability of the nation’s financial system, and cost taxpayers hundreds of billions of dollars.
Some big banks have totally suspended foreclosure activity because of the robo-signing allegations, even though all the people foreclosed upon were in fact massively behind on their mortgage payments, and any robo-signing that occurred did not change that at all.
Government-controlled mortgage giant Fannie Mae, which helped cause the mortgage crisis, doesn’t even want its defaulted mortgages foreclosed upon any more. If Fannie Mae continues its de facto moratorium on foreclosures, lots of people who are perfectly able to pay their mortgages will simply stop doing so, imposing billions of dollars in losses on the taxpayers, who have already spent more than $100 billion bailing out Fannie Mae, and may end up incurring hundreds of billions more in losses.
It may also set off a wave of copycat defaults by other mortgage holders whose mortgages are held by FDIC-insured banks, some of which may go under and have to be bailed out by taxpayers….again.
It appears that the Obama Administration wants to suspend all foreclosures until after the 2012 election, even if that results in countless billions in losses to taxpayers, banks, and investors — and even if it sets a dangerous precedent that could result in reduced availability of mortgage loans and increased mortgage interest rates in the long run.)
***Ed Randazzo, is a nationally syndicated author. He has been a conservative activist and consultant for over 30 years and is currently the Chief News Editor of Life and Liberty Media***
