August Rumor: The Mortgage Hail Mary to Save Soulless Democrats

Via Memeorandum

Remember Peggy?


Peggy may be getting her wish if there is any truth behind this August rumor:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.

The last weapon in the arsenal to stave off political annihilation. Surely they wouldn't dare would they? Of course they would:

The mortgage Hail Mary would be a last-gasp effort to prevent this [loss of House and working majority in Senate] from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.

Count me among those who would be greatly offended.

Don't Worry About Paying Your Mortgage

Remember Minta Garcia, the school bus driver with the $800,000 home?  Garcia once begged Obama on CNN, "Stop the foreclosures."  From her mouth to Chairman Obama's ears.  The Washington Post  reports the Obama administration will require lenders to slash or eliminate mortgage payments of the unemployed for up to six months though the administration may allow lenders to permit borrowers to skip payments altogether.

Oh, but there is more:

The administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.

The problem of "underwater" borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged.

Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said.

So, no new taxpayer dollars are required, just the old taxpayer dollars they had laying around.  I feel better already.  Let me say I have sympathy for anyone unemployed during this awful economy particularly under the leadership - for lack of a better term - of this president.  Perhaps if the administration had targeted their efforts on  "J O B S" everyone, including the President, would be far better off.

Nevertheless, there does come a point where people are taught through such intervention, there is no need to plan for a rainy day.   Robin Koerner at "The Moderate Voice," is asking himself why he bothered:

A few months ago, the principal on my mortgage was comfortably more than the place was worth, and my low income was in decline. So I did the responsible thing, cut my expenses back to the bone, and raised and moved whatever money I could to cover it, and to try to pay it down. I wanted to deal with the fact that I was upside down on the mortgage and dangerously exposed to future rate increases; most of all, I wanted simply to reduce my monthly payments.
Why did I bother?

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.

The President is quite generous in this election year with OUR money as he uses it to toss to the plebes in hopes of assuaging residual anger they were last to get a bailout.  The Loney Conservative notes the bad optics in an election year:

Well, he can’t have any more Obamavilles pop up, or foreclosure related suicides, now can he? Of course not. 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.

There is always that potential, isn't there, it's really all about him.  It's as though he suddenly realizes people are struggling because Axelrod suggested the visuals weren't working or something.   I am sure there will be a whole new array of victims trotted out for stump speeches so Obama can claim to have saved them from being tossed in the streets by evil bankers and their Republican allies.  Lest we forget, the Wall Street crew financed Obama's campaign, now they will be ordered about to save the Democratic majority.   Guess when this is all set to be put in effect?   September, timing is everything when you're putting on a show.

More on this at Memeorandum

Merry Christmas - Unlimited Bailouts for Fannie and Freddie

Consider yourself Santa Claus for the formerly quasi-governmental institutions known as Fannie Mae and Freddie Mac. The White House announced on Christmas Eve they would eliminate the caps on bailouts for the "zombie" Government Sponsored Enterprises removing all doubt there was anything private about the institutions:

As some observers have pointed out, all the move really did was formalize what everyone has figured for decades, that the two zombie GSEs were truly organs of the federal government, and that their debts would be backed up ad infinitum.

There can be little doubt the news was released after markets closed Christmas Eve and presented as an update in order to minimize the impact of the news.  Ed Morrissey writes:

The announcement was designed to put them out of reach, just as it was designed to keep the news out of reach from the general public.  No one can seriously argue that Treasury and the White House woke up early on Christmas Eve and suddenly discovered a reason to lift the caps on the Fannie/Freddie bailout, after all.  This had to be in the works for weeks.

This leads to the larger question of why the White House chose to act unilaterally and why now.  Joe Weisenthal asked credit analyst Edward Pinto for his theories.  Pinto lists five possible reasons for the move and all portend greater involvement and control over the mortgage market:

The above actions would preserve and strengthen the government’s involvement and control over the country’s housing finance system and make it harder to reintroduce substantial private sector involvement later on.  They would also continue distortions in the marketplace leading to who knows what unintended consequences. Finally these steps would do nothing to deleverage the housing finance system, a key step in returning it to any degree of normality.

 As if the lessons of government intervention in this market haven't been clear enough already, the Obama administration plunges ahead full throttle for greater involvement and control.  Prepare yourself for a little social engineering Obama-style.  The $400 billion set aside for the mortgage market from the previous bailout still had slightly less than $300 billion available for further assistance.  As Ed Morrissey pointed out if a larger amount had been needed the administration could have merely raised the limit instead of removing all caps.  Weisenthal sees no scenario where the move restores the market to any semblance of normality and makes it more difficult to restore greater private market involvement.  There is no other conclusion but that the Obama administration has effectively taken control of the GSE's for some future purpose.

 I am betting Ed Morrissey is correct in this prediction:

 I’d bet that the Obama administration retools its foreclosure prevention programs to have Fannie and Freddie buy up the paper and forgive parts of the principal on the loans, and have taxpayers eat the losses on a massive basis.

I will gladly listen to the Obama administration offer an alternate rationale for the move but I am not holding my breath waiting for it either.