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Wednesday, October 26, 2011

Another Backdoor Bank Bailout by another name

We're back from our business trip, and super-exhausted from all the hustle-bustle that travelling can cause, so this post will be more to the point.

Seems on Monday or Tuesday (so hard to lose track of days without internet sometimes), President Obama announced a plan to help mortgage holders by reducing their payments by entering a program called HARP.  Yay~  The only thing is, that if the homeowner ends up defaulting after entering the program, the liability has been passed from the banks themselves to Freddie & Fannie Mac.   And who owns them?

Yep-- you & I.

If you want to read the more complicated explanation, see below:

From Huffington Post:  "The newly expanded program would expunge legal liabilities associated with mortgages refinanced through the program for the original lenders of the mortgages. Each time a bank sent a loan to Fannie and Freddie, it certified that the loan met Fannie and Freddie's safe lending criteria. But many loans sent to the mortgage giants did not, in fact, meet those criteria. Currently, when borrowers default on those ineligible loans, the mortgage giants can "put back" the resulting losses onto the banks that pushed the loans.

Under the modified plan, "put back" liability at banks will be erased for any underwater mortgage that is refinanced through HARP, eliminating Fannie and Freddie's ability to sack lenders with losses in the event that the mortgage does not pan out.

If borrowers go through HARP, but decide after several months that the modest monthly savings do not outweigh owing tens of thousands of dollars more than their home is worth, taxpayer-owned Fannie and Freddie will have to take the full loss. Even if the original loan was sent to Fannie and Freddie with false or fraudulent guarantees from the bank -- promises that may directly be tied to the borrower's current financial problems -- banks will be immune from liability. Fannie and Freddie plan to charge banks "a modest fee" to extinguish this liability, but the administration has yet to determine what that fee will be."

Cliff notes version: Obama's plan means taxpayer-owned Fannie and Freddie will have to take the full loss. & banks will be immune from liability.  

Why must Every Single Fucking policy enacted by Bush, Obama or the Fed be a secret backdoor bank bailout?? Can't they take a Loss??!!

 Today the President also announced a plan to 'help' those with student debts- lower monthly payments and consolidate to lower Interest Rates.  Not sure if this is another bank bailout- haven't had time to read particulars, but that should certainly help when the students reach month 12 or 24 after graduation and still can't find work.

Now see what happens when one travels too much-- we get cranky.  Well a good night's sleep and we'll be back to writing more time-topical posts Thursday...