This week President Obama unveiled his PRESIDENT OBAMA: "My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value, as long as borrowers pay their debts under court-ordered plans."Why would someone lend money to buy a house if they knew that a judge could later alter or void the contract (lower the principal to be repaid, reduce the interest to be earned, lengthen the period of repayment, etc.)? If I had $250k to lend, would I risk lending it to anyone who could effectively STEAL it by government fiat? Of course not!
This plan will effectively dry up private investment in home mortgages, making the federal government the defacto "owner" of homes not purchased outright with cash.
As The Heritage Foundation reported:
The plan treats borrowers who sacrificed to pay their mortgages on time the same as those who used their equity for a boat and stopped paying their loans. This moral hazard sends a clear message to our children that they can avoid the consequences of their actions. But this is only one reason the plan is bad policy. Others include:This is our wise leader's "solution" to the housing crisis? The destruction of capitalism, contract law, and the free-market system?
The plan’s mortgage cram down provision would only worsen the housing crisis in two ways: First it would increase the risk to lenders and lead to higher interest rates for people trying to buy homes today. Second, the policy would open the door to achieving mortgage reductions for tens of millions of homeowners who can afford their mortgage payments and whose homes are not at risk.
The plan will fail because too few people will qualify and many of those that do will default anyway. The housing bubble was caused in large part by speculators who bought homes planning to flip them for quick profit and other who out right lied on their loan applications. The mortgage bailout will do nothing to stop these foreclosures. Furthermore, the re-default rates for people that have already participated in mortgage modifications show that as many as 50% of them go on to default again.
The plan risks another $275 billion in taxpayer funds. The Obama Administration claims their plan will only cost $75 billion, but that is only true if it works out perfectly. If the plan fails to stem the inevitable correction in housing prices taxpayers will lose a full $275 billion.
Where does our Constitution authorize the President and/or Congress to insure "equality of outcomes" for all? It doesn't! Our leader's "plan" is merely the central tenet of Karl Marx's socialist dream!
In the "real" world, when someone crashes and burns, "scavengers" pick up the pieces. Those who make unwise investments or suffer calamitous misfortune often are forced to sell off their assets to satisfy their debts. (Anyone who has played "Monopoly" knows this!) In our capitalistic system, one person's "loss" becomes another person's "gain".
However, if insanely inflated home prices are forever maintained at their lofty heights and never allowed to fall, the current "poor" (including those with now-reduced incomes) will still be precluded from owning a home. Likewise, those who did the right thing -- by scrimping and saving and assiduously avoiding going deep into debt -- will still be locked out of the home-buying market. Under President Obama's plan, those now maintaining untenable ownership of their homes will continue to do so on the backs of those who cannot even afford to buy a house! What fairness! What equality!
President Obama's plan rewards bad behavior and/or those who bit off more than they could chew. What next? Will he pass a law that rescues everyone who makes a bad investment or who falls on misfortune for whatever reason?
Why should I (and my posterity) be forced to pay my neighbor's unwise/ridiculously high mortgage? I not only have to live within my own means, but now his as well?
Wouldn't the BEST "plan" be to allow home prices to fall (and people to relocate) -- so that others could afford to own a house again? Maybe even (gasp!) pay cash for their next home?
Yes, many of us (including my family!) may be displaced. That's what happens when people lose their jobs and can't pay their bills -- especially when they are hopelessly in debt! My gosh! Government-prodded banks were issuing 30-year (and even 40-year) interest-only, 100%-financed jumbo home loans to janitors and cafeteria workers! Talk about reckless lending practices! Talk about indentured servitude for life!
Now I must pay for such foolishness and greed? Apparently, yes.
ALL OF AMERICA has been encouraged to live beyond her means. We have become a nation of debtors. Now it appears those debts cannot be repaid.
Our leader's plan foolishly throws more money into the fire, futilely postpones the inevitable, and cruelly locks us even deeper into debt that our children and grandchildren can never hope to repay.
"...when the wicked rule, the people mourn." (D&C 98:9)
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