President Obama’s mortgage relief plan has, once again, the responsible subsidizing the irresponsible:
President Obama yesterday announced his plan to prevent home foreclosures, saying he wanted to be “very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans . . . And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.” We really do wish he were right. In fact, the details released yesterday suggest the President’s plan will do all of the above.
Anyone with mortgages owned or guaranteed by Fannie Mae and Freddie Mac will be able to refinance to lower rates if his mortgage is between 80% and 105% of the value of the home. This is a sweet deal that is not available, for example, to many renters looking to buy homes now. Sadly for those who deferred the gratification of homeownership, the 20% down payment has now become industry standard. But at least their taxes will allow other people to stay in homes they can’t afford.
Existing borrowers who may not qualify for Fan/Fred refinancing can still receive loan modifications that move their mortgage payments down to 31% of monthly income. In either case, no effort will be made to verify that recipients of aid were truthful on their original mortgage applications. Given that mortgage fraud skyrocketed during the housing boom, and that the Obama Administration intends to assist up to nine million troubled borrowers, we can say with certainty that the unscrupulous will be among those rescued.
Plus there’s this thought:
“Now that those of us who have been making steady, on-time payments on our mortgages for years will be paying off others’ mortgages through our taxes, can we claim a tax-deduction for our neighbors’ mortgage interest too?”
— Edward G. Stafford, responding to “Dukes of Moral Hazard.”
Encouraging responsible behavior? Why would the government do that?
(Via Instapundit.)
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