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Tuesday
Sep072010

Obama's Brand New Houseowner Bailout Means YOU Will Be Paying For All Those Deadbeat Home-Equity Loans (Call The White House @ 202-456-1414 & Pass It On)

Happy to pay for your home-equity loan, neighbor.

##

President Stimulus has unleashed the sound and the fury.  Two-hundred billion for capital investment that's nothing more than cash for clunkers X 50.  Also $50 billion for infrastructure.  Listen Jackwagon, maybe you should have thought of that with your first stimulus.   And just this afternoon, a brand new loan-mod program that has some distressing details.  Ultimately it's a stealth bailout for banks and mortgage-debtors who borrowed to finance a luxury lifestyle, and now can't afford to pay it back. 

Congratulations!  You're going to be paying for your neighbor's home-equity loan.

The program must resolve a stubborn problem that has hindered every other modification program: how to deal with second mortgages.  The program says second liens must be reduced so that the total mortgage debt is less than 115% of the home's current value.  The government will make payments for banks to reduce those loans, but banks have been very reluctant to write down seconds that are current.

Continue reading at the WSJ

The big-picture aim of the program is to prevent walkaways, as it targets houseowners who are current on their payments but facing a negative equity situation where their house is worth less than the outstanding mortgage.  It's essentially a government sponsored, taxpayer-funded mortgage program for principal writedown.

There are 2 problems.  Mortgage holders don't deserve a writedown at the expense of everyone else, and 2nd, 3rd (4th and 5th -- see below) mortgages are being included. 

This is an affront to taxpayers and must be stopped.  The thought of borrowed dollars from the next generation being used to writedown deadbeat home-equity loans for the irresponsible, is not pleasant.  Keith Jurow has an important piece on HELOCs this morning.  Check out this example:

Although the average outstanding HELOC balance is roughly $49,000 now, this figure hides the real problem.  The average HELOC written in California for residential purchase in 2004 was $150,000 and in 2005 was $139,000.  Hundreds of thousands of Californians took out a HELOC and then refinanced it several times to pull cash out from their growing equity.  Here is an example of how it worked from a recent post on IrvineHousingBlog:

"The original sales price is not clear from my records, but it looks as if the buyers paid about $1,200,000 in 1997. There was a $900,000 loan which I assume was 80% of the total purchase price. The original owners were a couple, and after the point where only the wife is on title in 2004 -- presumably after a divorce -- the HELOC abuse became truly remarkable.

  • On 3/11/2004 the wife appears alone on title, and the first mortgage is $999,800.
  • On 8/30/2004 she refinanced with a $1,000,000 first mortgage.
  • On 12/28/2005 she refinanced with a $2,170,000 first mortgage.
  • On 2/1/2006 she got a HELOC for $250,000.
  • On 8/22/2006 she refinanced with an Option ARM for $2,500,000.
  • On 11/15/2006 she opened a HELOC for $490,000.
  • On 8/1/2007 she refinanced with another Option ARM for $3,225,000.
  • On 10/22/2007 she opened a HELOC for $500,000.
  • Total property debt is $3,725,000.
  • Total mortgage equity withdrawal is $2,725,200 during a four-year stretch."

Of the 13.2 million outstanding HELOCs, it is not far-fetched to estimate that at least 95% of these borrowers are in "negative equity" when you add the first and second liens together.  For California, the figure could be 98%.

DB here.  A quick list of what you'll be paying for:  Luxury cars and SUVs, swimming pools, vacation homes, boats, boob jobs, plastic surgeries, big fat diamonds for wives & girlfriends, European vacations, weeks at the beach in Bali, cars for the kids, country-club memberships, designer dresses, that fun weekend in Paris, the time in Mallorca when they saw Paris Hilton blow coke off a monkey's butt, tennis and golf lessons for the kids, a personal trainer for mom, a hair transplant for dad, and those really cute dog outfits -- in every color.

Pretty much anything you can imagine, that bill is coming to you.  Multiple HELOCs were cash-flow rivers flowing through bubble states like honey down a grizzly bear's ass.  Everybody who was anybody financed their lifestyle through house-ATM withdrawal machinations.  And now, Obama wants you to pay for it. 

This should be the final straw for voter outrage.  The frugal and wise are being asked to carry the bloated and profligate

Call the White House now @ 202-456-1414 and tell the switchboard operator how you feel about the new houseowner bailout and especially the part about bailing out underwater home-equity loans.

Write off those 3 helocs Mr. Deadbeat, the taxpayer thinks you need a hand.  

##

 

 

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Reader Comments (31)

Sep 7, 2010 at 1:42 PM | Registered CommenterDailyBail
Government to Deploy Broader Mortgage Aid

http://online.wsj.com/article/SB10001424052748704323704575461920164400014.html?mod=WSJ_hps_LEFTWhatsNews

Read this whole piece...there's much more to it than i showed in the story...

I draw the line on taxpayer bailouts of housing at 2nd mortgages...this is infuriating...i can't imagine how renters must feel about it...
Sep 7, 2010 at 1:43 PM | Registered CommenterDailyBail
Sep 7, 2010 at 1:57 PM | Registered CommenterDailyBail
Geithner Makes Shocking HAMP Admission: Federal Loan Modification Program Just a Ploy to Enrich Big Banks

http://dailybail.com/home/geithner-makes-shocking-hamp-admission-federal-loan-modifica.html
Sep 7, 2010 at 1:57 PM | Registered CommenterDailyBail
Sep 7, 2010 at 1:59 PM | Registered CommenterDailyBail
Can The Economy Even Recover, When 92% Of The Population Thinks The Economy's Terrible?

http://www.businessinsider.com/can-the-economy-even-recover-when-92-of-the-population-things-things-are-horrible-2010-9#ixzz0yrrxfTVe
Sep 7, 2010 at 1:59 PM | Registered CommenterDailyBail
How Blanche Lincoln Fell So, So Far Behind In Arkansas

http://tpmdc.talkingpointsmemo.com/2010/09/how-blanche-lincoln-fell-so-so-far-behind-in-arkansas.php

She's getting her ass kicked by 30 pts...
Sep 7, 2010 at 2:00 PM | Registered CommenterDailyBail
Christine O'Donnell's Views On Sex And Porn Take Social Conservatism To The Extreme

http://tpmdc.talkingpointsmemo.com/2010/09/odonnells-greatest-hits.php
Sep 7, 2010 at 2:01 PM | Registered CommenterDailyBail
Sep 7, 2010 at 2:01 PM | Registered CommenterDailyBail
Sep 7, 2010 at 2:03 PM | Registered CommenterDailyBail
Irish Bond Spreads Now Highest Since Height Of Sovereign Debt Crisis

http://www.irishtimes.com/newspaper/breaking/2010/0907/breaking33.html
Sep 7, 2010 at 2:03 PM | Registered CommenterDailyBail
I don't get it. I'm outraged (of course), but what's in this for the lender? If I were a lender (or investor in HELOC's or other MBS), I'd only want to unload crap loans to FHA. The good ones, I'd keep. As I understand it, the lender/investors can take a 10% loss of principal in order to avoid a bigger loss later on. But why go along with the program UNLESS you're pretty darned sure that you're going to lose more than 10% if you hold the loan.

As with PPIP, does Treasury/FHA think we're stoopid?

Also, the WSJ article mentioned "other incentives" for lenders to take write-downs, but it doesn't say what these are. I searched Treasury and FHA's websites, but I got nothing.

Do they even know what the hell they're doing? Maybe someone should do a Mark McHugh and write the geniuses at FHA. This is eerily reminiscent of the PPIP trial balloon (which crashed and burned like a lead zeppelin). Maybe if we make enough noise we can crash this one, too.
Sep 7, 2010 at 2:04 PM | Registered CommenterDr. Pitchfork
Obama's New Business Tax Break Is A Gigantic Version Of Cash-For-Clunkers

http://www.businessinsider.com/obama-200-billion-tax-break-for-business-2010-9#ixzz0yrt3QQ7Z
Sep 7, 2010 at 2:04 PM | Registered CommenterDailyBail
Pitchfork, you know mortgage issues much better than I...it's a complicated program...mostly to benefit banks it seems to me...2nd and 3rd mortgages have always been a sore spot with me...and i knew another houseowner bailout was coming...i'm seething that it includes home-equity loans......
Sep 7, 2010 at 2:07 PM | Registered CommenterDailyBail
Sept. 7 (Bloomberg) --Hungary, Romania and Serbia, which turned to bailouts in 2009, are struggling to find buyers for their debt as spending cuts weaken government power and concerns grow about a stalled recovery.

http://www.bloomberg.com/news/2010-09-07/hungary-romania-serbia-struggle-to-sell-debt-after-receiving-imf-funds.html
Sep 7, 2010 at 2:08 PM | Registered CommenterDailyBail
Sep 7, 2010 at 2:11 PM | Registered CommenterDailyBail
Manpower: Sorry, There Won't Be A Hiring Surge In The Fourth Quarter

“Clearly there are signs of a softening labor market, but when we consider what we are hearing from our clients and by looking at our own business, there is reason to be cautiously optimistic,” said. Manpower Inc. Chairman and CEO Jeff Joerres. “The hiring intentions for the fourth quarter are not enough to break through the labor market sound barrier that we’re all eagerly anticipating, as 71 percent of employers indicate no change in hiring.”

Of the more than 18,000 employers surveyed, 15% anticipate an increase in staff levels in their Quarter 4 2010 hiring plans, while 11% expect a decrease in payrolls, resulting in a Net Employment Outlook of +4%. When seasonally adjusted, the Net Employment Outlook improves slightly to +5%. Seventy-one percent of employers expect no change in their hiring plans. The final 3% of employers indicate they are undecided about their hiring intentions
Sep 7, 2010 at 2:14 PM | Registered CommenterDailyBail
http://krugman.blogs.nytimes.com/2010/09/07/infrastructure/?src=twt&twt=NytimesKrugman

Krugman whines that the stimulus from Obama is too small...punk...
Sep 7, 2010 at 2:15 PM | Registered CommenterDailyBail
i knew another houseowner bailout was coming...i'm seething that it includes home-equity loans......
--

Me, too. I'm hoping for another Santelli moment.
Sep 7, 2010 at 2:26 PM | Registered CommenterDr. Pitchfork
Throwing money at creating temporary jobs is not going to solve the long-term jobs situation. We must reassess NAFTA, CAFTA and GATT, but as well, we must pass public funding of campaigns. Had our politicians not been on the corporate payroll these job killers never would have been passed in the first place.
Sep 7, 2010 at 3:14 PM | Unregistered CommenterJack E Lohman
Here's the only reaction i can find so far...it's from peter morici...a column...

http://www.cnbc.com/id/39037554/

Now, the White House proposes that for homeowners, up-to-date on payments but whose mortgages exceed value of their homes, banks and investors forgive the equity gap and the Federal Housing Administration back up new mortgages on the market values of those homes.

Wisely, banks and investors are reluctant to write-off debt on performing loans—they may actually get out what they are owed in the long run. Banks are likely to hoist on to the FHA—and the taxpayer—homeowners they believe are likely to fall behind on payments soon.

It’s another election year ploy that will blow up later, because those new loans will fail and require much higher fees for honest FHA mortgages.

When Republicans point out the shortcomings of those proposed jobs and mortgage initiatives, President Obama will cast them as cynical defenders of the rich.
Sep 7, 2010 at 3:16 PM | Registered CommenterDailyBail
Yeah, Morici is right. And so will Obama be, when he calls Republicans "cynical defenders of the rich." (But not exactly for the right reasons.)
Sep 7, 2010 at 4:59 PM | Registered CommenterDr. Pitchfork
I can't believe this stuff is going on and those bankers are sitting in their offices making huge bonuses when they should be sitting in jail along with the heads of the Treasury and FED and a whole bunch of politicians.

http://www.youtube.com/user/fiercefreeleancer
Sep 7, 2010 at 5:35 PM | Unregistered CommenterSagebrush
IT's a good clip sage...i've posted that story before it's here...

How The FDIC Is Killing Short Sales: The Story Of OneWest, IndyMac & Taxpayer Funded Sweetheart Deals (VIDEO)

http://dailybail.com/home/how-the-fdic-is-killing-short-sales-the-story-of-onewest-ind.html
Sep 7, 2010 at 10:40 PM | Registered CommenterDailyBail
I hadn't seen that post. Good story, it raised my pissed off level off the scale.

I'm beginning to think nationalizing the banks is a good idea. The greedy bastards have outsmarted, outmaneuvered, and screwed everybody. Hell we probably should start sending out taxes to the big Wall Street Banks. It appears they're going to get most of it anyway if our incompetent government has anything to with it.

Jefferson was right!
Sep 8, 2010 at 12:47 AM | Unregistered CommenterSagebrush
It all breaks down to this: Those who can pay taxes will be paying the debts of those who can't.

We pointed out the long term ramifications of bailing out failure in September of 2008. You have to let the profligate go bankrupt. LET THEM FAIL and stop forcing taxpayers to BAILOUT the debt peddlers, or face the coming TAX REVOLT.

Why does anyone pay taxes at all?

Because you have property, and STUFF, that the government will seize, if you don't.
And you don't want to lose all that STUFF. But the people who can't pay taxes cause they're up to their asses in debt have STUFF too, STUFF that they BORROWED on credit. And you're being forced to BAIL OUT their creditors (1) because you are frugal, and made the sacrifices today to have a secure financial future, and (2) others chose to borrow a fantasy lifestyle today.
When government steals from the prudent to pay the creditors of the profligate, you create a TAX REVOLT!!! (it'll be a future post at letthemfail.us)
Sep 8, 2010 at 12:48 PM | Unregistered CommenterWil Martindale
Right on Wil...well said...
Sep 8, 2010 at 1:38 PM | Registered CommenterDailyBail
Well like you have said DB, you can catch them with their hand in the cookie jar but nobody ever gos to jail. The goverment looks after the banks, and the banks look after the goverment. The people get screwed over & over.......
Sep 8, 2010 at 5:25 PM | Unregistered CommenterTexas Dar

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