The cleverest wealth transfer yet...

[SlipperySlope]

Today the Treasury and HUD announced that they would be making $3B in zero-interest loans to unemployed homeowners in certain "hardest hit" housing markets.

On the surface, this program sounds positive. It will give tens of thousands of families across the United States a chance to hold onto their homes for up to 24 months.

But the more I read about this program, the more I question the intent. These are zero percent interest, non-recourse, subordinate loans. These are loans designed to *not* be paid back.

The government will be taking our taxpayer dollars, let struggling homeowners *briefly* touch it, and then pass that money to the banks holding the mortgage. If and when the home is ultimately foreclosed on, the government has no intent or possibility of being paid back. Instead of forcing the banks to accept the government as the #1 lien-holder on the property, the government is putting itself at the back of the line.

This is really just another artfully concealed transfer of wealth from taxpayers to the banks. In effect the government is saying to the banks "here is another $3B dollars of taxpayer money. All you have to do is let these people stay in their homes for 24 months before you foreclose" - homes that, due to the locations selected, the banks really have no desire to foreclose on since the market is already depressed. As long as the home stays occupied and the government makes the payment, the bank holds the loan at full value on its books. If the bank foreclosed and sold the house it would have to take the loss.

Kicking the can down the road one more time. But not really solving the problem. The *only* mortgage modification program that has been shown to work at keeping people in ownership of their homes is principal reduction. This program doesn't do that. It just takes another $3B out of our pockets and gives it to the banks.

I'm so sick of this. Why can't they come up with some way of helping people that doesn't just make the rich richer?


Edit: Link added per request
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-176

[msongs]

1. thank gosh we don't have former wall street execs running the treasury lololol nt

[SlipperySlope]

5. Yes, thankfully...

That would be like having a fox guard the hen-house. Nobody would ever do something like that.

[rucky]

2. link, por favor

[SlipperySlope]

3. Link added to OP per your request.

[rucky]

6. merci

[hfojvt]

4. always look on the dark side of life

and what about those unemployment checks? All people do is spend them at big chain grocery stores and wal-mart. It just makes the Walton's richer.

Think of this positive. When money is transferred "from the taxpayers" well the richest 10% pay most of the income taxes. So it ain't coming from you and me, although I did lend my refund to Uncle Sam for zero percent interest, and also increased my with-holding.

[SlipperySlope]

7. Unemployment can be spent where and how you see fit.

Unemployment can be spent where and how you see fit. This money will basically go straight from the government to the banks.

I see your point about "from the taxpayers" being the richest 10%. But I believe we will all suffer when the whole house of cards collapses. And instead of really addressing the fundamental problems, everything I see them do seems to only sweep things a little more under the rug while continuing to protect the rich and powerful.

[hfojvt]

11. I don't see emergency assistance as a bad thing

Everything we do in life is a delaying action, considering that we are all gonna die. But if I am gonna lose my house because I lost my job and cannot find another one in this bad economy, then a two year delay is gonna give some people the time they need. Everyone wants to be doom and gloom now, but the economy is not going to be bad forever. At least it never has been in the past.

[SlipperySlope]

12. If they wanted to help the individual, then give the loan with less strings...

They could help the individual even more by making the money available with less strings. Why not just give as two-year housing allowance that you had the *option* of paying to your existing lender, or you could move out of your underwater home and just pay rent, or maybe you could even move to another city with a better job market and use it to get established there.

The way this is structured, it keeps you shackled to your current house and current lender.

And if by some miracle you are able to turn your bad situation around, find a job, and keep your house - then you get hit with the whammy of having to pay the loan back. But if you walk away, the loan is forgiven.

This is a transfer to the banks. It has the plus that it keeps people from being foreclosed, but a transfer nonetheless. If the goal had been to help people instead of banks this would have been structured much differently.

Hell, what are you supposed to do when your unemployment runs out anyway. No money for food, clothes, or gas. But god forbid the cash-flow to the bank stops.

[girl gone mad]

17. This is definitely a bad thing.

At the end of the day, these people are going to lose their homes and end up with a huge tax bill, to boot.

[TheKentuckian]

16. I've net paid every year and never made national median.

[w4rma]

8. I like this MUCH better than all the other bailouts of the banks, to date. (nt)

[SlipperySlope]

9. N/T

N/T

[autorank]

10. First rate analsis k*r

They don't give anything away that they won't take back by stealth or force.

[phasma ex machina]

13. Banksters are homeowners because they legally own the homes until the loan gets fully paid off.

"Homeowner" is a synonym for "bankster."

[leftstreet]

14. K&R

Very good analysis

[snot]

15. Exactly right. If the main point were . . .

either to help those who need it most, or to strengthen the economy, there are better, more efficient ways to spend the money.

[indepat]

18. Excellent analysis: and the beat goes on...and on...and on

:P