Friday, February 20, 2009

Mortgage Mess

If you have been trying to make sense of Pres. Obama's mortgage proposal thing, you are not alone. I've been shifting through stuff trying to figure it out and here is what I've come up with.

Obama is promising $75 billion in incentives to coax lenders and mortgage holders to work with homeowners facing foreclosures. He also want to infuse another $200 billion for....(get this!) Freddie Mac and Fannie Mae. That's right, the agencies that got us into this mess! They are now completely government owned, and hold many of the nation's mortgages that are suffering from this subprime mess.

Almost one in 10 home mortgages are either delinquent or in foreclosure. The first to be helped will be those people whose homes are now worth less than the amount of their mortgage. Obama's plan is to help the approximately 4 million people at risk of losing their homes by offering incentives to lenders to modify their loan terms to make the payment more affordable. And lastly, the $200 billion infused into FannieMae and Freddie Mac will help jumpstart the housing market by buying more new mortgages.

$75 billion will be used to entice lenders to work with the homeowners. $1000 for every mortgage modified. There are a more incentives to get the payments down to 31% of the homeowner's gross monthly income.

The most troubling question to me, which was brought by Rep. Boehner and Rep. Cantor is this; Will mortgage providers be required to verify income and other eligibility standards before modifying the mortgages? This isn't even addressed in the proposal! Can you say "fraud waiting to happen?" Also, how can we be sure that those who get this help won't be in the same position a year from now?

How frustrating it must be for those of us who have always paid our mortgages and have never bought more house than we could afford or more houses than we could afford, to be essentially paying for those who did.

The responsible get punished and the irresponsible get awarded.

It's pure outright crazy.