Obama’s Housing Shell Game …
We’ve now come full circle. Instead of trying to get people to stay in their homes, Obama is keen to pay them to leave. Delight consider Program Will Pay Homeowners to Sell at a Loss.
In an effort to end the foreclosure crisis, the Obama handing out has been trying to keep defaulting owners in their homes. Now it will take a new deal with: paying some of them to leave.
This latest program, which will allow owners to sell for less than they owe and will give them a small cash to speed them on their way, is one of the handing out’s most aggressive attempts to grapple with a problem that has defied solutions.
Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation help.”
Small sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.
Under the new federal program, a lender will use real estate agents to determine the regard of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.
Huge Shell Game
Diana Olick describes the circumstances perfectly in Mortgage Principal Writedown Won’t Save Housing.
And so it starts. Huge gun lawmakers are making the go toward principal writedowns as the last resort to save the housing market.
The problem is prices. Home prices have fallen so far in the toughest hit areas, the areas where the bulk of the uneasy loans are, that banks would have to write down principal 30 to 50 percent to place borrowers back in the green. Accounting rules require that banks write down the regard of those loans on their books, and experts tell me that if banks really accounted for all the losses in the home loan market, they’d all be insolvent.
That’s why the Obama Handing out has made this kind of shell game in the first place.
I stole that shell game thought from housing consultant Howard Glaser: “We’re spending tens of billions of dollars on a tax credit to get people to buy homes, we’re spending federal money to keep them in their homes through the modification program, and now we’re going to pay them to go out of their homes. This is not a sustainable system for the housing market. It’s a shell game. Bernie Madoff may possibly have made this system,” Glaser told me today.
F.R.A.U.D.
Let’s take real estate agents who might not have had any sales for 6 months or even a year, and agents who have a vested interest (a fee) in selling a home, and let’s place them in charge of figuring out what a home is value. Excellent thought.
Oh…there’s no chance real estate agents will sell homes to their friends for cheap or to total strangers for that matter, just to get a fee. Indeed, real estate agents have been the paragon of virtue throughout the crisis so this is the culmination of a exact thought.
Even appraisers working directly for the bank might be tempted to make special arrangements with privileged real estate agents. A final approval process at the bank would make fraud harder, but that is contrary the thought the lender must take an offer if it hits the established minimum bid. A secondary review would also slow things down.
That aside, even with the chance for fraud, lenders are losing money by doing nothing, and in many cases by let people live in homes rent free for 18 months or longer. I don’t know dealing with fraud issues is the lesser of two evils, assuming of course the banks can afford the loan losses. Then again, what alternative is there besides pretending loans on the books are value full regard?
This is what our affordable housing program has become: Giving tax credits to new home buyers, spending taxpayer money to keep people in their homes, paying people to go out of their homes, and bankrolling Fannie Mae and Freddie Mac with tax dollars for unlimited losses.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Source: http://globaleconomicanalysis.blogspot.com/2010/03/obamas-housing-shell-game-small-sales.html