Friday, February 13, 2009

Hey Obama, subsidize my rent, too!

Barack Obama wants to subsidize irresponsible homeowners:
The Obama administration is looking at subsidizing the mortgage payments of struggling borrowers before they default, according to sources familiar with the discussions.

If it comes to pass, the program would blaze a new trail in the federal government's foreclosure prevention initiatives. Until now, the efforts have focused on helping those already behind in their payments through interest-rate reductions and other loan modifications. The Bush administration had not committed any money to helping borrowers.

Obama, however, has pledged to spend at least $50 billion to help borrowers in trouble. Treasury Secretary Tim Geithner said Tuesday that the administration would release its plan within a few weeks. He and Housing Secretary Shaun Donovan have been meeting with banks, housing advocates and trade organizations this week to listen to their foreclosure prevention proposals.

Details remain scarce, but at this point the subsidy plan entails having struggling homeowners take an affordability test and undergo a re-appraisal to see if they are eligible. The subsidy would allow servicers to adjust the loan terms without having the mortgage's investors take a loss, which should make them more open to the loan modification.

Assisting borrowers before they default would help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

"This will help put a floor on home values," said one person familiar with the negotiations.


  1. If you had to choose between giving billions to irresponsible banks or to irresponsible home buyers, I choose the latter.

    Also, it's a bit more comprehensive of a solution, moving upstream to the root of the problem, if you will. Fewer foreclosures will mean fewer bank writeoffs which will lead to fewer bank bailouts.

    Bailing out banks is merely plugging holes in the dam.

  2. When homeowners enjoy stability, the nation enjoys stability, and vice versa, when they suffer instability, the nation suffers instability.

    I agree, it doesn't seem fair that people should get help for what some perceive as irresponsibility. But was it really irresponsibility? The justification I've always heard from BHs as to why they were being irresponsible is that "why should we pay for a devaluating assest, when we can get the same thing by renting?". Well, as we're now finding out (and as I predicted long ago right here on this blog), in the end the powers that be will not allow values to drop ... and people to be forced out of their homes. Why? Because it is in no one's interest ... not even in the renters' interests.

  3. TRILLION$ pissed away and "that's not fair" is the best they could come up with? they should change their site to i'm going to register a URL for

  4. Guy,

    BHs want a sure thing and they don't mind waiting for it. Forever.

  5. Hey lance,

    "new paradigm"


  6. Trent,

    You never answered the obvious question: why do we have to give billions to anyone?

    Because Obama and Bush said so?


    P.S. This is domestic financial terrorism: Give someone a shitload of money or we'll blow up the economy

    If you're going to start giving money, at least try to do it fairly or it results in social unrest. Especially when you start giving it to the wealthiest - homeowners.

  7. BTW,

    Lance... prices will come down in one way or another, through price drops or externalities. Government cannot pass or rescind economic law.

    As I see it, bubble heads have already won. The next 2-3 years are just icing on the cake.


  8. As I see it, bubble heads have already won

    hmmm .. I didn't realize this was a competition ... or a battle? Maybe that's what's holding BHs back ... self-"victimization" ...

  9. Well, as we're now finding out (and as I predicted long ago right here on this blog), in the end the powers that be will not allow values to drop

    Uhm... values already have dropped. A lot.

    I can't believe you're still trolling this place.

  10. "Maybe that's what's holding BHs back ... self-"victimization" ..."

    For me its not wanting to pay $400K for a rowhouse in cracktown. I dont feel like a victim....I feel I would be a victim if I bought at $400K only to see it drop to 1/3rd its price, then getting shot or mugged by a pimp across the street.

  11. Lord Lance does allow drugs in his "hood". His kingdom is free of drugs, male prostitutes and bubbles. It is the perfect land with rainbows, unicorns and high rents. Only the most select peoples are allowed to buy there...

  12. That's right Jim, all ignorant people come from DC public schools.

    You're obviously brilliant.

    (and overweight, but you're working on that, right?)

  13. "That's right Jim, all ignorant people come from DC public schools.

    You're obviously brilliant."

    No, that would be EVERYONE ON EARTH not in DC, genius.