Monday, November 30, 2009

Great Idea! Obama to Force Banks to Give Out More Bad Loans

They conveniently forget it was the government pressuring lenders to give out bad loans that got us in this mess in the first place. But due to the enduring Obama recession, I guess they have to keep repeating their mistakes until they get it right.
The Obama administration on Monday plans to announce a campaign to pressure mortgage companies to reduce payments for many more troubled homeowners, as evidence mounts that a $75 billion taxpayer-financed effort aimed at stemming foreclosures is foundering.

“The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.”
So they'll be playing Name and Shame. How clever.

How about naming the real culprits? Barney Frank and Chris Dodd come immediately to mind.

Nah, can't do that.
The Treasury has announced plans to assign officials to monitor the largest mortgage servicing companies on a daily basis and will require companies to develop and report their specific plans to increase the number of modifications they complete. Loan servicers may face monetary penalties and sanctions if they fail to fulfill plans. Treasury is also expected to delay incentive payments to servicers until individual modifications are permanent.
Of course the last thing they'll ever do is admit this is a failure.
The servicers say that they are doing a good job and are making a good faith attempt to comply with the requirements and guidelines of the program.

According to the Times, there is now discussion in the Senate about a national foreclosure relief program based on one now in use in Philadelphia. In that city mortgage companies are forced to submit to court-supervised mediation with the borrower before they are allowed to proceed to foreclosure. Democrats in Congress are also a low pushing to allow the bankruptcy courts to "cram downs" mortgage balances to an amount compatible with the current market value of the house.

One has to wonder, might the plan to pressure loan servicers actually be counterproductive?
Of course it's counterproductive. What the stories fail to note is many who got "relief" originally wound up defaulting again anyway. It was giving loans out in the first place to people who couldn't afford them that caused the disaster. Instead of fessing up to the real problem we're just spinning our wheels and wasting untold amounts of money.

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