GOPideas... ideas done right

As noted in previous posts, the Obama Administration’s Home Affordable Modification Program (HAMP) is designed to ensure that people who could not afford their homes (many of whom likely committed fraud to acquire them) are now being provided handouts from taxpayers to pay the bills that they are refusing to pay (or by honoring their mortgage and vacating the home that they are no longer paying for). This is done by 1.) direct subsidies to lenders and borrowers and 2.) forcing lenders to eat losses on houses.

Not content with doling out free money to people who made loans they should not have made to people who should not have taken them, the Obama Administration developed the following guidelines for servicers. The results of the program were easily predictable: numerous people have been granted temporary reprieve from foreclosure, but few have been permanently modified. This is completely logical: if someone could not pay their mortgage six months ago, how likely is it that they will be able to pay it now --- and if you are a bank, do you really want to write off the principal, taking the hit now and then giving someone not paying their bills, the ability to not pay a lower bill. This seems unwise --- which is exactly why few loans have been permanently modified.

However, now that few banks are making permanent modifications, the Administration is giving them the “Chicago Way” treatment: bullying and intimidation. The Chicago Sun Times is reporting that the following is one of the new aspects of HAMP:

“Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.”

In other words, if a bank is not giving away free equity in homes (if someone owes $250,000 over the next 20 years and that is “modified” to $200,000 over the next 40, they are giving away equity), then they will have some explaining to do to the Obama Administration.

Admittedly, when the current Administration took office, I thought the conservatives yelling about socialism were a little, ahem, overzealous. Now, I admit my mistake. Using political power to bully private companies to handout money to favored interests (and, therefore, creating a cadre of citizens indebted to the political class that provided the handout), it the epitome of crony capitalism and the precursor to more overt methods of redistribution.