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RightChange: President Obama’s Mortgage Plan: Double Dipping Failed Policies

President Obama’s first Jobs plan, Stimulus 1, was a complete failure.   Just read this, this, and watch this for some convincing.  If you choose not to read the linked articles, ask the common man on the street if he thinks Stimulus turned our economy around.  We went $1 trillion in debt for a jobs bill that did not create enough jobs to put a scratch in our recovery.  That should have been a good enough reason for us to never consider doing something like that again.  It wasn’t a good enough reason for Mr. Obama.  He proposed another massive Stimulus program last month – and the only difference between that and the first one is that it would be paid for by $1 trillion in tax hikes.  The American public rejected that bill and so did the Democratic Senate.  Since then, Obama has vowed to pass Stimulus # 2 piece by piece.  The Democratic Senate again rejected it.  Now, he has vowed to pass this bill through executive order without Congressional approval, starting with the mortgage industry.  We as Americans need to decide what the true travesty is in our current situation.  Is it that we have a leader who is willing to bypass Congress for a plan it has already rejected? Or, is it that we have a leader who is bypassing Congress to pass a recycled version of a plan that has already failed.

The first executive order on Mr. Obama’s agenda is to boost the housing market by revamping an old plan known as HARP, the Housing Affordable Refinance Program.  He is calling on the government sponsored enterprises that are financially backed by the federal government nick named Fannie Mae and Freddie Mac to practice the same policies that got us into the recession in the first place.  He is telling them to order banks to reduce the mortgage loans for the same homeowners that already received loans on houses they could not afford back in 2009.

In 2009, the Obama administration rolled out HARP to lower loans backed by Fannie Mae and Freddie Mac to those homeowners who were current on their payments but did not have enough equity to refinance their loans.  The program was supposed to be strictly for borrowers who owed between 80-105% on the value of their homes, but was opened up to those who owed 125% of their home value!  When these homeowners that could not afford their homes in the first place walked out on their payments, the housing market crashed and the recession started.  It defies common sense that the government should mandate banks to give money away to those who cannot afford to pay their mortgage in the first place.  But, President Obama is in the White House.

His new executive order will mandate banks to lower mortgage payments not just for those who owe 80-125% of the value of their home, but will open it up to anyone no matter how underwater they are.  Proponents of this program say by lowering these mortgage payments to those who cannot afford their home in the first place will give them more expendable money.  Does Obama think that by taking more money from businesses and giving it to those who cannot pay their bills to spend on televisions and cell phones is actually going to boost our economy into leading the future?

Sadly, he does.

If we reduce monthly payments to give these people more money to spend, it just takes money away from someone else who had it i.e. the people who own mortgage companies.  They could be using this money to expand their business or make new home loans to those who can actually afford it.  All this does is force lending institutions to lower their standards for millions of people who should have been renters.  This is exactly what the federal government did before the recession and it is exactly what they are going to do now under Obama.  The government is guaranteeing loans so that Fannie Mae and Freddie Mac can sell them to investors for a profit.  This is not Wall Streets fault; it is the government’s fault.  We shouldn’t be occupying Wall Street; we should be occupying the government.

President George W. Bush tried to reform Fannie and Freddie but was rejected by Senator Sen. Chris Dodd of Connecticut after he successfully threatened a filibuster. Senator Dodd later became the backer of the Dodd-Frank Wall Street reform bill that gave Fannie and Freddie a massive bailout.  Republicans also tried to reform Fannie and Freddie in 2003 and 2004 four times!  The Democrats blocked it and they are blocking it today.  We are headed towards a double dip recession because Obama and the Democrats are double dipping failed policies.

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