Government set to subsidize foreclosures

Government set to subsidize foreclosures

Yet another government program to ‘solve’ the mortgage crisis pays homeowners to foreclose. This is unbelievable. Via the New York Times:

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

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 assistance.”

Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.” [My emphasis]

To correct one glaring misnomer, the government has no cash to “spread around.” That is your money and my money they are “spreading around.”

2010-03-08T08:51:43+00:00 By |Government|