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February 18, 2009

And Another $75 Billion* In Taxpayer Money Out The Door. This Time To Deal With The Housing Crisis.

And today's bailout winners are...people who spent too much on their homes compared to their incomes! Congratulations you irresponsible fools, come on down and get your checks!

President Barack Obama's plan to tackle the foreclosure crisis will spend $75 billion in an effort to prevent up to 9 million Americans from losing their homes.

In tandem, the Treasury Department said it would double the size of its lifeline to Fannie Mae and Freddie Mac. The government, which seized the mortgage finance companies last fall, said Wednesday it would absorb up to $200 billion in losses at each company.

The plan, which Obama is releasing later Wednesday, is more ambitious than initially expected — and more expensive. It aims to aid borrowers who owe more on their mortgages than their homes are currently worth, and borrowers who are on the verge of foreclosure.

...Another key component: a new program aimed at helping homeowners said to be "under water" — with dwellings whose value have sunk below the principal still owing on their mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 to 5 million families do just that.

Of the nearly 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth, according to Moody's Economy.com

At NRO Jonah Goldberg wonders why upside down mortgages are such a big deal? I'm kind of curious about that myself. (He gets answers here)

I know this situation is painful for a lot of people but absent some compelling reason beyond the "we have to keep families in the homes they can't afford and shouldn't have purchased in the first place" argument, it seems the housing market's price correction is a feature, not a bug of the system.

We don't have the details of the plan yet but if the idea is we have to reinflate the housing market, I'm not quite sure why that's either a good idea or a sensible use of the governments non-existent resources. If creditors want to renegotiate the terms of an agreement that is one thing, if the government is going to do it by fiat (either legislatively or though bankruptcy proceedings) that's quite another.

Based on the events of the last few months, I fear the worst.


*Just saw on FNC that $50 billion is coming from existing TARP money and the remainder is coming from Fannie Mae and Freddie Mac.


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posted by DrewM. at 11:33 AM

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