Thursday, March 25, 2010

Here's Why Mortgage Modification Programs Funded By Taxpayers is BAD Public Policy

March 25 (Bloomberg) -- More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report.  Here's the news link:  LINK.

As per the article, 51.5% of mortgages modified in the first quarter of 2009 had re-defaulted by the end of the year.  Now, we know the banks, at the urging of Obama, put strict foreclosure moratoriums on at in the last month of 2009, so the real number is probably higher.  Think about this fact:  51.5% of modified mortgages in 2009 re-defaulted within 9 months.  That is just staggering.  But it's also consistent with re-default numbers that were made available in 2008.  In fact, I don't remember the exact percentage, but in 2008 a large number of modified mortgages went delinquent after the first 30 days.

Obama has committed $50 billion to mortgage mods and one of his foot soldiers stated the other day that the Govt is committed to spending every last dollar of that $50 billion.  Just based on early statistics, at a minimum $25 billion of that will be flushed down the toilet.  That's Taxpayer money.  Who benefits?  The banks benefit because that money is used to compensate the banks for most of the amount modified PLUS the banks get a few more mortgage payments before the mortgage lapses back into default.

Mortgage default is always and everywhere a bad lending and unemployment problem.  What Obama has done is spread the cost of this problem across the all Taxpayers, transferring the cost from the Big Banks to the Taxpayers and bailing out the banks from a bad lending decision.   But, then again, ultimately it will be those financing our debt who will suffer the extreme consequences, because there's no way in hell the Taxpayers will ever be able to repay Treasury debt.  Maybe the Chinese and Japanes are the real idiots.  Got gold?


  1. Another recycled TARP play. I knew that TARP money was never, ever going to be retired. Sooner or later the numbers are going to get too big.

  2. Thaf number is far greater here in Florida Bro

  3. gyc: TARP will be recycled thru FNM/FRE. With the cap off how much Geithner can run thru those two nuclear waste dumps, expect that the Treasury, via FNM/FRE will be monetizing a few trillion in mortgages by taking them off Big Bank balance sheets and shoving up the Taxpayer's ass.

  4. Yo J Mac. I figure FLA is 75% in the first year of a mod. Take away that foreclosure moratorium in December that 51.5% is prolly 60%.

  5. When the pension plans get the 401k's you know its time to get not just gold, but a boat and a small island to escape to.
    I think things have been so unreal for so long the escalation of unreal has failed to register.

    I hate the term "sheeple" but I can think of no other term so fiting.

  6. dave,
    have you seen this video?
    as the saying goes, we get the leader we deserve.

  7. I saw the headline on yahoo about that but had not seen the video. That's hilarious, in a poignant way.

    To be honest, for as much I hated Clinton, I hated W even more and now I hate Obama even more than W. Makes me yearn for someone like Nixon LOL.

  8. I see where Bart Chilton has kicked the can to the end of the year for possible position limits.

    I am of the opinion the whole system will be burned down by then. What a total farce!

    Joe M.

  9. It's all window dressing to show they're doing something for the "main street".

  10. 100% right. BUT it's also transferring wealth from the Treasury/Taxpayer to the BIG BANKS.