Nothing would surprise me anymore.
Some are expecting an “August Surprise” in which Democrats would propose that Fannie Mae and Freddie Mac write off hundreds of billions in mortgage debt owed by people who are under water (i.e., they owe more than the house is worth).
Call it the Mother of All Walking Around Money, or a pre-election voter appreciation Stimulus:
Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.
The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.
I knew I should have bought that Big, Unfair House.
Rumors aside, I still don’t see this happening. While 20% of mortgages are under water, 80% are not, and this bailout would piss off the 80%.
And as we know, the Democrats would not dare pass legislation opposed by a clear majority of Americans.
Update: After this post, I decided to check on how the Big, Unfair House was doing. Looks like the cabinets are being delivered, and the brickwork has arrived:
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Comments
I'm part of that 80% and this would indeed 'piss me off.' I believe I was a responsible first time homebuyer. I negotiated a fair price, I negotiated a good full term fixed rate, I investigated the market in my area and in less than three years I'm not underwater. I didn't get any new homebuyer tax refunds either! During these first three years I have even changed jobs, moved, and am letting out my house. Everytime I see ideas like this pop up, it drives me mad. I feel like when they do this it will only lower the value of my house. If I can be responsible, why can't other people.
And how exactly will they determine fair market value, and will they enforce this valuation on local municipalities forcing a lowering of property tax valuations……
I'm not holding my breath….
"And as we know, the Democrats would not dare pass legislation opposed by a clear majority of Americans."
Sarcasm is only funny when it's true. I'm laughing……! Let's hope that if they do this, it will p.o. enough people to ensure both House and Senate conservative Republican majorities!
With mortgage rates continuing to fall, I called my bank to try to renegotiate my APR, trying to save refinance expenses. The woman told me I had too good of a payment history for them to consider any modification. However, if I were to fall behind by two or three payments, then they could work with me. I knew I should have gone on that cruise instead of paying my mortgage. Damn!
Under this social engineering scheme, in an effort to make them feel better about themselves by purporting to help the needy, they wind up simply punishing the responsible, productive members of society. They've chosen to believe that lowering the level of one class is equivalent to raising the level of another. They believe that any engineered equalization of the classes is a good thing.
They wouldn't dare… their constituents would be too busy partying to vote.
"They wouldn't forgive billions of dollars worth of loans. Not even the Democrats could be that stupid!"
Democrat Response:
http://www.individualsole.com/2008/06/26/barack-obama-yes-we-can-by-antar-dayal/
"And as we know, the Democrats would not dare pass legislation opposed by a clear majority of Americans."
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Hoo-hoo, haha, heeheeheehee!!! (slaps knee & wipes tears from face, struggles for breath after wild fit of laughter) — Oh, THAT was a good one!!!
Business Insider says they been paving the way for this since December.
http://www.businessinsider.com/remember-this-gigantic-fannie-and-freddie-giveaway-has-been-in-the-works-since-last-december-2010-8
Neither ofour 2 far left parties woulod jam bad laws down our throats! No liberal Preisdent would propose" TARP, Obamacare! Those are both conservative programs thatall Americans love.
The above is sarcasm for you radical left Republican cement heads!
an old ex Jarhead
You are confusing a clear majority of homeowners with clear majority of Americans. And appartment-dwellers are far from clear-cut. On one hand the richer of them are not happy that their taxes are used to bail out deadbeats. On the other hand most are poor and do not pay any taxes anyway (except sales tax). They will only be too happy to dillute your 20-80 figure, just to lash out at whoever their Democrat puppeteers tell them (e.g. at "the rich").
"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." — Alexis de Tocquville.
That silly Frenchman. The joke is on de Tocquville. He couldn't imagine the electorate would be so complacent to allow the ruling class to usurp their Constitutional rights without a fight. de Tocquville was wrong. It no longer requires an act of Congress to bribe the electorate, Obama can do it via executive order. All he needs is a pen that works.
What's really striking about this is the dictatorial nature of the thing. How on Earth did we get to the point where a U.S. president could do something this sweeping and consequential simply via executive fiat, and do so for such transparent electoral reasons without any kind of public debate? If there's any difference between how this president operates and the strongman antics of Peron, Castro or Chavez, I for one can't see it.
Considering the public's funds would be used to to wipe away this debt, it would have to be construed as a tax on those who do not qualify and such a tax would appear to be an un-apportioned tax hence not permissible. In addition would not this debt forgiveness be a taxable income for those who received it? The fact that such a rumor is being taken seriously is indicative of just how disastrous Obama and the democrats are.
What are the odds that this underwater bailout would come as shhhh… taxable income? lol
The rumor seems to have originated from Goldman Sachs and other banks who have reportedly received letters from the Treasury on this. It's all rumor but who knows. This would trigger another wave of bank failures, particularly the smaller banks who despite being the most responsible banks, suffered the brunt of the fallout. The world turned upside down.
Of course the Democrats would dare. And true to form, the Republicans would deliver exactly enough votes to put it over the top and most of them run up their ACU scores appearing to be "the party of "NO!"",
I placed a call to my Congressman (Joe Wilson) this morning and spoke with a staffer for a few minutes to make sure ol' Joe knows how fired up we responsible homeowners are about this merde. The staffer took my information down and assured me she would relay the message. I can't wait for his next townhall meeting to hear his stance.
It has been reported that the Treasury Dept flatly denied this rumor but I can't find an official statement to see what exactly they are denying.
It seems to me that part of this rumor is believable, the part where Goldman contacted their customers discussing the possibility of such a move by the Treasury based on communications from the Treasury. That would seem to be easy to confirm from multiple sources.
Who knows. The markets for MBS securities ignored this all day so maybe there is nothing to it. There are enough holders of MBS securities that were it believable, someone would have at least started to lighten positions and that didn't happen as far as I can tell.
So what happens if the government does this and house prices go down another 20% over the next year or two? Does the government do it again? Does it create a precedent for future housing market busts? What about the people who already lost their homes to foreclosure and the institutions (and their shareholders) who took big losses?
I totally agree with you about those numbers being why it'll never happen. I'm calling it a hope balloon to appease pass some false hope to people to encourage them to get out and protect those in office in November.
pasadenaphil:
At the end of last year, the Obama administration lifted the cap on taxpayer support for FNM and FRE. They now have unlimited taxpayer support WITHOUT having to go through Congress. Here's the WaPo article on it:
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR2009122401588.html
Given the stellar job Geithner did negotiating payoffs to AIG's creditors at 100% on the dollar, if Obama decides to forgive some of the mortgage principal, there is no reason to believe the creditors have to take a hit.
Past experience suggests they'll be bailed out. Our community organizer in chief will simply take the money from the producers of society and give it to the creditors who released the homeowners from part of their mortgage obligation.
If Obama's crew has developed a model projecting voter turnout will likely allow them to retain the House if they pull this stunt, I would not be surprised to see it done.
Maggot: financial eggs are so scrambled already that it is hard to say what will happen. As it is, it looks like the Feds will be rigging the bond market for eternity and non-hedge fund (high-frequency traders) trading volume on the stock exchanges is down 70-80% from three years ago with so sign that investors are coming back.
We need our financial markets if our economy is going to work efficiently. As things stand, everything is upside down due to government capriciousness and the cynicism and uncertainty that comes with that.
You can't keep a patient under sedation forever. There is only some much operating a surgeon can do. Comatose can be worse than dead.
They can write me as many checks as they want, but I'm still not voting for them.