Government Cost Of Helping One Homeowner: $300 Billion

By: Nick Adama

[ Posted On: 2009-03-27 ]

Five months and $300 billion later, the federal government's HOPE For Homeowners program has helped exactly one homeowner avoid losing a property to foreclosure. This is a perfect illustration of how government solutions are worse than the problems they are supposedly designed to solve, in this case the foreclosure crisis and falling property values.

CNNMoney has an article describing the debacle that has become the HOPE for Homeowners program. Out of 752 applications taken for assistance, the Federal Housing Administration (FHA) has insured just that one loan. And the Obama mortgage relief plan has many of the same characteristics and requirements of this current failure.

In fact, the best way in Washington for a plan to be upgraded, revamped, and improved is for it to fail spectacularly, and HOPE for Homeowners in no exception. According to CNN, "the House of Representatives recently approved an updated version of HOPE as part of the bankruptcy-reform bill that is a keystone to President Obama's Homeowner Affordability and Stabilization Plan."

This offers the perfect amount of false hope to people facing facing foreclosure, which carries on the grandiose "place your hope in the changing power of hope" theme of the presidential campaign.

If saving one home from foreclosure means that the government must appropriate nearly $300 billion and turn away over 750 other homeowners, what chance is there that any of its programs will really solve any of the problems in the housing market?

The three hundred billion dollars set aside to save one property means that all of the other three hundred million people in America have to put in $1,000 each -- to save one house! Of course, if this were an actual tax and the government was accountable for its failures, this waste and inefficiency would be eliminated quickly.

Instead, the government is able to rely on borrowing money or simply printing it, as Federal Reserve Chairman Ben Bernanke admitted the government is doing in his interview on 60 Minutes. Therefore, the HOPE for Homeowners program will be continued in the newest program to prop ,up housing prices at bubble levels.

But maybe the new improved version of the failed plan will convince some lenders to participate. CNN says that "Borrowers who owed $220,000 on a house valued at $200,000, for example, would need their mortgage balances reduced to $180,000 to qualify for an original HOPE for Homeowners refi. That's a $40,000 write-off. Under the new plan, lenders would have to forgive $34,000."

Is it conceivable that many banks would voluntarily participate in a program where they have to take a $34,000 cut instead of a $40,000 loss on a defaulted loan? Is there that big of a difference between $34,000, $40,000, or $60,000 (the average cost of a foreclosure) that would convince a lender to allocate additional resources to helping homeowners?

Unfortunately, the answer is still no. The fact that the program is voluntary for the banks and forces them to recognize significant losses on mortgages will keep them from participating. A slightly more lenient program is not what is needed. A plan that has been willing to spend $300 billion taxpayer dollars and has helped only one family needs to be ended before it hurts more homeowners.

Article Source: http://www.afroarticles.com/article-dashboard

About The Author: Nick Adama -- writes articles providing homeowners with important foreclosure help resources. Visit his site to read about saving your home today: www.foreclosurefish.com/

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