The Obama Foreclosure Bailout - Already Expecting Failure

By: Nick Adama

[ Posted On: 2009-03-30 ]

It is becoming more apparent by the day that homeowners who rely just on government plans to stop their foreclosure will end up sorely disappointed in the results. From one disastrous plan to the next, the banks and investors have been taking advantage of the government to keep from having to provide any real services to their borrowers.

The latest debacle has been the complete failure of the much-touted HOPE for Homeowners plan which has been given $300 billion to guarantee mortgages and has helped a grand total of one homeowner avoid foreclosure so far. This is money that could have been used in the private sector to fund new loans or just keep money in people's pockets to save or spend in the economy.

Now Secretary Treasury Timothy Geithner told the Council on Foreign Relations that the newest Obama mortgage modification plan "has a pretty good chance of gaining traction." This plan represents another $75 billion that the government is taking from people to assist homeowners in preventing from losing their properties.

And all the plan has is a "pretty good chance of gaining traction." This should strike fear into the heart of any homeowner who places all of their faith in the new program or any government plan to address the housing market. What does Secretary Geithner's statement even mean, when it comes right down to it?

It means that the government is entirely unsure of whether or not any of their programs will have any impact at all on the housing market or on a homeowner's ability to stop foreclosure. The economy is just like a car stuck in the mud and spending $75 billion and being optimistic about it might help it get a little bit closer to being able to drive out of the mud. What a metaphor!

Either this new loan modification program is expected to be a complete disaster or the Treasury Department is hedging its bets on this plan, having seen the failures of previous ones. In either case, borrowers should not rely just on these government guaranteed mortgage refinances and modifications to save their homes.

If the US Treasury Secretary is hedging his words on the ultimate success or failure of the plan and spending $75 billion to take a shot in the dark on helping homeowners, then these same homeowners also need to hedge their own bets. The more options they have to avoid losing a house, the better.

So far, the government has created numerous plans and appropriated hundreds of billions of dollars to end the foreclosure crisis, with no significant reduction in the foreclosure rate to show for it. The politicians would have been better off sending out checks to borrowers to pay their mortgages or just paying off everyone's mortgages directly.

But this policy of handing out money to the banks in order to get "credit flowing again" has been a disaster. Credit is not flowing again, and consumers are attempting to pay down their debts with the money that they have left, rather than borrowing more. Banks are sitting on the money while borrowers pay back loans or go into foreclosure if they experience a financial hardship.

Even if the government's programs have all had noble intentions behind them, the banks have taken advantage of these new plans to grab more money while avoiding assisting their clients in default. This has only made the recession more harmful to homeowners, taking their money from them, preventing prices from falling, and creating trillions of dollars of new money.

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

About The Author: Nick Adama writes articles to help borrowers stop bankruptcy and foreclosure. You can find out more about how to save your home and credit at his site: www.foreclosurefish.com/

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