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Anti-foreclosure program is not enough
A foreclosure sign in front of a house for sale in Stockton, Calif.
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TEXT OF INTERVIEW
Steve Chiotakis: A report out today by the Congressional Oversight Panel says the government program to help homeowners avoid foreclosures is falling short. And it's calling on Congress to beef up rescue efforts. Marketplace's John Dimsdale joins us live from Washington with the latest. Good morning John.
John Dimsdale: Good morning Steve.
Chiotakis: So what's this panel saying?
Dimsdale: Well essentially they think that the mortgage foreclosure epidemic has moved beyond the subprime mortgage crisis and is growing worse because of unemployment. The panel says that that $50 billion loan-modification program, which was an effort to make terms more affordable for struggling homeowners, was never really designed to cope with a jobless rate in the 10 percent range, which means now even homeowners who took out conventional, fixed mortgages with good down payments have lost jobs and they're facing foreclosure.
Chiotakis: What are they recommending, John?
Dimsdale: They think the government should step up efforts to get these loans modified. And that could mean throwing more money at the problem, which most panel members said would be worth the expense. But that's not a unanimous view. The panel's two Republican representatives voted against the report. They don't think that the support program should be expanded because it'll put m,ore taxpayer money at risk.
Chiotakis: All of this, John, comes in the midst of warnings that the Federal Housing Administration, the FHA, could be facing a government bailout down the road. What's that all about?
Dimsdale: Yeah, that's right. With the housing bust, the FHA has been insuring mortgages for low-income and first-time home buyers at an incredible rate -- four times more than usual. And there's worry that the FHA's insurance fund is going to run out. The commissioner was before Congress yesterday saying he doesn't see the need. But as these defaults rise, not everybody is reassured.
Chiotakis: All right, Marketplace's John Dimsdale in Washington. John, thanks.
Dimsdale: Thanks.
There is a very good angle to this story that is being missed. All foreclosures are preventable based on law. But why are homeowners not being advised on the law? Because, typically, mortgage portfolios containing prime and subprime loans have been intermingled and situated under the credit default swap vehicles. When Bank of America purchased Countrywide, it inherited all of the toxic loans it had shifted from its portfolio to Countrywide's by allowing Countrywide to refinance many of its loans. The question that exposes this scheme can be simply stated: If the loan product is of such good value and quality, why did Bank of America not keep its customer by refinancing, rather than allowing Countrywide to be refinance the home? That's the TRICK!
These people who are recomending spending tax payer money to socialize housing are the same people who never recognized real estate bubble at its peak. These are the same people who cheerlead when everybody was buying houses they cant afford as sign of progress being made. These are the same people beleive printing more money is the way to build wealth. Good luck with these kind people running govt and FED etc and setting the policy.
