Plan to Protect Homeownership
Here we go again with the next section of Obama’s Blueprint for Change. This time we’ll scrutinize his plan to “protect homeownership.” From the blueprint, here’s how Obama plans to
Protect and Promote Homeownership.
|Create a Universal Mortgage Credit: Many middle class Americans do not receive the existing mortgage interest tax deduction because they do not itemize their taxes. As a result, primarily wealthy Americans benefit from this homeownership incentive. Obama and Biden will ensure that middle-class Americans get the financial assistance they need to purchase or keep their own home by creating a 10 percent universal mortgage credit that gives tax relief to Americans who have a home mortgage.|
First question. Why do these middle class Americans they speak of not itemize their taxes? Because their deductions don’t exceed the standard deduction. That means all their tax deductible expenses–including mortgage interest–sum to less than the standard deduction. They get to deduct more than they’ve spent on tax deductible items already! In other words, they are already getting this tax break and more!
How about this 10% universal mortgage credit? According to this Mortgage News Daily article, this will effectively reduce the interest rate on mortgages by 10% for qualified taxpayers. If this is indeed the case, we’re again talking about reducing taxpayers to taxfilers by reducing their tax burden to less than zero. Can you say Robin Hood? The blueprint goes on to say this will provide 10 million homeowners with an approximate savings of $500 per year, helping them remain in their homes. While $500 might make a mortgage payment for some, I think it’s a stretch to say that $500 will prevent someone losing their home.
|Close Bankruptcy Loophole for Mortgage Companies: While investors who own multiple homes and people with vacation homes can renegotiate those mortgages in bankruptcy, current Chapter 13 law requires ordinary families to stick with the original terms of their home loans—regardless of whether the loan was predatory or unfair.|
I don’t know if Obama remembers this, but it seems Congress enacted legislation to keep borrowers from abusing the bankruptcy system recently, let’s see…I think it was the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Though this legislation targeted those who would have filed Chapter 7 (allowing debt to be discharged rather than restructured,) it was deemed necessary because of abuse by debtors. Now suddenly, culpability for borrowers’ inability to pay their debts has shifted to lenders! Obama voted against the Act, but it’s interesting to note that Biden voted for it. So it seems at least the Vice-President elect recognized the system was being abused by borrowers.
And what’s meant by a predatory or unfair loan? Were some borrowers forced to sign a mortgage they didn’t want? Does this mean any loan can be classified as such if a borrower becomes unable to pay? Unless a borrower was dragged into a dark room and physically forced to sign an agreement while protesting the terms, it would seem the responsibility lies with the borrower. I distinctly recall being flabbergasted by advertisements to sell 125% home equity loans and interest-only loans, telling my wife how absolutely insane it was for anyone to accept such terms. Any responsible borrower would have thought the same thing and refused these “unfair” or “predatory” terms. Anyone with a brain should have known that housing couldn’t continue to appreciate at the abnormal rates of the last few years.
So, who is ultimately responsible for borrowers not being able to repay these loans? The borrowers themselves, that’s who! Should the mortgage companies have known these loans weren’t likely to be repaid? Certainly, but our politicians–Democrats and Republican–encouraged this irresponsible behavior because it artificially inflated our economy and kept them in office. Whether you like Bill O’Reilly or not, he nailed it when he pinned part of the blame for the current mess with Fannie Mae and Freddie Mac on Barney Frank. Here’s the exchange if you missed it:
I’m not saying Republicans don’t share the blame, but the Democrats also deserve to shoulder some. We the people also deserve to shoulder the blame because we were stupid enough to continue putting these same idiots back in office time and again!
The blue print continues with Obama’s plan to
Prevent Future Crises in the Housing Market
|Mandate Accurate Loan Disclosure: Barack Obama and Joe Biden will enact laws to ensure that all prospective home buyers have access to accurate and complete information about their mortgage options. Obama and Biden will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages.|
What, exactly, is keeping borrowers from discovering this information now? Every time I’ve ever borrowed money, this information was readily available. Now, let me state that I’ve always had good credit. I’ve always been conservative when it came to borrowing money, never borrowing more than I needed and always having a conservative plan for repayment that left a considerable cash flow cushion. That’s not rocket science, it’s called acting responsibly! Continually placing the blame on corporations and refusing to let delinquent borrowers suffer the consequences of being irresponsible only encourages more irresponsible behavior.
|Combat Mortgage Fraud and Sub Prime Loans: Barack Obama introduced comprehensive legislation over two years ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity. This bill also provides counseling to homeowners and tenants to avoid foreclosures.|
Here we go again, blaming the mortgage companies while avoiding placing any blame whatsoever on irresponsible consumers of credit. According to the Summary of Obama’s STOP FRAUD Act, it would have amended Federal Law to make it a crime for any mortgage professional to defraud a person or business obtaining a secured loan. Isn’t such fraud already against the law? The FBI Financial Crimes Division seemed to think it was in this report dated May 2005. So this bill Obama touts in his blueprint would have really resolved nothing. As for the counseling provided to homeowners and tenants, does anyone really think irresponsible behavior is going to be changed through counseling? There are free credit counseling services available now. A quick Google search for “Free Credit Counseling” yields these links.
There’s really nothing substantial in this part of Obama’s plan. If anything, it’s likely to encourage more irresponsible borrowing by refusing to hold people responsible for their mistakes. The title makes it sound good though, doesn’t it?
Plan to Protect Homeownership. Sure.
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