Fannie Mae and Freddie Mac have recently begun to change their opinion regarding giving significant principal write-downs – where part of a mortgage loan is forgiven for people who are having trouble paying their mortgages. Previously, they said this would not be a good move for their companies regarding their foreclosure policies.
The reason for this sudden change – Democrats are pushing them. Most Republicans see the danger. Fortunately, the federal regulator of Fannie and Freddie is currently forbidding this change. Fannie and Freddie already have many different optional means for people to save their homes and are offering them to the homeowners in need, and there seems to be no need to add the Administration’s plan of principal reduction.
While principal write-downs for mortgages could prevent serious losses and keep people in their homes, it would costs the taxpayer millions of dollars. Some Democrats and some economists feel this would be a good tool to help the housing market get back on its feet. Many feel this would be a good reason for homeowners to fight to keep their property instead of letting it go into foreclosure. These homeowners would get a principal write-down on their mortgages. For example, some may get as much as $50,000 off of their principal, which would encourage them to keep their home. It sounds good on the surface. But there’s a hook.
The reason for this sudden change of opinion for Fannie and Freddie is because the Obama administration has increased the pay back for these write-downs using MORE taxpayer money. If Fannie and Freddie did this on their own they feel it would not be a good policy. Therefore, if it’s not a good policy for Fannie and Freddie to do it, why is it a good policy for the government to get involved?
With as many as half a million homeowners getting this kind of break, this could cause a stampede of people who see this as a way of reducing their mortgage but who actually do not need it. The Obama administration is telling Fannie and Freddie that they will pay back 50% of the loss that these companies would take. This in fact works like another bailout for these two companies, who were some of the worst offenders in the housing crisis. This is the reason for Fannie and Freddie’s sudden change of opinion.
The head of the Federal Housing Finance Agency, which oversees Fannie and Freddie, Ed DeMarco, said he does not want to see a lot of foreclosures but he has to protect the taxpayer as well because this is the mandate for his job. DeMarco and many Republicans field that this bailout will work against the taxpayers. One of their fears is that many homeowners would quit paying their mortgages so they can get this principal reduction. This could escalate into a very big problem. DeMarco is being pressured by 100 lawmakers who have signed a letter asking him to consider allowing principal write-downs.
So the Obama ministration wants to spend more of your money into this bailout proposition. It would appear the Administration has not learned a thing.
If the private sector is already doing this – LET THEM CONTINUE! There is no reason for the government to get into the game with tax-payer money. This is money the government doesn’t have anyway and would increase the debt, add more borrowing, and increase the interest We the People have to pay. So far the government – the ADMINISTRATION shows NO indication of becoming fiscally responsible.
In a normal household (mine) we have had to CUT SPENDING due to the financial crisis. The gover…ADMINISTRATION should follow this same example! We can not spend our way out of debt and IT MAKES SENSE that the gove…ADMINISTRATION can not do it either.
WAKE UP OBAMA! WAKE UP! Stop playing “fiscal roulette” with our tax dollars on a “SURE LOSE” situation. The ADMINISTRATION can not continue this course of tax and spend and get our nation out of the fiscal crisis it is in – “it ain’t gonna happen.” Lets do two things: stop spending on additional projects that will incur greater expense to administer and secondly, let the private sector do what the private sector does best – stay economically sound. If they feel they want to do principle reduction for some people, fine. THEY know when to quit and when to spend. The ADMINISTRATION does NOT.
Another problem is that this would make big government even BIGGER. they will have to add more people to oversee the administration of this bailout. This means adding more people to the current department that oversees Fannie and Freddie, or perhaps starting a whole new department. We need LESS government, not MORE government. Once the federal government adds people to oversee various areas this sucks even more tax-dollars out of our pocket.
The government never seems to be able to cut any area of expansion without causing great upheaval. . The new expansion becomes a special interest group that needs to be coddled.
The already BIG GOVERNMENT grows, and Grows, and GROWS, while the taxpayer groans, Groans, and GROANS