Proof Positive that Government’s “Homeowner Relief” Programs Are Disguised Bank Bailouts… Not Even AIMED at Helping Homeowners

Government Was Just Trying to “Foam the Runway” to Help Giant Banks

We pointed out last year:

Huffington Post notes, in a story entitled “New Obama Foreclosure Plan Helps Banks At Taxpayers’ Expense “:

A key new condition in the plan would shift the financial liability for refinanced loans from Wall Street banks to the American taxpayer.


The newly expanded program would expunge legal liabilities associated with mortgages refinanced through the program for the original lenders of the mortgages. Each time a bank sent a loan to Fannie and Freddie, it certified that the loan met Fannie and Freddie’s safe lending criteria. But many loans sent to the mortgage giants did not, in fact, meet those criteria. Currently, when borrowers default on those ineligible loans, the mortgage giants can “put back” the resulting losses onto the banks that pushed the loans.

Under the modified plan, “put back” liability at banks will be erased for any underwater mortgage that is refinanced through HARP, eliminating Fannie and Freddie’s ability to sack lenders with losses in the event that the mortgage does not pan out.

If borrowers go through HARP, but decide after several months that the modest monthly savings do not outweigh owing tens of thousands of dollars more than their home is worth, taxpayer-owned Fannie and Freddie will have to take the full loss. Even if the original loan was sent to Fannie and Freddie with false or fraudulent guarantees from the bank — promises that may directly be tied to the borrower’s current financial problems — banks will be immune from liability. Fannie and Freddie plan to charge banks “a modest fee” to extinguish this liability, but the administration has yet to determine what that fee will be.

“In most cases people would probably be better off walking,” said economist Dean Baker, co-director of the Center for Economic Policy and Research.

While this is outrageous, it’s nothing new. PhD economists John Hussman and Dean Baker, fund manager and financial writer Barry Ritholtz and New York Times’ writer Gretchen Morgenson say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama’s foreclosure relief programs as being backdoor bailouts for the banks. (See this, this, this and this).

We noted in February:

The 50-state settlement with the banks … over mortgage fraud is a stealth bank bailout, according to many top observers. See this, this, this, this, this, this, this and this.

This is par for the course … All of Obama’s previous “mortgage relief” programs have really been stealth bank bailouts which screwed the homeowner. And see this.

We reported in April that the current overseers of the Tarp bailout program – the special inspector general for TARP, Christy L. Romero – said that the Tarp funds haven’t been paid to homeowners, but have gone to banks:

A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office.The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has “experienced significant delay” because of “a lack of comprehensive planning” by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program.

“Look at the TARP money that goes out to the banks,” said [Romero] “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.”

And last month, the former Tarp overseer – Neil Barofsky – noted last month:

The truth is that the administration – whether through principal reduction or otherwise – has never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal.

In his must-read book Bailout, Barofsky says the Obama Administration never cared if the HAMP mortgage modification program actually saved homeowners from foreclosure, and that Treasury Secretary Geithner said that the program was simply aimed at spreading out foreclosures over time to “foam the runway” for the giant banks so that a high number of simultaneous foreclosures would not jeopardize their balance sheets. See this 45-second video clip:


This is in addition to all of the government’s other stealth bailoutsto the big banks.

By choosing the big banks over the little guy, the government is dooming both.

Proof Positive that Government’s “Homeowner Relief” Programs Are Disguised Bank Bailouts … Not Even AIMED at Helping Homeowners was originally published on Washington’s Blog


6 Responses to “Proof Positive that Government’s “Homeowner Relief” Programs Are Disguised Bank Bailouts… Not Even AIMED at Helping Homeowners”
  1. barbra orr says:

    Tracy i agree with you I am very disappointed in President Obama .No one wants to help anyone just make themselves look good. Of course with Bank of America out there anyone would look good.What it all comes dow to is no one gives a darn what is happeneing to the housing market.

  2. Peter J. Pike, Esq. says:

    More frightening prospect – if Obama is not re-elected, we get Mitt (who most assuredly, will be even worse!) ARGHHHHHHH. Vote third party.

  3. Anynomous says:

    Pam Bondi’s Office gets tough:

    Former tax collector misused official vehicle for drive to funeral and gets fined by ethics commission. Bondi and Rick Scott get involved.

    Really? Is that what they are doing? But they still can’t figure out what to do with the millions of dollars from the Bank settlement supposed to get relief to wronged homeowners? What a country!

  4. Sarah says:

    No more prisons needed. The housing crisis is dragging out the skeletons far and wide. If there is a silver lining it’s that people are painfully educated about how hostile authority can be. A hopeful person might want to grab the brake lever, put the whole thing in reverse. Something happened, we lost most of the good guys in Government, the barbarians want lawlessness for themselves and punishment for everyone else.
    Unless you’ve been asleep – new levels of poverty and misery are all around us. Dissent is increasingly met with force and paranoia from the Government. In the midst of a recession, we learn our Treasury Department and Banks assembled a cruel, vicious lie. We usually refer to such callous aggression in much starker terms, but from day one they’ve ignored millions being bankrupted and hurled to the street as “no big deal”. Wow, what comes next. Further “deregulation” has already resulted in the loss of habeas corpus, so it’s on in a bad way. Thanks again Obama!

  5. D Bass says:

    I voted for the guy. Hope and change, nope, just more of the same. I say empty the prison except for murderers, sex offenders, and move in Wall St. and all the corrupt bad guys out there. The question is do we have enouth prisons, I doubt it…….

    • Tracy says:

      There are probably enough prisons. BUT, I refuse to continue to pay the way for these evil people on Wall St. or prison. France had the right idea quite a few years back. Sharpen the blades.

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