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 overseer 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.

More dramatically, 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:


(others have corroborated Treasury’s focus.)

Remember that the entire Tarp bailout was initially sold as a solution to the housing meltdown, but was switched – before it was even approved – to a bailout for Wall Street.

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

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

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  • https://duckduckgo.com/ ron paul

    “Homeowner Relief” programs are designed to relieve owners of their homes.

    • eah

      If they are not paying for those homes, why shouldn’t that happen? Do you think people ought to be able to keep living in houses they are no longer paying for? Do you think renters who are no longer able to pay their rent should be able to keep living in their flats?

      • Jason Walker

        Reasonable questions. In that vein…. —Is it fair that the mega banks can ‘legally’ create money out of thin air and loan it at interest? —Is it fair that the mega banks have been receiving TRILLIONS of dollars from the taxpayers at nearly zero percent interest and then turning around and loaning it back to the US gov’t at a profit? Doesn’t that meet your definition of a scam? One would think that—if you are an independently minded person who reads this excellent blog, and are not a stooge on the DoD payroll—you would, after reading this blog, know that by and large the ‘irresponsible’ people are sitting on Wall St. in nice suits. And, the enablers of these financial crimes are sitting on Capitol Hill.

      • Cheyenne

        “If they are not paying for those homes, why shouldn’t that happen?” –Because for mortgages orginated between say 1998-2008, 9 times out of 10 the foreclosing party is NOT the one who lent the home owner the money (nor was the foreclosing party ever assigned the home owner’s debt). Consequently, the foreclosing party commits CRIMES (forgery, fraud on the court) to take a home to which the bank has no right, i.e., the bank steals the home. –“Do you think people ought to be able to keep living in houses they are no longer paying for?” Yes. I’ll take a civil breach of contract (by the home owner) to criminal fraud on the court (by the wrongul forecloser) any old day of the week. Fraud on the court is so severe that–like murder–it carries no statute of limitations. “Do you think renters who are no longer able to pay their rent should be able to keep living in their flats?” No. It’s funny, though, that you’d equate owners to renters, since the government’s massive everyone-can-own-a-home program hinged on the superiority of renting. Now that that’s blown up in the faces of banksters and the captured government serving the banksters, suddenly homeownwers’ contractual rights are so meaningless that massive crime–fraud on the court–has become official policy supplanting those rights.

  • Objector

    And let’s be clear. Eventually, these same bankers will foist austerity and high interest rates on the US government and their citizens.

    When will the “Reform Party” begin to take shape.

  • Cheyenne

    Outstanding, GW. Barofsky’s book extends the real nature of HAMP–a wealth transfer from taxpayers to Wall Street disguised by propaganda as a benefit to Main Street–to every TARP program, including TALF, PPIP, and the bailout of AIG. Each program is designed the same way, as a mechanism to effect that transfer by way of fraud, often borrowing the very schemes that paved the way for the onset of the crisis to begin with.

    Mainstream reviewers of “Bailout” somehow overlook the central role of fraud in the TARP bailout, just as they ignore the fact that bloggers who’ve been talking about the facilitation of fraudulent wealth transfers by government officials, far from being “conspiracy theorists,” have in fact been proven correct by Barofsky’s account as an insider.

    Despite being invited to do so, the U.S. Treasury has declined the opportunity to provide a single spokesperson to refute ANY of the factual assertions Barofsky’s book makes, which is all you need to know about their accuracy.

  • John B.

    We can´t be surprised by what is happening right now. Politics never served to help people like you or me. It served to protect economic interests. The difference between countries is in levels of how are people able to protect themselves. In Canada, for instance, the <a href="http://jaybanks.ca/vancouverrealestatenews/2012/08/10/new-mortgage-rules/"mortgage rules are being disobeyed by credit unions which are not credit unions at all. And everyone seems happy…

    US are constantly working on destroying the education system to breed new generations of brainwashed soldiers and religious militants. The result is that people like Barofsky are never heart enough and people like Romney achieve candidacy.

  • John B.

    We can´t be surprised by what is happening right now. Politics never served to help people like you or me. It served to protect economic interests. The difference between countries is in levels of how are people able to protect themselves. In Canada, for instance, the mortgage rules are being disobeyed by credit unions which are not credit unions at all. And everyone seems happy…

    US are constantly working on destroying the education system to breed new generations of brainwashed soldiers and religious militants. The result is that people like Barofsky are never heart enough and people like Romney achieve candidacy.

  • Zoe Simmons

    did bofa havea legal security instrument in the first place to modify? , second did they have the authority to make the modifications with those said rules known to all parties who were part of the transaction — was it clear and fair to the consumer based on existing laws — what is it a rider of some sort piggy backing on the original note so they could lie to homeowners TRICK them into signing – FRAUD AND LIES AGAIN — I don’t see how they can claim i knew that one page was creating a new mortgage with them — I ‘ve been through four over the years — if that was clear we would have said NO — my husband was adamant that we planned on suing countrywide for their predatory equity stripping and illegal practices that HARMED us when we were at our lowest point — did all parties, the investors and the borrower all understand that now bofa was the new deed holder? – -if not it is fraud again — i did not sign away ANY rights and did not even talk to BofA in person – my husband talked with someone – i am in process of being fast tracked into foreclosure right now — dec 23 — HAPPY Holidays — AND ON PURPOSE by yet another fraudulent, bad servicer … they took over the fraudclosures for bofa after bofa could no longer continue trying to put clothes on naked mortgages with more fraud … so, now the new servicers does an “audit” of our escrow and determines instead of $59 hazard insurance policy we need a $1589 policy! Raising our payment a higher payment than premodification — i would have NEVER waived my rights for — $200 a month reduction are you kidding – no reduction in principal and our home lost over 100k in value! Anyway, they are forcing us into foreclosure — the rocket docket as they call it after they paid off the states and bar associations STILL NO RELIEF for the HARMED — I was never given notice of countrywide class action suits and I DESERVE EQUAL TREATMENT under the law and to have my wrongs righted and my grivances heard and remidied not saying oops sorry too late … your state collected for you now you are stuck with the deal they made for you ???? — I am NOT “taking one for the gipper” Back to the servicers, and investors — all are giddy … new inventory … new money … well, I hope the judge’s in wa state think this behavior is anything but ethical or follows the RULE of LAW in our state … and if the RULE of LAW is applied fairly to me as is it suppose to be .. the deed and note are separated with the securitization and the destruction of the original note – they can not claim to have lost thousands of original notes and make a mockery of the rule — and showing a screenshot as evidence in one case — are you kidding! All rules of security instruments will apply — before during and after the fraud of modification was perpetrated on the hurting american home owners. Find the original notes and show valid chain of title is the only equitable clothing (fraud on its face when so many servicers apply for so many lost notes – from testimony it appears they do not have them — countrywide wanted to be sure to have no confusion – they were the defacto owners and if you went against them – your trusts would have “naked – unenforceable notes,if you did the simpler transaction – an insurance policy of sorts .. .bahwahahaa … I DEMAND to be treated equally under the law — the banks had the upper hand in all the contracts — yet now they want me to take the fall and loss for their frauds — call us deadbeats and undeserving of loans. I’ve been paying my mortgage for 16 years paid far over the principal but I am not to get my day in court … just want to rocket docket me — roll me over and kicked to the curb by these bankers – just to be replaced with what the street is calling “new” money — I am mad as hell — those who should be jailed are getting enriched unjustly — many times over in my mortgage situation — to big to fail and to big to be jailed – i guess. Well, the only way to prevent such abuses is to make them PAY — lose stuff — seizure laws for bankers and corporates — equal and fair protection under the law — like the rich always say .. let the free market work — the rule of law. I don’t think fannie mae and the gov. should pay for the losses as bofa and others — bofa never had the right to be the owner of the security instrument as it was assigned many times over and over in my case — a fraudulent modification document is not a security in the property or new deed at all — they just heaping more fraud upon more fraud.. hoping the smoke screen will cover all the naked mortgates and their other frauds — wondering how many toxic mortgages are left in wa state — some homeowners took on new clothed mortgages not the fraudulent modification process — many just walked away but some may be back and DEMAND JUSTICE — i can imagine how others like me 17 years into the home and then they are just treated like shi* .. called dead beats … pitting other americans against us — but they should see if they get away with this and still continue a mers system with same leaders — there is no longer any reason to say we aren’t all serfs and slaves to these gov./ corporate war machine industrialists — we are the ones holding up the recovery .. the economy is dragging because WE WANT JUSTICE and will not just walk away … again I WANT FAIR TREATMENT UNDER THE LAW … and i do not see how on gods green earth how bofa can provide an ORIGINAL NOTE — without the lie of “its lost – the dog ate it” aren’t judges kind of tiring of that — I am sure some are very determined to get to the bottom of this — I hope I can get an attorney to help me — THANK GOD/DESS I have some previous paralegal training — so at least I have a bit more understanding of the system than some homeowners.

 

 

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