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.

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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.

 

 

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