Mortgage bailout expanded to seconds

posted at 2:47 pm on April 29, 2009 by Ed Morrissey

Diana Olick predicted this almost two months ago, but hardly anyone paid attention.  Now the Obama administration has made it official by including seconds in their mortgage bailout plan.  Instead of paying just to keep people in their homes, now we get to pay for their home improvements, too:

The Obama administration unveiled an expansion of its $75 billion foreclosure prevention plan yesterday, providing new subsidies to mortgage lenders and investors.

Under the expanded plan, some homeowners could see their payments fall significantly and the interest rate on their second mortgage pushed down to 1 percent. The announcement comes nearly two months after the administration launched the housing program, called Making Home Affordable. While officials said some borrowers have already received help, the foreclosure rate is rising and it could be months before the program begins to have an impact.

The new efforts address, in part, criticisms from consumer advocates that the administration’s housing plan did not go far enough and that borrowers still face too many barriers to receiving help.

“Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall. Every step we take forward is done with that imperative in mind,” Treasury Secretary Timothy F. Geithner said in a statement.

Responsible homeowners?  Responsible homeowners wouldn’t have taken out a second on their home equity if they couldn’t afford it.  Seconds get used for lots of purposes, including debt consolidation and home improvements, but all of these purposes are entirely voluntary.  No one held anyone at gunpoint and forced them to take a second mortgage.

Let’s revisit Olick’s rant from early March, when she scooped the media on this effort:

It’s not that I don’t get the reasoning. Sure, do all you can to help people pay their mortgage, like get rid of other debt. By why stop there? What about car loans? Student loans?? The second liens, in general, were used by borrowers to either buy more home than they could really afford or to use their homes as ATM machines. Yes, some people use home equity lines of credit to pay college tuition.

But I can’t tell you how many homeowners I’ve interviewed (and just take a look at David Faber’s documentary House of Cards to see more) who took out home equity lines to put in a pool or buy a fancy car or put an addition on the house that includes a fancy new kitchen with a Viking six-burner. And I’m supposed to pay for all that?

It’s one thing to suck up the bitter pill in order to save the greater housing market and keep families in their homes, but using taxpayer dollars to give homeowners a free ride on second liens is preposterous.

In truth, the government shouldn’t act as guarantor to first mortgages, either.  But the effort to force lenders to write down seconds is entirely absurd, for the reasons Olick stated.

By the way, guess how many homeowners took advantage of Obama’s Hope for Homeowners program, the one that promised to get lenders to write down first mortgages?  One.  It turns out that lenders resent losing money and didn’t want to cooperate with Obama’s H4H program.  This modification allocates up to $5500 over three years to lenders who adjust the principal on the loans.  Guess who’s paying for those writedowns now?  You and me.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Looks like I can afford that new roof I’ve been wanting.

Thanks! Suckers!

lorien1973 on April 29, 2009 at 2:49 PM

By the way, guess how many homeowners took advantage of Obama’s Hope for Homeowners program, the one that promised to get lenders to write down first mortgages? One.

Seriously? Wow.

BadgerHawk on April 29, 2009 at 2:50 PM

Yeah… I’m so happy that I’m paying for others’ McMansions and pools.

Illinidiva on April 29, 2009 at 2:52 PM

Liberals…….Hypocrits and Losers….

SDarchitect on April 29, 2009 at 2:52 PM

I’ll be buying a new motorcycle doing some home repairs with my second mortgage courtesy of you people.

Appreciate the help, see you on the road.

Bishop on April 29, 2009 at 2:52 PM

There is no end to any of this.

Full steam ahead.

artist on April 29, 2009 at 2:52 PM

Oh, man. When Obama hears about this, he’s going to be “furious”.

LibTired on April 29, 2009 at 2:52 PM

In truth, the government shouldn’t act as guarantor to first mortgages, either. But the effort to force lenders to write down seconds is entirely absurd, for the reasons Olick stated.

True…but once the they crossed that first line, there’s no limit. And it will keep going.

AUINSC on April 29, 2009 at 2:54 PM

Heck, let’s just declare a Jubilee, and get rid of all debts whatsoever. You don’t owe me that five you owe me from last week, and Bob don’t have to get Steve back for making out with his girlfriend last night.

Credit card balances will disappear, and student loans will all be forgiven.

Movie studios won’t have to pay the stars for their current movies, and CBS won’t have to pay Couric and Letterman their combined eleventy bizillion dollars.

And, best of all, no more national debt. We owe no one anything. Come and take it, if you think you can.

And what happens then? Why, everyone is happy! Thank you, Barack Obama! Thank you, Democrats! Let’s all do the happy dance. Whee!

Snowed In on April 29, 2009 at 2:54 PM

What a bunch of jerk offs

blatantblue on April 29, 2009 at 2:56 PM

Bailouts for house-flippers. Lovely.

Sekhmet on April 29, 2009 at 2:57 PM

When we applied for a home equity loan 2 years ago for some needed repairs, I got run through the ringer checking my credit score, employment and savings ability. I met all those tests, got the work done and paid off the loan.
I should have done the resposible thing and let Obambi pay it for me.
I’m such a chump, working my a$$ off to do right by my family. Shoulda cried poor.

ChicagoBlues on April 29, 2009 at 2:57 PM

Ah, I get it now. We’re just living in some weird Twilight Zone episode where our dreams come true and right now we’re having nightmares. Happy dreams, people! Then good things will happen to us when we wake up.

But on the off-chance this isn’t a TZ episode, you know, I’ve always wanted to travel the world. . .

rbj on April 29, 2009 at 2:57 PM

If only there were a way to just hand over all of our money to the government and then have them just pay for everything outright. Then, if we need anything (groceries, prescriptions, a roof, a pool) we could just submit a form and have them cut us a check if approved.

myrenovations on April 29, 2009 at 2:57 PM

/sigh

Rewarding people who used their houses as ATM machines with no consequences.

I dunno what to do or say anymore. It gets so exhausting to sit idly by and watch my country get ripped to shreds by this narcissistic fool.

BardMan on April 29, 2009 at 2:57 PM

The word swine applies not only to the flu.

Mason on April 29, 2009 at 2:58 PM

This administration is one giant train wreck waiting to happen. Each day new cars are added. It is going to be one magnificent wreck when it runs out of track. Too bad Marty McFly and Doc Brown are not behind the controls to take us back to 1981.

anticucho on April 29, 2009 at 2:58 PM

Seriously, I told all my friends months ago that if the new Administration really wanted to do something BIG to help people in financial trouble, it should take $900 billion and pay off everyone’s credit card balances. That would help a lot of middle class families who tend to carry the biggest balances, help the banks, and help the mortgage lenders because people with zero credit card balances could probably keep paying their mortgages. Yeah, it would have “penalized” people who don’t abuse credit cards, but it would be a lot fairer and have a more stimulative effect on the economy than the willy-nilly bank bailouts and crazy mortgage modification plans we have ended up with

rockmom on April 29, 2009 at 2:59 PM

I’ve lived in my home for 12 years, and because of one thing, or another, the improvements here, are slow, but ongoing. I refuse to go to the government for this. So now, instead of getting my home done, I get to help others get theirs done. So much for that bringing everyone to the same level. UGH

capejasmine on April 29, 2009 at 3:00 PM

O.M.F.G.

Don’t put in a f**ing pool if you can’t afford one.

bluelightbrigade on April 29, 2009 at 3:03 PM

I, for one, just love having my income stolen to pay for irresponsible losers.

Sounds to me like people are spending their mortgage payment on Starbucks Lattes and telling the lenders to go to hell.

Rae on April 29, 2009 at 3:04 PM

And do you guys know there was a time in the not-so-distant pass that anyone who took out a second mortgage was considered a loser? It’s true.

Rae on April 29, 2009 at 3:05 PM

passt

Rae on April 29, 2009 at 3:06 PM

who even qualifies for these loans? The information is so vague. i’m surprised I haven’t seen Obama on stage with a bunch of people who took advantage of his mortgage bailouts and sang him praises in front of a camera.

Daemonocracy on April 29, 2009 at 3:10 PM

Choo GOT to be poopin’ me!

tree hugging sister on April 29, 2009 at 3:12 PM

notice the liberal trolls never show up in these threads.

lorien1973 on April 29, 2009 at 3:13 PM

All we hear is the economy is improving, I don’t see how the economy can improve with all these bailout. It doesn’t make sense. I know we will see inflation in a few years is that all. I can’t see how this can be sustainable for more than a few more months. This is just crazy.

Brat4life on April 29, 2009 at 3:14 PM

gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme, gimme.

Griz on April 29, 2009 at 3:16 PM

I sold my house in 2007 because I had to move for a job. I got married in 2008 and just bought a house today. My wife has never owned a house. Guess who doesn’t get the 8,000 dollar credit?

We don’t.

So we go out, in this market, buy OUR and HER first new house and the federal gov’t won’t let us take a credit for it… Yet we get to pay for people’s HDTVs and Home Improvements.

WTF!! I AM FURIOUS. Not Obama, oops mistake furious… I am FURIOUS.

James on April 29, 2009 at 3:16 PM

Obama is coming after our 401K’s -MARK MY WORDS- to pay for all of this.

It’s the “spread the wealth” plan. It won’t be “fair” that YOU have money in your retirement but Juan Gonzolez doesn’t even have a house.

IT’S COMING.

stenwin77 on April 29, 2009 at 3:16 PM

Federalists 10:

A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.

James Madison tried to write a constitution to protect us from this stuff. I guess he could not envision the morals of our society declining so much.

WashJeff on April 29, 2009 at 3:19 PM

Frustating. Who will give me a mortgage? Even one I can actually…you know…afford?

But I get to help pay off other people’s mortgages. How is that “fair?”

Bob's Kid on April 29, 2009 at 3:20 PM

notice the liberal trolls never show up in these threads.

lorien1973 on April 29, 2009 at 3:13 PM

Ed should put “Gay Marriage” or “Abortion” in the title to trick them.

WashJeff on April 29, 2009 at 3:21 PM

Anyone know how much money is stashed away in 401K’s by Americans? (Of course, they’re worth considerably less now.)

stenwin77 on April 29, 2009 at 3:21 PM

As each day passes, I am thinking more and more about relocating my assets to Liechtenstein, and making preparations for returning to my ancestral roots. Might be a pauper of sorts, but at least would have the advantage of the Alps out my front door, and good food and a lot better beer.

coldwarrior on April 29, 2009 at 3:23 PM

ATM machines

Reminds me of Gerald Ford, who was for the “ERA Amendment”.

corona on April 29, 2009 at 3:25 PM

Time to stop paying taxes.

Just go tell your boss to Eff Off, get fired and watch the unemployment checks (which California just extended from 59 to 79 weeks) come rolling in for almost 20 months!!

omnipotent on April 29, 2009 at 3:25 PM

I’m beginning to look forward to the day when the whole economy crashes and burns. It will happen sooner rather than later. Economic laws are immutable, unimpressed by fawning media coverage, and impervious to Barack Obama’s particular “gifts”.

Sure on many levels it’ll be horrific. I don’t dispute that for a second. But witnessing all those Obama supporters and their “magical thinking” skull f*cked by reality will be priceless.

Mike Honcho on April 29, 2009 at 3:26 PM

I can’t understand the thinking here. How much deeper into debt is Obama going to push our country so that some people have it easy?

Loxodonta on April 29, 2009 at 3:28 PM

And do you guys know there was a time in the not-so-distant pass that anyone who took out a second mortgage was considered a loser? It’s true.

Rae on April 29, 2009 at 3:05 PM

I remember those days. Now people have to have everything they want. Used to have to save or go to a bank for a personal loan. Now they max out their credit cards or tack on a 2nd and 3rd loan on the house. All for “wants” not “needs”. Now they end up with a free ride at our expense. We cannot wait ’til 2010 or 2012.

hillbilly on April 29, 2009 at 3:31 PM

I’m for the mortgage bailouts it if the people receiving them have to get a big, red “O” tattooed on their foreheads – that way they’ll be shamed in public. The Scarlet O!

BJ* on April 29, 2009 at 3:32 PM

I wish I had a nickel for every person that told me they didn’t qualify for a write-down after I told them I didn’t qualify. My mortgage would be paid off by now.

I don’t know the one person who has successfully had their mortgage balance reduced.

FIFM (Fixed It For Myself)

Traffic Cop Timmy on April 29, 2009 at 3:32 PM

This is an obnoxious bailout for second-mortgage lenders. This has always been the riskiest kind of lending. Most of these lenders knew they were playing with fire. But they are paying hardball with the first mortgage lenders over the loan modifications.

Legally, a first mortgage cannot be changed without a “re-subordination” of the second lien. If the holder of that second lien refuses to re-subordinate, the first mortgage lender can’t do anything but foreclose on the homeowner. Of course, in a foreclosure the second lien lender usually gets nothing, so it would seem counter-productive for it to refuse a re-subordination, but that is what is happening. So many of these are out there and this is hanging up a lot of loans that otherwise could be modified without even any assistance from the government.

rockmom on April 29, 2009 at 3:36 PM

Parent: “You are grounded for three weeks!”

Child: “Ahhhhhh, that’s not fair!”

Parent: “It is retroactive to April 1st.”

Limerick on April 29, 2009 at 3:39 PM

My wife and I have owned our home for over 20 years, we’ve had no house payment for at least 6. We have built our home from the ground up. And we’ve finished each room as we could pay for it. I don’t borrow money from the bank, we save and pay cash. Small home but nice and paid for.

Alex Martinez on April 29, 2009 at 3:39 PM

I want to thank everyone for the great patio, and patio furniture you bought me.
I am glad we added a little dock on the back of the property to take advantage of the great bass fishing in my backyard.
The landscaping is beautiful and many neighbors have complimented me (and in turn, you) for having such nice taste.
Thank you very much, we appreciate it, and we can now afford a second vacation we never planned on.
Again, thanks for your generosity, if I only would have known, I would have up-graded some of my grilling appliances and made the water feature a little larger…I don’t suppose…

right2bright on April 29, 2009 at 3:42 PM

notice the liberal trolls never show up in these threads.

lorien1973 on April 29, 2009 at 3:13 PM

Second mortgages make you repubs angry.

But Katrina doesn’t.

At least now we know where your priorities are.

LibTired on April 29, 2009 at 3:43 PM

But Katrina doesn’t.

LibTired on April 29, 2009 at 3:43 PM

Not in the slightest. I don’t remember Uncle Sugar offering to help the Mrs and me when our home had a foot of water in it. I don’t remember Uncle Sugar putting a new roof on the house when God sent two inch hail through the roof. And I damn sure don’t remember you knocking on my door with either a sump pump or roofing shingles.

Limerick on April 29, 2009 at 3:47 PM

But Katrina doesn’t.

LibTired on April 29, 2009 at 3:43 PM

Yes, we’re angry at how Blancstare and Nagin effed that one up.

CDeb on April 29, 2009 at 3:48 PM

But Katrina doesn’t.

At least now we know where your priorities are.

LibTired on April 29, 2009 at 3:43 PM

You think that Katrina was man made?
Don’t you know that was a hurricane, and that we can’t control those?
Sheeesh, flunked science did you?

right2bright on April 29, 2009 at 3:58 PM

But Katrina doesn’t.

LibTired on April 29, 2009 at 3:43 PM

But of course! We are the ones to blame for Katrina. It happens that we have control over the weather now…

I can see what’s going to happen next. I can see Obama ordering his thugs to identify all of those Tea Party protesters he did not notice at first, but now he’s mad at; then, evict them all from their houses, mortgaged or paid for; and then re-inhabit those houses with those who could have never afforded it on their own…

Yeah, the kind that believe Obama will pay their mortgage and their car. What else? Pay their groceries? Clothing? Utilities?

newton on April 29, 2009 at 4:00 PM

“To each for whatever they want. From each, whatever they have.”

Star20 on April 29, 2009 at 4:01 PM

Limerick on April 29, 2009 at 3:47 PM
CDeb on April 29, 2009 at 3:48 PM
right2bright on April 29, 2009 at 3:58 PM
newton on April 29, 2009 at 4:00 PM

Sorry, guys. I was just doing my single-celled lib troll imitation. I didn’t think it was that good.

LibTired on April 29, 2009 at 4:11 PM

great… not only do I get to pay 4 ya house….. but I get to pay for the second you took out on ya house to buy da Cadillac Escalade.

roflmao

donabernathy on April 29, 2009 at 4:13 PM

LibTired on April 29, 2009 at 4:11 PM

No harm, no foul. Too much caffine, too little sleep.

Limerick on April 29, 2009 at 4:27 PM

Obama is coming after our 401K’s -MARK MY WORDS- to pay for all of this.

It’s the “spread the wealth” plan. It won’t be “fair” that YOU have money in your retirement but Juan Gonzolez doesn’t even have a house.

IT’S COMING.

stenwin77 on April 29, 2009 at 3:16 PM

My Pop will be 71 this year. Sometime last year while discussing the economy/politics I mentioned they will come after the 401k’s and tax the IRA’s.

He said that would be his breaking point and the guns would come out. FWIW

rat

riverrat10k on April 29, 2009 at 4:29 PM

notice the liberal trolls never show up in these threads.

lorien1973 on April 29, 2009 at 3:13 PM

They’re out sipping drinks while floating in the pool that you and I are about to pay for.

CDeb on April 29, 2009 at 4:30 PM

Liberals Statists…….Hypocrites and Losers….
SDarchitect on April 29, 2009 at 2:52 PM

And Liars…

SeanTate5 on April 29, 2009 at 4:33 PM

Hey, it’s only money. Timmy will just print some more.

GarandFan on April 29, 2009 at 4:52 PM

I forget exactly which program he was talking about, but a call-in to our local radio station said he had gone to the government website about mortgage help. Shortly, he was inundated with solicitations from law firms that would help him renegotiate his loan for an average fee of $2700. He later got someone from the government on the phone who confirmed that the government website was essentially a qualified lead generating system for law firms. WTF?

rat

riverrat10k on April 29, 2009 at 5:00 PM

By the way, guess how many homeowners took advantage of Obama’s Hope for Homeowners program, the one that promised to get lenders to write down first mortgages? One.

Maybe that’s because it’s a freaking scam and people don’t want to pay fly by night law firms thousands of dollars up front to “adjust” their mortgage for them?

Buy Danish on April 29, 2009 at 5:14 PM

YEAH…I pretty much DESPISE my neighbors.

Their Harley Davidson and the fake titties riding on the back all came courtesy of their piggy bank home equity.

AND THEY WERE PROUD OF IT.

Two trips to the courthouse for the REAL PICTURE of what my neighborhood will turn into in the next twelve months revealed that the HELL IS FAR FROM OVER.I hate not knowing, and IF MY FIVE NEIGHBORS KNEW WHAT I KNOW ABOUT THEM, they would be VERY. VERY. ASHAMED.

And the first foreclosure sign I see, I AM PULLING OUT ALL THE STOPS ON THE SHAME CAMPAIGN. IT’LL BE GOSSIP AGOGO.

NARCISSISM SHOULD BE A LINGERING, PAINFUL, AND TERMINAL DISEASE.

seejanemom on April 29, 2009 at 5:46 PM

This is so wrong in so many ways. I was one of those honest taxpayers. But no more. I will find ways to not report income and inflate every deduction I take.

F*ck the government.

TeleL on April 29, 2009 at 5:49 PM

This is so wrong in so many ways. I was one of those honest taxpayers. But no more. I will find ways to not report income and inflate every deduction I take.

F*ck the government.

TeleL

Right this way, Mr. Galt, right this way…

Paul_in_NJ on April 29, 2009 at 6:02 PM

By the way, guess how many homeowners took advantage of Obama’s Hope for Homeowners program, the one that promised to get lenders to write down first mortgages? One.

Maybe that’s because it’s a freaking scam and people don’t want to pay fly by night law firms thousands of dollars up front to “adjust” their mortgage for them?

Buy Danish on April 29, 2009 at 5:14 PM

Er, no — dunno what you’ve been reading, but that’s not H4H. Hope for Homeowners requires you to 1) default on your loan just to be eligible and 2) give up 50% of the equity when you sell your home. In return, the lender reduces your outstanding balance, and… no, seriously.

But never mind — it’s much too complicated and Treasury’s gonna revamp it… eventually.

Paul_in_NJ on April 29, 2009 at 6:05 PM

Sorry, guys. I was just doing my single-celled lib troll imitation. I didn’t think it was that good.

LibTired on April 29, 2009 at 4:11 PM

That’s funny…one wrong step and we go berserk…I’ve gotta get in my afternoon nap…

right2bright on April 29, 2009 at 6:12 PM

This is so wrong in so many ways. I was one of those honest taxpayers. But no more. I will find ways to not report income and inflate every deduction I take.

F*ck the government.

TeleL on April 29, 2009 at 5:49 PM

Sorry, treasury secretary job is already taken…don’t try to smooth talk your way into a job…

right2bright on April 29, 2009 at 6:14 PM

Let’s see where is that pool contractor’s phone number. I know it was here somewhere….

jbh45 on April 29, 2009 at 6:30 PM

Kids, grab your towels…we’re going for a dip in the neighbor’s pool we’re paying for!

batter on April 29, 2009 at 6:44 PM

Paul_in_NJ on April 29, 2009 at 6:05 PM

You’re right. Help4Homeowners is not the same thing as the scam Obama was peddling, “MakingHomeAffordable“. Help4Homeowners was actually a Bush initiative.

Buy Danish on April 29, 2009 at 7:45 PM

I’ve am a first time poster and I had to relate this story and why the bailouts get me so angry. I bought a house in March of 2006, a 30 yr fixed mortage. It is an 80/20 type loan that I have stayed current and was never late on any of the payments. In April I was laid off from a large Transportation/shipping company in Memphis. The first thinkg I did was call my mortage company to see what options were open to me under this bailout plan. I was told by Countrywide since I was not behind, it was not owned by Fannie or Freddie that they couldn’t help me. I was told that if I GOT BEHIND then they could help. I could have played the game and got the cheap ARM and bought too much but I didn’t. This is the reward. This is what idiots in Washington don’t get. I am sure that this new program will be of no help either.

Eddie on April 29, 2009 at 8:43 PM

I’ve am a first time poster and I had to relate this story and why the bailouts get me so angry. I bought a house in March of 2006, a 30 yr fixed mortage. It is an 80/20 type loan that I have stayed current and was never late on any of the payments. In April I was laid off from a large Transportation/shipping company in Memphis. The first thing I did was call my mortage company to see what options were open to me under this bailout plan. I was told by Countrywide since I was not behind, it was not owned by Fannie or Freddie that they couldn’t help me. I was told that if I GOT BEHIND then they could help. I could have played the game and got the cheap ARM and bought too much but I didn’t. This is the reward. This is what idiots in Washington don’t get. I am sure that this new program will be of no help either.

Eddie on April 29, 2009 at 8:45 PM

Jeez, Is there no end? And Obama says hes not letting up now that the first 100 are done.
I was thinking, when other people’s country sucked they would move to the USA. Now that the USA sucks where do we move?

JeffVader on April 30, 2009 at 10:44 AM

Actually, the intended target of this program are borrowers with ‘piggyback’ seconds, which they took to avoid paying PMI. It’s not clear whether the big-spending crowd you rightly deride will get any help here, since lender participation is (for now) still voluntary.

Paul_in_NJ on April 30, 2009 at 3:33 PM