HUD offers interest-free $50K loans to unemployed homeowners to stem foreclosures

posted at 2:20 pm on August 12, 2010 by Ed Morrissey

Call it a hair-of-the-dog solution to a seemingly intractable problem.  The Department of Housing and Urban Development have begun issuing emergency $50,000 loans at zero interest to unemployed homeowners in an attempt to stall foreclosures, using $1 billion of Porkulus funds for the effort and $2 billion from the same source for indirect aid through state governments.  Ironically, while foreclosure seizures are rising, the actual trend is more optimistic:

The Obama administration is providing $3 billion to unemployed homeowners facing foreclosure in the nation’s toughest job markets.

The Treasury Department says it will send $2 billion to 17 states that have unemployment rates higher than the national average for a year. They will use the money for programs to aid unemployed homeowners. Some of those states have already designed such programs.

Another $1 billion will go to a new program being run by the Department of Housing and Urban Development. It will provide homeowners with emergency zero-interest rate loans of up to $50,000 for up to two years.

The news comes as foreclosure seizures have increased by 6% over last year:

The number of U.S. homes lost to foreclosure surged in July, another sign lenders are moving quicker to take back properties from homeowners behind in payments.

Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.

Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.

Also, the cancer appears to have spread to areas outside of the original epicenters of the collapse:

Home foreclosures are climbing in the Northwest and Midwest, areas that had earlier dodged the worst of the mortgage crisis, according to real estate data firm RealtyTrac Inc. With 14.6 million Americans out of work and consumer spending declining, further weakness in housing could push the economy back into recession, former Federal Reserve Chairman Alan Greenspan said Aug. 1.

Foreclosure rates in Utah, Idaho, Illinois and Colorado rose in the second quarter compared with a year earlier, and rank among the 10 highest in the country. The number of homes seized by lenders at least doubled in 19 states and more than tripled in seven of them, according to Irvine, California-based RealtyTrac.

That’s the bad news, and it’s legitimately bad.  The Obama administration has failed to do anything more than to extend the cycle of foreclosures, which merely postponed the inevitable for lenders faced with unsalvageable situations.  However, it masks better news, which is that the actual failure rate is finally declining as the worst cases finally get cleared off the ledgers:

The number of properties receiving an initial default notice — the first step in the foreclosure process — rose 1 percent last month from June, but tumbled 28 percent versus July last year, RealtyTrac said.

Initial defaults have fallen on an annual basis the past six months.

In other words, the market has begun to find its equilibrium, a process in which the Obama administration has interfered for the last eighteen months in a vain attempt to make some political hay while the sun not only didn’t shine, but the skies poured.  The use of a billion dollars to float homeowners over the next two years is hardly the most damaging intervention concocted yet by the administration, but it’s not going to do much without a big change in employment to match it.  The real problem, as just about every one of these news reports acknowledge, is the lack of jobs for American workers.

To fix the foreclosure crisis, the Obama administration has to abandon its top-down, command-economy policies and eliminate the uncertainties that its massive expansion of the regulatory state and of the national debt has created.  Otherwise, the interest-free loans will also mainly default and the foreclosure crisis will only be extended into 2012 … right before the presidential election.


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

Comment pages: 1 2

These are loans?

So, let me get this right. They are deep in debt, facing foreclosure, and unemployed, right?

So…let’s give them a LOAN.

Pure madness.

Opposite Day on August 12, 2010 at 3:56 PM

Check out the particulars of this new HUD bailout program:

Under the program, eligible borrowers must:

1.Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years;
2.Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home;
3.Demonstrate a good payment record prior to the event that produced the reduction of income.

I can’t qualify for this even though I am unemployed again, because I’ve moved heaven and earth to keep up the payments on my mortgage and am not delinquent. This basically rewards unemployed people who just said “f*ck it” and stopped paying their mortgages 3 months ago, and it helps out the banks who hold those loans so they don’t have to book a loss or take over the property in a foreclosure.

I feel like an idiot for paying my mortgage!

rockmom on August 12, 2010 at 3:58 PM

If you push fluids without stopping the hemorrhaging, you just wind up with longer suffering and a bigger puddle on the floor.

redshirt on August 12, 2010 at 3:55 PM

What’s Obamacare have to do with this?

NoDonkey on August 12, 2010 at 4:00 PM

The question I have is; if I go on vacation now, will I have time to fill out the request for the free loan, or do I have to delay my vacation?
If I delay my vacation, will the government pay for any re-issue of my flight tickets? Or pay for canceled bookings?
Could I have the forms sent to Costa Rica, that way I can fill them out and fax them back…I can have the loan by the time I get back from Coast Rica.

Fax number is at the top of the page, thank you.

right2bright on August 12, 2010 at 4:01 PM

rockmom on August 12, 2010 at 3:58 PM

Don’t feel so bad, like most boneheaded Democrat programs the paperwork will be so confusing and onerous, most people will give up before they get the $50K or find out months later they weren’t eligible.

NoDonkey on August 12, 2010 at 4:02 PM

If you push fluids without stopping the hemorrhaging, you just wind up with longer suffering and a bigger puddle on the floor.

redshirt on August 12, 2010 at 3:55 PM

I missed this Pelosi speech, do you have a link?

right2bright on August 12, 2010 at 4:05 PM

That sh*t is illegal now. The credit card bill passed last year prohibits banks from screwing around with posting dates of payments made in good faith by the borrower, and it seriously restricts the use of high “default rates.” There’s also a private right of action for violations. So if your bank is doing that now, you should sue the hell out of it.

rockmom on August 12, 2010 at 3:54 PM

Citibank has done this with millions of cardholders. They enacted provisions prior to the bill going into effect. That means that if you are late, not 30 days or skipped, your rate goes to 29.99% Google what’s been going on with Citi. And they took billions of taxpayer money.

Cody1991 on August 12, 2010 at 4:05 PM

They would make more “sense” as grants -that people would be encouraged to repay when they can- since the money is not going to be possible to be paid back without a Recovery of the entire economy

Giving out loans is sheer Ostupidity.

profitsbeard on August 12, 2010 at 4:06 PM

I missed this Pelosi speech, do you have a link?

right2bright on August 12, 2010 at 4:05 PM

What? Did she say something similar?

redshirt on August 12, 2010 at 4:07 PM

If you push fluids without stopping the hemorrhaging, you just wind up with longer suffering and a bigger puddle on the floor.

redshirt on August 12, 2010 at 3:55 PM

What’s Obamacare have to do with this?

NoDonkey on August 12, 2010 at 4:00 PM

The situation may be totally different, but the ‘solution’ is mighty similar – If all you have is a hammer, all your problems look like nails.

Vashta.Nerada on August 12, 2010 at 4:09 PM

I can haz loan?

These are loans?

So, let me get this right. They are deep in debt, facing foreclosure, and unemployed, right?

So…let’s give them a LOAN.

Pure madness.

Opposite Day on August 12, 2010 at 3:56 PM

kiakjones on August 12, 2010 at 4:12 PM

Retailers of shiny chrome rims and big-screen TVs are bracing for the impact of the new program….

slickwillie2001 on August 12, 2010 at 4:13 PM

Gosh. How ’bout some love here?

tree hugging sister on August 12, 2010 at 4:14 PM

When the loans aren’t repaid? The Congress will just raise taxes to offset the losses…if you’re going to pay for something, you might as well just pay twice.

This is true redistribution of wealth. There will be no repaying the loan, Congress will either forgive them of the loan or borrow (from us) to pay off their debt. Either way, the tax payers are giving a $50k paycheck to all of those who are unemployed on top of their unemployment checks that have been extended…

Geministorm on August 12, 2010 at 4:19 PM

Vashta.Nerada on August 12, 2010 at 4:09 PM

Correct, but I was trying to make a point regarding the quality of care we’ll receive under Obamacare (may it be repealed both harshly and swiftly).

NoDonkey on August 12, 2010 at 4:19 PM

Hmmmm.

Someone tell me this is a joke.

sigh.

memomachine on August 12, 2010 at 4:29 PM

Hmmmm.

Funemployment!

Recession with benefits!

ForcloseFun!

Evication!

oh hell. my heart isn’t in it anymore.

memomachine on August 12, 2010 at 4:31 PM

What? Did she say something similar?

redshirt on August 12, 2010 at 4:07 PM

Sorry, I thought you were describing her and her speech…

right2bright on August 12, 2010 at 4:36 PM

The best thing for the unemployed homeowners that have money problems:
1. Put the house for sale.
2. If that impossible, let it foreclose and declare bankrupt.

The worst thing to do is put yourself in more debt.

Housing expense is what take most of your income and if you can’t afford it it is best to let it go. It will free up a lot of resource that could be put for better use.

jdun on August 12, 2010 at 5:02 PM

First GOVERNMENT MORTGAGE CORP. , Makes home loans that the borrower had no chance of repaying , then we had the crash, now they are going to loan money again that will never get repayed ?
Hey, here is an idea why not let the government buy a car maker and then make them build an electric car that couldnt be sold even with a subsidy …………………….

ELMO Q on August 12, 2010 at 5:18 PM

Clink on August 12, 2010 at 5:13 PM

Ah, the sucker tax.

I’m suprised the Dems haven’t instituted a national lottery by now, that’s exactly the sort of circus clown “thinking” they specialize in.

NoDonkey on August 12, 2010 at 5:30 PM

If we had just let the markets do their thing and hit bottom we wouldn’t be in this extended bailout catch 22 (assuming Obama had a bit of economic sense and didn’t make all these sweeping changes and regulations businesses can’t pay or plan for).

LifeTrek on August 12, 2010 at 7:01 PM

We increased residential mortgage debt from $5.1 trillion to $11 trillion in 8 short years from 2000 – 2008.

Again, we increased our national residential mortgage debt BY 6 trillion dollars, at a time when the market was over-priced.

It took us 100′s of years to get to 5.1 trillion. It took us 8 years to more than double that number to 11 trillion!

The question is, how much did we overspend? 2 trillion? 3 trillion? More??

That is what people do not seem to grasp yet; the enormity of the issue.

Prime loans (which were actually what I call faux-prime because the majority of prime loans done during that time did not remotely fit the true definition of a prime loan), Alt-A loans, Subprime loans… doesn’t matter.

ANY loan done during that time frame was a bad loan because the value of the underlying asset was distorted/inflated.

The harsh reality is that millions of the jobs that were created during that time were temporary, because they existed only as long as the real estate bubble existed (really, it was an asset bubble of almost ALL asset types).

That bubble has burst and it’s a long way down back to earth.

The pain must come.

Jobs, jobs, jobs (non-government, preferably export-creating jobs) are the only pain reliever!!

The anti-business attitude in Washington has got to stop.

Jobs are the only thing that can save us, if anything can.

painesright on August 12, 2010 at 7:21 PM

Nothing like an offer to dig your hole deeper that will do nothing more than add more doom and gloom to the housing industry!

Soon they may have to enact the Homestead act again to get people to TAKE homes for the low cost of a few improvements!

BigMike252 on August 12, 2010 at 8:37 PM

Keep working losers!

/

This is idiotic.

CWforFreedom on August 12, 2010 at 9:13 PM

Guys, don’t you get it yet? The debt means absolutely nothing. Yes, a bold statement but hear me out. The US Treasury prints t-bills and sells them to the fed. The fed buys them with zeros they added to their computers. The Chinese buy some with zeros they add to their computers. We in turn buy their crap with the dollars we borrowed from them thus returning the dollars to them. In exchange they get zeros added to their accounts in the form of interest payments that our government creates out of thin air. The higher taxes have nothing to do with this whole mess. The higher taxes are there to provide “economic justice” in the form of punishment for success. At the end, no one expects the debt to be paid, just serviced in the form of interest payments.
Too bad it doesnt work like that for the rest of us… or does it?
Think about it for a second. If you walk away from your debt, what happens? Your credit rating is shot right? But you already walked away from the debt with your assets. and by definition you have to be making more money than those assets are worth. So imagine if you were 100% debt free tomorrow with the same income you have today. Can the bank put you in jail? No, only the IRS can do so. Can they take your home, sure, but only after many months of delinquency. You see they don’t want to foreclose and take the loss in their balance sheet. So they wait and wait hoping some one (you or the .gov) starts servicing the debt again. Meanwhile you save all the money you used to make payments with. Why, because you now have no more credit and will have to make all future purchases with cash. But, is that a bad thing? How much money would you be able to save by not paying interest on debt? How about your ability to haggle for the best price by using cash?

I know, your current visceral response is to think I’m an irresponsible jackass and almost criminal for suggesting you go John Galt. Ok, so be it. Bu think about this. Where did the money the bank lent you come from? The savings accounts of their customers? Nope. The banks profit margins? Nope. They came from thin air. Thats right, thin air. The bank lent you the ability to buy things on the promise to pay and the bank never actually pays. It just provides additional promises to pay. You don’t believe me? Please don’t believe me. Do your own research. But once you do, ask yourself, why should you give the bank your most valuable asset, your time, for the privilege to be their slave? But, you borrowed money on your word and your word is your honor right? Do you really think that you have a chance? You were trained to believe that you needed to spend 40-60K for a college degree in order to make enough money to pay for the student loan you took to get the degree. In the meantime, you cant save for a car, so you go in debt to get one. But wait, what if you could save the car payments for 3 years and then buy the car cash? 0% interest, no debt. Same number of payments but you can get a better deal buying cash. Is not like you needed extra money, you are already spending that much in car payments. You were encouraged to buy the biggest home you could afford and then upgrade as your income improved. Is a tax deductible investment after all. Meanwhile, your tax deduction can even begin to keep up with the interest rates, so were is the advantage? What if you rented for 10-15 years and then hired a crew to build just enough to meet your needs in cash. No interest, no debt.
Do you remember fight club? Remember what Tyler Durden did at the end? A complete reset? Lets us all hit the tilt button. Lets go John Galt. As long as you feed the ponzi monster it will continue to rule you. Kill the monster.

rarbolay on August 12, 2010 at 10:41 PM

Let me help you a bit on your research. Look up “money is debt” on you tube. Read the “Creature from Jekyll Island”. Look up “fractional reserve banking”. Then, after you get over being angry, get even.

Really, how do we stop the .gov from ruling us with no end? Starve them. You cant collapse them by not paying taxes. Ask Wesley Snipes. But you can starve the real source of funds, the banking system. No debt, no money. No money, no power to rule you. No money to pay the ATF agent, no ATF agent. No money to pay the EPA regulator, no EPA regulations. A complete bloodless revolution. Well bloodless if you don’t count the riots and the casualties of the collapse. But you wont have to pull the trigger. You don’t have to use violence. You don’t have to do anything different. Just stop paying your debt. Refuse to play. Who is John Galt?

rarbolay on August 12, 2010 at 11:22 PM

Well … defaults on loans are going to go up as soon as people realize the government is giving away money if you default on your loan.

Welcome to the self-licking ice cream cone.

HondaV65 on August 13, 2010 at 7:00 AM

Honestly.. what good does loaning money to people – who obviously can’t manage it or pay it back -do? This wasn’t a loan. It was another redistribution.

Silly, disgraceful, pathetic, corrupt.. our government is all of the above

tflst5 on August 13, 2010 at 7:24 AM

This is true redistribution of wealth. There will be no repaying the loan, Congress will either forgive them of the loan or borrow (from us) to pay off their debt. Either way, the tax payers are giving a $50k paycheck to all of those who are unemployed on top of their unemployment checks that have been extended…

Geministorm on August 12, 2010 at 4:19 PM

Isn’t that the truth. How are we going to stop this folks???

wi farmgirl on August 13, 2010 at 8:57 AM

These are loans?

Opposite Day on August 12, 2010 at 3:56 PM

You know, like, say, Sharia Law.

Lourdes on August 13, 2010 at 11:39 AM

This is true redistribution of wealth. There will be no repaying the loan…

Geministorm on August 12, 2010 at 4:19 PM

Was reading that several “mega mosques” in the U.S. are being built with “interest free loans”, too. Of the million-dollar level.

Lourdes on August 13, 2010 at 11:40 AM

I get the impression of a giant wheel, like the Obama-O imagery:

A giant wheel that creates the impoverishment and unemployment and lack of futures overall for millions that then sends them interest-free-money from others without their permission that will never be repaid that then impoverishes many more that then…

Lourdes on August 13, 2010 at 11:42 AM

I’d like to remind all Americans that, meanwhile, we have many a deployed military who is not provided with SHOWER facilities, who are making their own showers out of plastic buckets and hoses while still doing their frickin’ jobs under fire.

Lourdes on August 13, 2010 at 11:48 AM

Citibank has done this with millions of cardholders. They enacted provisions prior to the bill going into effect. That means that if you are late, not 30 days or skipped, your rate goes to 29.99% Google what’s been going on with Citi. And they took billions of taxpayer money.

Cody1991 on August 12, 2010 at 4:05 PM

The interest rate on my CitiBank MasterCard is 5.74 percent, has been for several years now.

Dasher on August 14, 2010 at 8:21 PM

rarbolay, excellent points. One of the top three most illogical and damaging changes to our financial institution was the idea of money coming out of thin air.

While we certainly didn’t invent the concept, we’ve taken it to such ridiculous extremes that the entire US economy is in danger of becoming a giant Ponzi scheme. There was a social peak when the Baby Boom ended but everything else just kept chugging along…

Dark-Star on August 15, 2010 at 4:59 PM

Comment pages: 1 2