Green Room

Yet another gov’t intervention in housing sets up perverse incentives

posted at 11:57 am on March 28, 2013 by

It’s almost as though they can’t help themselves.  At least this time the Washington Post points out the obvious:

Federal housing regulators took a significant step on Wednesday toward helping borrowers who are falling behind on their mortgage payments — a move that will help more people but also introduce new risks that some homeowners could deliberately stop paying in order to become eligible for assistance.

The Federal Housing Finance Agency, which oversees mortgage finance giants Fannie Mae and Freddie Mac, announced that borrowers who are more than 90 days late on their mortgages will become automatically eligible for a modification to the terms of the home loan. The goal is to reduce monthly payments.

In the past, to be eligible for a mortgage modification, borrowers had to provide documentation they had a financial hardship. They will no longer be required to do so — though providing such documentation will make borrowers eligible for more substantial monthly savings.

So you can be wealthy and have no trouble paying your Fannie/Freddie-backed loan, but just want to reduce your interest rate and/or principal. Instead of going through the cost of refinancing, just skip three payments and voila! Uncle Sam bigfoots your lender and you get a lower monthly payment, apparently at no cost.

Gee … what could possibly go wrong here?

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Remember, when the “unintended consequences” of these “good intentions” occur, Leftists will proclaim it to be the fault of the…..(drum roll)…..free market!

visions on March 28, 2013 at 12:16 PM

It’s almost like they’re trying to crash everything on purpose. But we know that couldn’t be true, since Obama is such a nice guy and stuff.

The Rogue Tomato on March 28, 2013 at 12:20 PM

Why, it’s almost like they want the market to fail…

trigon on March 28, 2013 at 12:20 PM

I’ve heard this song before. Somebody should start a band and call it Fed Gov and the Perverse Incentives.

ElectricPhase on March 28, 2013 at 12:29 PM

Barry likes to blow bubbles.

Flange on March 28, 2013 at 12:32 PM

Barry likes to blow bubbles.

Flange on March 28, 2013 at 12:32 PM

I thought the dog’s name was bo.

VegasRick on March 28, 2013 at 12:43 PM

So I’ve been paying my mortgage – on time, with an extra amount to round up the payment to the nearest hundred – like a total sucker, eh? Yeah, figures.

Jeddite on March 28, 2013 at 2:18 PM

Barry likes to blow bubbles.

Flange on March 28, 2013 at 12:32 PM

“Bubbles” is his pet name for Reggie?

Who knew?

bigmacdaddy on March 28, 2013 at 2:26 PM

FHFA said Fannie and Freddie would use existing “screening measures to prevent strategic defaulters.”

Yeah, we know all about your ‘screening procedures,’ and we’re paying the bill for them. These morons could screw up a two-car funeral.

RadClown on March 28, 2013 at 2:45 PM

As a recently retired real estate appraiser, I can tell you what’s wrong with it, or what could go wrong with it, EVERYTHING! Duh, of course.

You think the CRA-incited, subprime mortgage-backed-securities-caused, 2007-2008 housing collapse was bad? Well then, just you wait until FHA/HUD’s collapse comes in the near future. And it is coming. The big joke after the 2008 collapse, among appraisers, was that FHA “became the new subprime”. And it has. And no one is reporting it.

Just like no one reported the then-impending late 1980s S&L debacle (which lead to FIRREA ’89). Just like no one reported the 2008 collapse. That is, until it was already too late.

Just like NO ONE is reporting that Gov Cuomo had a lender and its in-house AMC on the ropes for mortgage fraud as NY’s AG, only to drop it mysteriously when it starting leading back to Fannie and Freddie. Then to only initiate and start the HVCC (which put the AMC foxes in charge of the property valuation henhouse), which has now sunset into Dodd-Frank, which is killing the “money business” in this country.

Indeed, what could go wrong?

GuitarSlinger on March 28, 2013 at 3:06 PM

“Bubbles” is his pet name for Reggie?

Who knew?

bigmacdaddy on March 28, 2013 at 2:26 PM

Yo, dog. You bad.

iurockhead on March 28, 2013 at 4:18 PM

It’s almost like they’re trying to crash everything on purpose. But we know that couldn’t be true, since Obama is such a nice guy and stuff.

The Rogue Tomato on March 28, 2013 at 12:20 PM

Why, it’s almost like they want the market to fail…

trigon on March 28, 2013 at 12:20 PM

Almost?

Really???

iurockhead on March 28, 2013 at 4:20 PM

Why, it’s almost like they want the market to fail…
trigon on March 28, 2013 at 12:20 PM

“What do you mean we want the market to fail???
It’s YOU who want Obama to fail!!!”
- Proggies

Marcola on March 28, 2013 at 4:52 PM

Housing 2.0
–bayam

tom daschle concerned on March 28, 2013 at 5:01 PM

So I’ve been paying my mortgage – on time, with an extra amount to round up the payment to the nearest hundred – like a total sucker, eh? Yeah, figures.

Jeddite on March 28, 2013 at 2:18 PM

So what? You’re pissed because you had to pay for something you bought? You were in a better position to pay your mortgage. I suppose you’d throw families out into the street?

hawkdriver on March 29, 2013 at 12:59 AM

Why, it’s almost like they want the market to fail…

trigon on March 28, 2013 at 12:20 PM

I know, right?
Wait’ll they do this with student LOANS!
Imagine the chaos!
Imagine the hysteria they can stir up to use it as an excuse to grab more power & destroy even more freedoms! (assuming there really is any left-wait, the 2nd is left, so far).

Badger40 on March 29, 2013 at 9:29 AM