Fixing troubled mortgages for the elderly

Sometimes older is not wiser. It seems that Pedro Garcia, a retired corrections officer, refinanced the home he bought for $23,000 40 years ago for $490,000 with what is known as an exotic "option ARM." In 2009 the house was valued at $150,000. When his payments had balooned beyond his pension's monthly income he quit paying. Bank of America, under pressure from tax cheat Geithner to remedy these bad decisions and "predatory lending" when money was flowing, refinanced it for $85,000 and then gave him a reverse mortgage on that, so he is now paying nothing. Of course, he'd already used that refinancing money--$70,000 to fix up the house, medical bills for his ill wife, and monthly living expenses. I guess the bank just eats that. But he still has a small second mortgage, which has also been modified by that lender. Something like 500,000 borrowers have been rescued by Obama's $75,000,000,000 foreclosure prevention plan. (WSJ story here) According to the article, Mr. Garcia and others were misled by these predators and the ARMs they pushed. No mention in this article about the number of non-profit organizations (like ACORN) that worked with banks and pushed both subprimes and ARMs especially for minorities. 32% of option ARMs were in foreclosure or delinquent as of August, compared to 48% of subprime. The difference is the option ARM people were good credit risks, sensible and wiser. Go figure. Pot. Rainbow. Free money.

And we're still seeing schemes from the government to put people into more housing debt, this time it's Obama instead of the Bushes or Clinton. Earlier this week there was an article on the tax credit plan for first time buyers. Claims for the $8,000 tax credit might have significant fraud. What a surprise! This little goodie if it is extended, will cost the tax payers an additional $16.7 billion. The new proposed ceiling might be $300,000 income per couple instead of the current $150,000. Under the current stimulus plan we the tax payers pay $43,000 for each borrower who uses that $8,000 tax credit. If they raise the ceiling, each tax credit will cost us $250,000 per home sale. (WSJ story here) Folks, you all took second grade math. Does this make any sense to you?

Update: On April 3, 2008 Michelle Malkin exposed the housing counseling racket, deep within the Bush Administration: ". . . mortgage counseling is a thriving racket that benefits far Left groups ranging from the AARP to ACORN to La Raza and Legal Aid. The Department of Housing and Urban Development funds hundreds, if not thousands, of these groups across the country. In October, HUD announced more than $44 million in new housing counseling grants to over 400 state and local efforts. The White House has increased funding for housing counseling by 150 percent since taking office in 2001." http://michellemalkin.com/2008/04/03/the-left-wing-mortgage-counseling-racket/

But wait--she appears on Fox News from time to time, so it must not be reliable.

Greenspan bursts some bubbles

Demand driven by expection I think is a fancy phrase for greed

"I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1% rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages and may have contributed to the rise in U.S. home prices. In my judgment, however, the impact on demand for homes financed with ARMs was not major.

Demand in those days was driven by the expectation of rising prices--the dynamic that fuels most asset-price bubbles. If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations (seasonally adjusted)." in Today's Wall Street Journal