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07.18.2011 0

The House That Debt Built (And Then Foreclosed On)

By Rebecca DiFede – With the economy falling to its knees beneath the titanic national debt, President Obama has recently decided to revisit the issue of the major housing crisis. Previously, he had only referred to the problems in the housing market in passing as “a concern”, despite the millions of homes that have sunk into foreclosure during this recession. It seems that he has only just come up for air long enough to decide that to get re-elected he needs to look like he’s doing something.

Following his Twitter Town Hall meeting, Obama began discussing his plans to help brighten the future of the otherwise dismal housing situation. According to an article in the Wall Street Journal, these so-called plans suggested “having taxpayer-owned mortgage giants Fannie Mae and Freddie Mac relax their rules for loans to investors”, with the thinking that this would allow more people to take out loans and would begin to nibble away at the housing inventory overload.

This idea would be really great if, say, this wasn’t the exact thing that caused our recession in the first place. Fannie Mae and Freddie Mac were giving loans to pretty much anyone with empty pockets, and then when the time came to pay, well, the pockets were no less devoid of money. And now, after costing taxpayers over $138 billion thus far, Obama is suggesting that we risk more of the country’s money (that it doesn’t have) by taking the loose lending standards and make them more relaxed. For this to happen, banks will pretty much have to give their associates bags of money, and have them fling it into the streets for passersby, holding a sign that says “Here you go, pay us back whenever!”. I’m sure the upstanding citizens that borrow that money would be quick to return it.

Liberals would argue that the housing crisis wasn’t caused by the fact that Fannie and Freddie gave away money to more people than The Price is Right, but rather the bi-partisan deregulation law pushed by Wall Street caused the collapse. However, according to the report released by the Financial Crisis  Inquiry Commission, (a committee which investigated all of the events surrounding the economic crash and interviewed over 700 witnesses), concluded that it was in fact “the collapse of the housing bubble—fueled by low interest rates, easy and available credit, scant regulation, and toxic mortgages” that caused the downfall of the economy.

Originally, President Obama had a plan to deal with the housing crisis which involved a mortgage assistance program known as the Home Affordable Modification Program (HAMP) that promised to reduce the monthly payments of people who qualified. Over 2.7 million homeowners applied, hoping to get their interest rates lowered or loans extended. But because the criteria to be accepted into the program was so specific, only 1 in 4 households received any loan modifications through HAMP.

All in all, over 1.3 million people were disqualified from the program, and wasted countless taxpayer dollars to help only a small percentage of the at-risk population. The housing crisis is affecting millions of people, and the numbers are only going to grow until the Obama Administration stops trying to play sugar daddy with taxpayer money and let’s the market hit bottom.

Though our President may believe he is trying to help these people, all he has really done is throw good money after bad in a blatant attempt to curry favor and win votes.  In Obama’s world throwing other people’s money at a problem so he can appear to be caring is more important than actually standing aside and allowing the housing market to heal.

Unfortunately, with about 16 months until election day, his annual refocusing on housing is producing nothing more than the same faulty lending regulations that caused the problem in the first place.  Hopefully, people will realize that you can’t build a campaign out of failed promises, any more than you can build a house out of debt.

Rebecca DiFede is a contributing editor to Americans for Limited Government.

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