02.10.2012 0

The ‘deadbeat’ bailout

Deadbeat homeowners who weren’t making payments on their mortgages are receiving a bailout. Yes, you read that correctly.

Check out this piece from Charles Gasparaino on the matter:

It’s hard to imagine a less-deserving group of victims: people who gambled during the housing bubble by purchasing homes with borrowed money that they knew or should have known they couldn’t afford, but who are now able to stay in the homes they should have never bought because of what amounts to paperwork errors on the part of the nation’s big banks.

But that’s essentially what went down yesterday, thanks to the Obama administration’s latest re-election gimmick — the nationwide mortgage-foreclosure settlement.

Everyone — from the president, to officials at the Department of Housing and Urban Development, to at least some of 49 state attorneys general who cobbled together the pact, including New York’s Eric Schneiderman — took the all-too-familiar class-warfare route in selling the deal to the public and national media. They’d like us to believe that the nation’s largest banks are finally paying for their bad behavior during the housing bubble and its aftermath, when millions of Americans either lost or were in jeopardy of losing their homes.

That’s because the banks will cough up $26 billion for various abuses, including illegal foreclosures. Many “victimized” home-owners will get relief, mostly in the form of refinancing of underwater mortgages. So, they can stay in their homes, at least for a while.

It’s such a win-win, the administration is boasting, that even those people not part of the specific victimized class will benefit because the deal creates a stronger housing market. If banks can’t foreclose on properties, the theory goes, they can’t depress housing prices more by selling these properties on the cheap.

Problem is, almost all of the “logic” behind the deal isn’t logic, but a combination of half truths and outright lies. Even worse, the settlement will likely prolong the housing slump and set the stage for it to happen again.

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