Wednesday, October 8, 2008

Obama rejects McCain's proposal to rescue families from foreclosure

It must be nice to be safely insulated from the American financial crisis.

You know, to be one of America's "golden boys," one of the "elite" who will always be financially stable, regardless of what happens to the rest of America.

A member of the U.S. Senate, whose paycheck, medical benefits and retirement will always be protected from the ravages of an economic recession.

For those who haven't been paying attention, Barack Obama's campaign recently criticized John McCain's proposal to provide a $300 billion mortgage bailout plan for American home owners, claiming that it "would cause the government to lose too much money for the payment of bad loans."

Obama economic adviser, Jason Furman said in a statement. "The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud." (Um, Jason, I hate to say anything, but that's what your boss just voted to do with the $700 billion bailout). Re: Mortgages, sorry Jason, but it's not too expensive, if you do it right, like they did in the 1930s.

Here's a list of the bailout's biggest winners -- and it's not the families who are losing their homes to foreclosure.

Obama -- who voted to spend $800 billion to rescue America's failing financial industry -- (an industry comprised of some of the richest corporations in the world) -- corporations that lobbied Washington D.C. for assistance for themselves, but not for the families that are losing their homes.

McCain told reporters, "I would order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes — at the diminished values of those homes — and let people be able to make those payments and stay in their homes."

The proposal, "which he called the American Homeownership Resurgence Plan, is as much a policy plan for the future as it is a political tactic for the present."

McCain's proposal to buy up bad home mortgages would use nearly half the $700 billion from the recent Wall Street bailout package to assist Americans directly, instead of indirectly by rescuing the nation's financial markets. "

Forgive me for asking, but how many billions of dollars has Senator Obama voted to spend on foreign policy and foreign humanitarian aid during his term in office?

Did it ever occur to the Senator that the dollars he is spending are "the people's" tax dollars? That maybe some of those "billions" should be spent on the people who live and work in the United States of America?

Perhaps Senator Obama could visit or temporarily try living in one of America's growing tent cities. That way, he would know first hand what it is like to try to raise children in an environment without clean running water, toilets or heat.

Meanwhile, there are hundreds of thousands of empty homes across America.

Who wants to live in a nation that sends deputies to evict impoverished 90 year old widows from their homes? Pray tell us, Senator Obama, (since this is the taxpayer's money we're talking about) why is it too expensive for Americans to rescue citizens from bad mortgages? Are you so indebted to the wealthy power brokers in this nation, that you can't see Amercians need help?

After all, Congress and the Senate didn't blink when it recently voted to send $1 billion to Georgia for humanitarian aid. In addition to Georgia, the U.S. has provided $21.3 billion of aid to other foreign nations. Afghanistan has received $12.8 billion and we have authorized 18.4 billion for Iraq, (not counting what we have spent on the war). I could go on, but I might start losing sleep over the billions of American tax dollars we are sending abroad while millions of American citizens are being forced to live without: 1)adequate retirement; 2)medical insurance; and, 3) family wage jobs.

What kind of a civilization throws impoverished 90 year old widows out in the street to die? (An innately inhumane civilization). Is that what we have become? A nation of people who can look the other way when a 90 year old woman or a family is thrown out in the street?

And, what about all those empty, neglected homes lining the streets of our nation's neighborhoods?

In Lake Elsinore CA, a family of bobcats, (two adults and three kittens), moved in to one of many foreclosed houses. No offense to the Bobcats, but shouldn't a human family be occupying that space?

The last thing America needs is another arrogant, insensitive, heartless
jerk for a President.

It's time to turn this nation around and build a society that we can all be proud of. What does that society look like? Neighbors helping neighbors build strong communities. Medical insurance for the working poor as well as the corporate rich. An economy built on family wage jobs, not credit.

After all, safe, affordable, housing is not a luxury - it's a necessity. Just like clean running water and affordable utilities.

We can find a way to allow families to remain in their homes. Loans can be restructured. New interest rates established. Payments can be modified to allow families and retirees to continue living in established neighborhoods.

I wonder how many people actually understand how the sub prime market worked?

First, its important to note that on the average, sub prime borrowers were charged much higher loan fees than borrowers pay for a conventional loan.

In the state of Washington, that fee (including other forms of compensation) could be as high as 6%.

Most sub prime products offered a teaser rate that allowed lending institutions to qualify borrowers at a lower interest rate, without any consideration for the borrower's future ability to make payments once the loan adjusted.

Teaser rates are typically fixed for a period of one, two or three years. Once the introductory ARM term expired, the loan could adjust by as much as 6% in the first year.

In other words, if a homeowner attempted to refinance or sell his/her home before the pre-pay penalty expired, he/she was required to another pay an additional 6% of the loan balance to the bank as a penalty. (Bye bye equity)!

Many borrowers were placed in sub prime loans when they could have qualified for a 30 year fixed FHA or Fannie Mae/Freddie Mac loan.

For instance, my son had a friend who purchased a home during the last four years. His credit score was 680. He had stable employment, adequate income and a sizable amount of money in savings. (Enough to pay cash for the house he was purchasing).

What does the loan officer do? He qualifies the borrower for a sub prime loan with a teaser rate of 5.250% interest. (At the time this loan was brokered -- 30 year conventional fixed rates were in the upper 4% bracket).

The borrower, a young man in his twenties, was charged a 3% fee by the mortgage broker for originating the loan. (3% origination fee plus a 3% yield to spread premium for a total of 6% compensation for the broker). The loan amount was $250,000.00. (6% of the loan amount for compensation to the broker, that got your attention, didn't it)?

The lender posted a notice of foreclosure on the front door shortly after raising the interest rate to 10%. (This loan had a pre-pay penalty). The home owner couldn't afford to make his payments -- and once he missed a few payments, there was no hope for him to refinance the house.

The borrower had significant equity in the home. America Servicing Corporation couldn't wait to get their hands on it! Not only did they refuse to negotiate with the homeowner, they actually refused to accept payments from him, forcing him further into arrears.

Are you starting to get a feel for how sub prime loans worked?

I would encourage people to think twice before they assume that all victims of sub prime loans were deadbeats with risky credit profiles.

As this story reveals, nothing could be further from the truth. I reviewed this young man's file, and the GFE did not list all sources of compensation, as required by RESPA, nor did it acknowledge that the loan was an non-conventional ARM.

In other words, the borrower didn't know what kind of a product he was receiving. The GFE stated right at the top, that the loan was a 30 year fixed conventional mortgage. The fraud was against the borrower, Senator Obama. Not the other way around.

Many borrowers who have lost their homes were innocent victims of dishonest lenders, bankers and mortgage brokers. The very entities that we just bailed out.

It's time for the government to step in and restore some sanity to the lending market. Restructuring loans for a number of borrowers makes sense. Home owners can remain in their homes. Neighborhood values will stablilize.

Over time, the borrower's credit scores will return to normal and the housing market will regain some stablility.

Additional information can be found here:

"McCain would buy bad mortgages" by AP:

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