President Obama and his big spenders are moving quickly, to the relief of those who are facing foreclosure on their mortgages. But the program they are offering will do nothing for those most in need.
In the fine print, Obama's plan provides no relief for any homeowner whose mortgage exceeds the total value of his home. But these folks are the ones who have been conned into taking sub-prime mortgages so loaded with brokerage commissions, interest rate subsidies, bank fees and lawyer and title-company charges that the amount of the mortgage has ballooned. These high mortgage amounts, coupled with declining property values, have turned about 20 percent of American mortgages upside down, so that the debt exceeds the value of the property.
By excluding these homeowners from help, Obama is guilty of a holier-than-thou hypocrisy. Was it not Fannie Mae and Freddie Mac that encouraged such over-mortgaged properties? Was it not the Democrats in Congress who passed legislation urging Fannie and Freddie to weaken the standards to allow more low- and lower-middle-income families to buy homes?
How can Obama suddenly pretend to be so shocked -- shocked -- that about 20 percent of America's home mortgages are now worth more than the property they finance? It was the insistence of liberal Democrats that made it so. When Housing and Urban Development Secretary Henry Cisneros demanded that Fannie and Freddie invest 42 percent of their assets in buying low- and lower-middle-income mortgages, and when his successor Andrew Cuomo raised the quota to 50 percent, what did they think would happen? When they explicitly told Fannie and Freddie not to insist on down payments in the mortgages they purchased, how did they think the purchase would be funded? Obviously, if you don't require the borrower to put money down, the full purchase price must be covered by the mortgage. To now, piously, refuse to come to the rescue of those who fell for your party's seeming generosity and bought homes on the terms it suggested is hypocritical at best.
But it is not only the over-mortgaged whom Obama will ignore, but those who have lost their jobs! If you do not make enough money such that your mortgage payments come to 31 percent of your income, you can't get your mortgage refinanced. If your income has dropped to a point where your monthly payments on your loan consume a greater part of your earnings than 31 percent, you are stuck.
So we have Obama rushing to the aid of those who have been hurt in this bad economy, but exempting from his proposed relief anyone who has lost his job and seen a cut in income or whose property values have dropped below the amount of his mortgage. In other words, he'll help anyone but those most in need.
And, once again, Obama would limit his aid to those who make below $200,000 a year. While he doesn't specify this limit in his proposal, he does limit his intervention to mortgages of less than $720,000. At standard mortgage interest rates, such a loan would call for $60,000 or so in payments a year. To qualify for relief, your mortgage payment can't be larger than 31 percent of your income -- or about $200,000. Once more, Obama makes it clear that he is not the president of anyone who makes that much money or more. He is only the president of the other people.
Obama, of course, forgets -- or doesn't care -- that those making over $200,000 account for almost a third of the total national spending and that you cannot stimulate an economy while constantly cutting off those people from any consideration in any government program. But Obama is determined to try.
© Dick Morris & Eileen McGann