“Obama to Bypass Congress on Mortgages” … But “New Obama Foreclosure Plan Helps Banks At Taxpayers’ Expense”

George Washington's picture

CBS News notes that Obama is bypassing Congress to enact mortgage reform:

President Obama is going to begin a series of executive branch actions that will not require action from Congress – or the assent of Republicans.


With recovery in the housing market tied to economic recovery, Mr. Obama will today announce what senior officials are calling a “major overhaul” of the government’s underused refinance program for federally guaranteed mortgages, in order to aid homeowners having difficult refinancing their housing loan.




Late Monday morning, the Federal Housing Finance Agency released details of new changes to its Home Affordable Refinance, known as HARP.

It may sound at first blush like Obama is bypassing the obstructionist Congress to issue executive orders to help homeowners.

But as Huffington Post notes, in a story entitled “New Obama Foreclosure Plan Helps Banks At Taxpayers’ Expense “:

A key new condition in the plan would shift the financial liability for refinanced loans from Wall Street banks to the American taxpayer.




The newly expanded program would expunge legal liabilities associated with mortgages refinanced through the program for the original lenders of the mortgages. Each time a bank sent a loan to Fannie and Freddie, it certified that the loan met Fannie and Freddie’s safe lending criteria. But many loans sent to the mortgage giants did not, in fact, meet those criteria. Currently, when borrowers default on those ineligible loans, the mortgage giants can “put back” the resulting losses onto the banks that pushed the loans.


Under the modified plan, “put back” liability at banks will be erased for any underwater mortgage that is refinanced through HARP, eliminating Fannie and Freddie’s ability to sack lenders with losses in the event that the mortgage does not pan out.


If borrowers go through HARP, but decide after several months that the modest monthly savings do not outweigh owing tens of thousands of dollars more than their home is worth, taxpayer-owned Fannie and Freddie will have to take the full loss. Even if the original loan was sent to Fannie and Freddie with false or fraudulent guarantees from the bank — promises that may directly be tied to the borrower’s current financial problems — banks will be immune from liability. Fannie and Freddie plan to charge banks “a modest fee” to extinguish this liability, but the administration has yet to determine what that fee will be.


“In most cases people would probably be better off walking,” said economist Dean Baker, co-director of the Center for Economic Policy and Research.

While this is outrageous, it’s nothing new. PhD economists John Hussman and Dean Baker, fund manager and financial writer Barry Ritholtz and New York Times’ writer Gretchen Morgenson say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama’s foreclosure relief programs as being backdoor bailouts for the banks. (See this, this, this and this).

In other words, yet another bailout for the big banks at the expense of the taxpayers … and the economy.

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JR's picture

Not only has the American citizen’s connection to his congressional representative been severed by the lobbyists’ congressional buyout, the President is going one better for his Bob Rubin pals. He bypasses the people’s Congress to go to war, he assassinates with impunity the enemies of his favorite foreign power, he bottles up the people’s business in a cloak of secrecy and criminality… and, NOW, he delivers to the bankers and his welfare supporters by circumventing Congress to gift them taxpayer money in the New Obama Foreclosurse Plan.

The list of appointees: Summers, Romer, Geithner, et al., and the clan of advisers, Axelrod, Rahm Emanuel, et al., made Obama’s plan for his Administration clear from the beginning, and now, is it any secret that he delivers? This infamous list of personalities around the throne begs the question: Who appointed whom?

As krispcritter says: The best president money can buy - if you're a bankster crook that is.

krispkritter's picture

So, he's buying re-election on the backs of taxpayer's by offering them houses for $100 or whatever all the while trying to suck up to OWS who is pissed at the banking cartel which he is bailing out via all this smoke and mirrors BS being done with Executive Orders. This guy is easily the BEST PRESIDENT EVER! (if you're a bankster crook that is)

Papasmurf's picture

Obama wants housing prices to rise to stabilize  housing prices and protect mortgage market (bank asset values).  At the same time, he wants to build more homes to employ people who vote for him (stimulate the voters) .  Does he have a clue about supply and demand curves?  If he butters both sides of his bread, butter side will land on the floor, no matter what he does.  With both thumbs up the arse, he can't find paydirt.   It's clear not only he doesn't know, but his masters pulling his strings don't know either. 

Widowmaker's picture

Awesome plan, great grand kids can pay for everything!

Hope and change all the banks can believe in.

Bob's picture

Does anybody know if these refi's become recourse loans? 

Goner's picture

I think the State is what controls if the loan is recourse or non-recourse, but I maybe wrong. 


twotraps's picture

It does make walking away more attractive.  Unintended consequences abound.....However, new rule changes are the new norm.  New ways to make losses not seem so ugly, to slowly let lenders off the hook and make govt seem an indespensible part of our lives.  Absent all thes new Rule Changes.....the game is involvent.

my puppy for prez's picture

HARP will be as earth-shattering for the US as HAARP!

Pondmaster's picture

But look at the bright side . The OWS will now clear the streets . NOT!!!!

Ranger4564's picture

He should be impeached, then imprisoned. 

jeff montanye's picture

hey!  although obama's plan seems highly illegal (how can the executive change the law as to what the loan acceptance rules are for fannie and freddie, especially now that the taxpayer is keeping them solvent?) it is not as bad as killing citizens (and their children and bystanders) by secret order (able to be talked about for public relations purposes but still way secret for any legal remedies).  what a guy.

YesWeKahn's picture

It's trillion times better than invading another country to help them become democratic.

Tic tock's picture

what does this do for MBS?

Tic tock's picture

Fine, at this point the Banks have deeper problems that may bury them. Removing the monkey from ordinary homeowners is a compromise

jeff montanye's picture

monkey is still there.  ordinary homeowners have fewer legal remedies under obama's plan.  monkey bite hard now.  you no likey.

pepperspray's picture

My wife's sold.  She wants me to apply right away.

Papasmurf's picture

Is she sold or rented?  Is she hot?  Teeth?  Inquiring minds need to know. 

Iam_Silverman's picture

"My wife's sold"

How much didya get for her?  I may be interested in selling mine.

JohnF's picture

Used wives are not worth much, except perhaps as a trade-in. You might contemplate keeping one and adding another as needed, as maintenance costs tend to escalate if you keep the one running until it is worn out.

Of course, outside of Utah you may need to check local ordinances to see if this is allowed. If not, you may want to simply ride your existing wife until she reaches the end of her useful life. Junking costs are usually minimal.


<g, d &r>

Iam_Silverman's picture

"existing wife until she reaches the end of her useful life"

I guess you're right.  Maybe if the current administration is re-elected there will be a Cash For Clunkers Program?

Cocomaan's picture

Disgusting. Thanks for posting the realness as usual, GW.

French Frog's picture

"... At Taxpayers’ Expense"

Sadly, this has clearly become the new 'normal'