The Obama Administration’s mortgage bailout for irresponsible borrowers (including wealthy borrowers with modest mortgage payments) provides a bounty for reckless sub-prime mortgage lenders like Countrywide to rip off your retirement plan. Countrywide sold its junky mortgages on Wall Street, where they ended up being owned by mutual funds that probably are in your 401(K). But it continued to service the mortgages and make money doing so.
Now, the Obama Administration is offering Countrywide $1000 to cut each of those mortgages — which it doesn’t even own — and $1000 a year for subsequent years in which it continues to service those reduced mortgages. So Countrywide is busy modifying thousands of mortgages it services, which aren’t even its property anymore — even though binding contracts say it can’t do that. When investor Bill Frey stood up to Countrywide earlier and sued it, he was demonized by Congressman Barney Frank, who spawned the mortgage crisis by blocking needed reforms and promoting risky loans in the name of “affordable housing.” Now, a bill pending in Congress would abrogate those binding contracts to enrich Countrywide at the expense of America’s savers. (The bill is being pushed by liberal Congressional leaders with the support of the left-wing groups ACORN and the National Community Reinvestment Coalition).
You may also have been ripped off if your mutual funds bought shares of the mortgage giant Freddie Mac, which the Obama Administration forced to incur $30 billion in losses to cut the principal and interest on the mortgages of delinquent and at-risk borrowers. My retirement plan contained shares of the mutual fund Legg Mason Value Trust, which owned a ton of shares in Freddie Mac.
Bailed-out mortgage borrowers are now defaulting by the thousand on their new, taxpayer-subsidized loans, which isn’t surprising, given that many of them ran up so much non-mortgage-related debt that they can’t afford even the small, reduced mortgages they received courtesy of the taxpayer.
Mortgage servicers have an incentive to modify mortgages at taxpayer expense to make them lower than necessary even if a responsible borrower could easily afford them. Why? because no borrower is going to refinance to get rid of a low mortgage. But many of them will refinance later on to pay off a high mortgage. So mortgage services will use taxpayer bailout money to cut interest and principal on mortgages that a responsible borrower could easily afford, in order to keep borrowers from paying off their mortgage.
The bill to allow mortgage servicers to abrogate the contractual rights of investors is backed by ACORN. ACORN, a beneficiary of the economy-shrinking $800 billion stimulus package, helped spawn the mortgage crisis by promoting “liar loans.” It has also engaged in extensive financial fraud and vote fraud. The Obama Administration has chosen ACORN to help conduct the 2010 census, which will be used to reallocate seats in Congress.
Obama’s $250 billion bailout for irresponsible borrowers is yet another breach of his campaign promise to enact a “net spending cut,” which seems to be just as forgotten as his broken promise not to raise taxes “in any form” on anyone making less than $250,000 a year.