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Didn't He Just Say, "NO MORE BAILOUTS!"

Updated on February 3, 2012

Vote Buying At Its Best

From The "Too Small To Fail" Desk

We've now moved from the "Too Big To Fail" concept to the "Too Small To Fail" arena. I'm talking about all these distressed home owners who got themselves in over their heads by buying homes they never should have bought in the first place. So now it is supposed to become the problem of those who had better sense to bite off more than they can chew in the first place? So lets reward bad behavior once again with more reckless nonsense proposed by Obama himself using no less than a State of the Union address to sandwich it in without details but the details are now emerging.

Some people will do anything to get re-elected. Obama will do anything and everything he can to continue have the opportunity to spend the tax payer’s money on things that he has no business being involved in. This time it just reeks of “vote buying.” Isn’t that illegal you might ask? Not when you’re corrupt and a snake oil salesman residing in The People's House. We’ve seen his housing crisis fix schemes before. As strange as fiction, but true never-the-less, when asked about his past schemes to solve the problem here is what he said, “I’ll be honest - the programs we put forward haven’t worked at the scale that we hoped.” There’s that “hope” word again.

Similar to his non-shovel ready "shovel ready" projects I am assuming.

Quite Enough Thank You Very Much!

What I’m talking about is his “underwater mortgage” scheme anew just with a tweak here and there. I’ll be the first to say I have empathy, not sympathy, for those who were stupid enough to buy a house they really can’t afford in the first place. After all, the federal government itself was the one who told them that they deserved home ownership. What they forgot to tell them is the costs associated with owning your own home. It’s also interesting that a Democratic President (Clinton) got the country, and lenders, into this mess and it’s another Democrat trying to bail those folks out.

This whole fiasco has cost the tax payers a bundle just in the cost of having to prop up Fannie Mae and Freddie Mac for their bad lending habits. Now, if Obama has his way, it will cost us another big bundle on a crap shoot in his attempt to make it appear like he is the good guy riding into the rescue. Didn’t he just say in his State of the Union address, “There will be NO MORE bailouts.” If this isn’t a bailout, what is it? A reward for doing something stupid that a person should have never done in the first place? At whose expense is the next question? Take a guess again - the tax payers of this nation and to a certain extent all consumers.

Yes You Did!

The interesting thing is how Obama plans on paying for this boondoggle. The word is “tax.” He wants to tax the banks to help fund this potential time bomb estimated to cost between $5-10 billion, probably the same banks he voted to bailout in the first place. The FHA enters into this because he plans to have that federal insurer be the front man. Now FHA has already been buffeted severely during the housing crisis so he wants to “insulate” the cash strapped mortgage guarantee fund. That will be the cushion for any losses caused by those refinanced home owners who go ahead and default after the fat lady sings. How nice of him. Now who do you imagine the banking industry is going to pass that tax on to? The first guess doesn’t count.

Here’s what he told the crowd in Falls Church, VA day before yesterday, "If you’re ineligible for refinancing just because you’re underwater on your mortgage, through no fault of your own, this plan changes that. You’ll be able to refinance at a lower rate. You’ll be able to save hundreds of dollars a month that you can put back in your pocket.” There’s the carrot at the end of the stick for his “vote for me, I’m the good guy” scheme. How is "fault" going to be determined?

In case you wonder what an “underwater mortgage” is, it is when you owe more on your mortgage than the house is worth. This opens this scheme up to those who also have conventional mortgages when before it was available to owners whose loans are owned or guaranteed by Freddie and Fannie.

The devil here is in the details. Remember that these are distressed home owners. The Obama proposal has this really neat stream-lined loan application process understand. Very little documentation will be required to prove the house is underwater. Nor will have they have to prove they can, or cannot, make the payments. Peachy huh? Word out of the Whine House is that, heck no, they won’t even have to have an appraisal done. Submit a tax return to prove income? No way Jose. The caveat is that they would have to verify they are currently employed. Many of them already have a job and can’t afford to chew what they bit off. How employment verification is to occur is a gray area in the "fact sheet.".

Even the unemployed might qualify. Keep your chin up this is going to one on all of us I’m sure. In order for the unemployed to qualify the feds are going to require the banks to use the entire underwriting procedure. I just bought my house recently and have a question. Who is going to pay all those fees that are associated with the normal buying of a home?

Then I get more confused. Obama knows this is risky, at least as risky as loaning or granting our tax dollars to his green energy company buddies. This part of the scheme will have to be pushed through Congress so lotsa luck. It goes like this and is designed to minimize the risk. These are home owners who have little financial incentive to make the payments in the first place regardless of being given a lower interest rate as the carrot. If the homeowner has a loan-to-value of 140% or higher then they can write down the balance before qualifying for their loan. Write down or buy down? Think about the question asked. How will the loan-to-value be determined since no appraisal is going to be required?

Questions, always those pesky little questions about details. How are the banks going to be convinced to write down those loans if that is the case? The Chicago strong arm way? The administration failed to answer that in its “fact sheet” on the program or in Obama’s speech about the subject. Who then ends up paying for the write down? Obama likes to paint with the broad brush. It all sounds good - at first. I suspect after all this is said and done, if it gets done, is that the US tax payer will once again end up taking it in the shorts. Sad but true.

Bend On Over Once Again...

I can hear it now, "This article is full of hate!" "Hate" is when liberals don't like the message of the messenger. Not really but it is full of reality.

As Always,

The Frog Prince

Same Boat, Same Course...


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    • KDee411 profile image

      KDee411 6 years ago from Bay Area, California

      You said it all, thanks for the truth and the great hub.


    • The Frog Prince profile image

      The Frog Prince 6 years ago from Arlington, TX

      Hreichel - Thanks for taking the time to stop in and comment. I was a successful Realtor for ten years and often had to do some financial counselling to prospective buyers. Sometimes commissions aren't everything. Some people actually have a conscience.

      And yes Clinton, Dodd and Frank thought this up and Timothy Geithner, as the Under Secretary of the Treasury, was the architect who designed this crisis.

      The Frog

    • Hreichel profile image

      Heather Reichel 6 years ago from Northwestern Pennsylvania

      Finally someone else that realizes it was Clinton not Bush that got us into this mess... Very rarely do I comment on political issues. But the mortgage crisis has always been a sore subject for me. You see, I was a mortgage lender for 5 years, prior to and during the first wave of foreclosures. Many times I talked a family out of a high loan even though it hurt my commission checks. It is a shame many of my counterparts did not do the same. It was just common sense not to put a young family into a house rich - cash poor situation... Even if they were approved. I did a number of "second chance" loans for the less then perfect credit clients... But we ALWAYS went over the repayment terms. Pre Bush administration claimed home ownership was a right- I let my clients know it was a privilege... To my knowledge, none of my homes went into foreclosure and I am very proud of this. It is true that the government made the unscrupulous lenders very wealthy by giving them a whole lot of rope to hang themselves. Unfortunately the ones left swinging are the home owners who trusted what they were told and did not do their due diligence. Hard to know who to really blame... But I can say that a bailout will only prolong the inevitable... Tearing off the bandage quickly is usually the better option... Just my $.02

    • The Frog Prince profile image

      The Frog Prince 6 years ago from Arlington, TX

      Stu - Some people think 'ARMS" are the things that are attached to their bodies. The sub-prime mortgage market is the chief cause of this fiasco. It all sounds good until the rate readjusts and then the reality sets in that they really can't afford the house then.

      The Frog

    • profile image

      Stu 6 years ago

      This whole thing reminds me of the cramdowns exercise Obama tried earlier. The problem is that most of the time, borrowers still default after about six months. A bigger problem is that without the underwriting that is missing in this new scheme, well-off home owners will game the system, costing the taxpayers money to reimburse whatever financial instutitions and/or government agencies "eat the difference." The simple truth is that alot of home buyers bought overpriced homes during the bubble, and financed them with ARM's that reset at rates they can't pay. They knew the home price, they knew it was way more than replacement value, and knew the interest rate reset risk. The taxpayer owes them nothing.


    • profile image

      Ghost32 6 years ago

      Frog: Obama quote in your Hub got me to thinking--always a dangerous proposition. "I'll be honest...." Short for, obviously, "I WILL be honest."

      Thus, by virtue of the word "will" indicating something in the FUTURE, the statement is a tacit admission that, "Okay, obviously I have NOT been honest up to NOW, but...."

      One thing gets stressed over and over and over when it comes to discussion of underwater mortgages, which is that, "...people were encouraged to buy homes they couldn't afford." This has since 2008 been the most irritating buzz-term to me you can possibly imagine (and I reckon you can imagine quite a lot).

      Why? Because, by the numbers:

      1. In early 2007, I bought a new house. I WAS placed in a subprime mortgage BUT DID NOT KNOW IT--and should not have been put there in the first place. All the underwriting critera were fine. It's possible the mortgage broker (whom I instinctively distrusted) made more money that way.

      2. In April of 2009, I abandoned the home to foreclosure--NOT because I'd committed to a higher payment than I could afford when I signed the papers, but because my $80,000 gas drilling boom truck driving job had been Obamafied; I was unemployed.

      3. That particular set of circumstances could not have been foreseen by me, my employer, the bank, or the man on the moon. NONE of us had ever HEARD of Barack Hussein Obama in 2007.

      As far as I'm concerned, at least MY slice of the "housing bubble bust" didn't happen because of bad underwriting; it happened because of a bad President.

      Remember in November!

    • FitnezzJim profile image

      FitnezzJim 6 years ago from Fredericksburg, Virginia

      The Frog is on target. When we were growing up, we were insulated from understanding the consequences of failure by use of a child-rearing technique called a 'Do-Over'. Now that we've grown up, 'Do-Overs' are called 'Bail-Outs'.

      Perhaps we're seeing a lesson in how to undermine American productivity: Reward Failure.

    • poetvix profile image

      poetvix 6 years ago from Gone from Texas but still in the south. Surrounded by God's country.

      More insanity from the so called leader designed to deceive those who are desperate and clutching at straws that will also further damage an already critically ailing economy. He has no shame! Keep on keeping on your royal frog you. It's nice to hear the truth extracted from the constant spinning of his deceptions. He reminds me a spider, sadly we are all caught in the web!

    • drbj profile image

      drbj and sherry 6 years ago from south Florida

      We are the land of the free, the home of the brave, and the country of sheeple who bought houses they could not afford because the Clinton administration made it possible to do so. Now if their home is worth less than their mortgage, they will gladly support any (?) leader who promises a solution. Sad and depressing but true. You have told it like it is, Frog.

    • Angela Blair profile image

      Angela Blair 6 years ago from Central Texas

      As usual, you're right on target, Frog. The thing I keep looking at -- and which you touched on -- is this POTUS keeps creating these problems which REQUIRE someone to ride to the rescue like the Lone Ranger. Maybe once, sure -- but again and again? Nope, that sounds like a long range (or Lone Ranger) plan to me. He spills the milk and then is the guy who's gonna clean it up, be the good guy -- in exchange for votes and re-election. Yep, you're exactly right in this Hub and I enjoyed it tremendously! Best, Sis

    • marywanders profile image

      marywanders 6 years ago from minnesota

      Frog, I felt you wrote an article that pointed out the problem with the proposal, I understand that not having to prove you can afford a payment opens the whole housing market to the same thing that caused it to crash in the first place. I may be wrong but I thought one of the scams that enabled people to get a house out of their price range was to claim income they couldn't substantiate, and that the income was never checked. If I am correct ( and I may not be) this is just the same thing all over again.

      If this proposal gets ok'ed we're going to have another housing crash. I have never worked in real estate or owned property, but I can see how stupid this proposal is. It makes no sense, but goes along with my theory no one wants to be resposable anymore, as they are entitled to do what they want never mind the rules, as they don't apply to them either.

      No logic no common sense, just selfish.

    • The Frog Prince profile image

      The Frog Prince 6 years ago from Arlington, TX

      CAS - I'll cross that bridge if I ever come to it which is doubtful. I live my life responsibly and in a fiscally sound manner. I have no sympathy for those who don't.

      mary - I was a very successful Realtor for ten years after I retired. I've seen some really stupid stunts pulled. That's why one of the things that bother me about this whole proposal is not making anyone prove they can afford it after it is all said and done. A person needs to read what is there in the article before making lame accusations about 'I don't know that I'm talking about." My experience base in life and education say otherwise.

      The Frog

    • marywanders profile image

      marywanders 6 years ago from minnesota

      Frog, there are many people who don't want to pay for their homes as they have lost money on them, they will walk away and try to find another home at a better price and just make the whole situation worse. Its one thing if you CAN"T make the payment as you have no income, its an entirely different thing to throw a tantrum because you owe 400k on a 250k house and you don't WANT to make the payment.

    • profile image

      CAS 6 years ago


      Don't worry in a few more years as more and more of us walk away hopefully you'll find yourself underwater and then you'll be able to put your money where your mouth is and your family can be the one left holding the bag for bailed out bonus paying fraud factories known as banks. Get used to years of walking away, mortgage morass and bank bailouts, or principal reductions.

    • The Frog Prince profile image

      The Frog Prince 6 years ago from Arlington, TX

      CAS - Your exceptions are few and far between, speaking of people who don't know what they are talking about. If they can afford to make the payments they should do so, regardless of the equity position they have in their homes. Buying a home implies risk so quit your whining.

      The Frog

    • profile image

      CAS 6 years ago

      Can you explain how it is that someone who is underwater bought more then they could afford? Are you aware that in come parts of this country where a lot of the banks perpetrated this mortgage fraud people who put down 200k on 550k homes have homes that are now worth 180k? People like you who have no idea what your talking about but you sure love to stick up for banks. Also why is is ok for fannie and freddie to sue 17 banks for mortgage fraud, and then turn around and tell underwater homeowners,"sorry your only underwater due to free market conditions"? Have you seen any of the latest mbs fraud lawsuits? The mers lawsuit today? Yeah the average joe in this country should have known all this was going on..

    • Bill's Ideas profile image

      Bill's Ideas 6 years ago from Virginia, USA

      You got that right

    • The Frog Prince profile image

      The Frog Prince 6 years ago from Arlington, TX

      Bill - I have him being another one termer like his Progressive pal Jimmie Carter. You can fool the American public once but I think the majority of the folks, beside the 20% who are liberal progressives, have caught on.

      The Frog

    • Bill's Ideas profile image

      Bill's Ideas 6 years ago from Virginia, USA

      The Frog, I would agree, these bailout have to stop. The only way I hope we can get stop is get a new President. I do not think that is going to happen for another four years. There may be something coming down the line that may. Look at me hub called Obama, should he be President? This has been floating around since the 2008 Elections

    • profile image

      Old Poolman 6 years ago

      Let's just slap another band aid on our economic problems, that will stop the bleeding enough to keep us alive until after the election. What a joke this is.

    • marywanders profile image

      marywanders 6 years ago from minnesota

      SIGH I can't beleive he thinks the whole country is full of sheeple, and that he can force this into law.

    • The Frog Prince profile image

      The Frog Prince 6 years ago from Arlington, TX

      BPOP - This is all about politics and his reelection, no more and no less. He knows damned well that Congress probably isn't going to go along with this crap shoot. Then he will revert to his class warfare mode and blame Congress. He's now too predictable.

      The Frog

    • profile image

      Pat Potts 6 years ago

      More of the same hope and change and lies from Obama, and a lot more bail outs and and BS. Some things never change.

      Great hub. voted up and more.

    • breakfastpop profile image

      breakfastpop 6 years ago

      If it looks like bailout, sounds like a bailout and reads like a's a bailout. This proposal is so irresponsible and lame it reminds me of the kid running for class president who promises a soda and candy machine in every class. Forcing the banks to lend money by taxing the banks is just the kind of skewed thinking I expect from this group of inept people in Washington. I don't think any of this will happen, but it makes for a nice sound bite when speaking to the masses. Up and awesome.

    • IntimatEvolution profile image

      Julie Grimes 6 years ago from Columbia, MO USA



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