Obama Housing Speech Demystified

In Obama's Feb 18 speech on the housing crisis, he said:

"The plan I'm announcing focuses on rescuing families who have played by the rules and acted responsibly" - how will it be determined who has acted responsibly?

"loans for families stuck in sub-prime mortgages they can't afford as a result of skyrocketing interest rates" - interest rates are the lowest they've been in my lifetime, certainly lower than I can remember.

"But I also want to be very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans. It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell. It will not help dishonest lenders who acted irresponsibility, distorting the facts and dismissing the fine print at the expense of buyers who didn't know better. And it will not reward folks who bought homes they knew from the beginning they would never be able to afford. In short, this plan will not save every home." - where do I start with this paragraph? Now someone will determine the motives of borrowers when they agreed to their mortgages?


"My plan changes that by removing this restriction on Fannie and Freddie so that they can refinance mortgages they already own or guarantee. This will allow millions of families stuck with loans at a higher rate to refinance. [at a lower rate]" - wait a minute! I thought the interest rates were skyrocketing?!?! At least they were 30 seconds ago when you said it.

"And the estimated cost to taxpayers would be roughly zero; while Fannie and Freddie would receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures." - I am really not anxious to see how many billions "close to zero" this really turns out to be.

"I also want to point out that millions of other households could benefit from historically low interest rates if they refinance" - so which is it? Skyrocketing or historically low?

"Sub-prime loans -- loans with high rates and complex terms that often conceal their costs -- make up only 12 percent of all mortgages" - this is flat out wrong. It is "sub-prime" refers to the borrowers. They are not prime, because of credit profile, amount they will put down, etc. The sub-prime mortgage has higher interest rates because sub-prime borrowers represent a bigger risk.

"Borrowers will be required to make payments on time in return for this opportunity to reduce those payments." - if these sub-prime borrowers were making their payments on time, we wouldn't be in this mess in the first place. What's new about this plan?

"In addition, as part of the recovery plan I signed into law yesterday, we are going to award $2 billion in competitive grants to communities that are bringing together stakeholders and testing new and innovative ways to prevent foreclosures. Communities have shown a lot of initiative, taking responsibility for this crisis when many others have not. Supporting these neighborhood efforts is exactly what we should be doing." - I wonder how much of this will go to ACORN?

"Our housing crisis was born of eroding home values, but also of the erosion of our common values" - hogwash! The home values eroded because of the mortgages that were not paid.

"It was brought about by big banks that traded in risky mortgages in return for profits that were literally too good to be true" - Big banks that were bullied by the feds and community organizers to offer mortgages to the sub-prime borrowers in the first place.

"by lenders who knowingly took advantage of homebuyers" - let's see if I understand this: banks loaned money to sub-prime borrowers who they knew wouldn't pay off the debts because there was some business 'advantage' in this? The idea is ludicrous.

"by leaders in our nation's capital who failed to act amidst a deepening crisis." - the very same leaders who are still in charge of the financial services committee (Barney Frank), the senate Banking, Housing and Urban Affairs committee (Chris Dodd) and the team that put together this bill in secret, closed-door committees (Nancy Pelosi and Harry Reid). You mean THOSE LEADERS in the nation's capital?