Mortgage Bailout: Another Democrat-Issued Flop
by TexasGOPVote on August 12, 2009 at 12:34 PM
With the stimulus plan failing to do any good, we can only assume that the same will go for the government's $50 billion mortgage-modification program. Daniel Wagner reports in a AP Impact article that the billions of dollars the government is supposed to be putting towards helping homeowners avoid foreclosure "are passing through — and enriching — companies accused of preying on the people they're supposed to help."
These preying companies are known as mortgage servicers and act as middleman by collecting monthly payments from homeowners and then funneling the money back to the loan-holding banks and investors.
But the industry has a checkered history. The AP found that at least 30 servicers have been accused in lawsuits of harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies. More recently, the companies also have been criticized for not helping homeowners quickly enough — delays that lead to more fees for homeowners and profits for servicers.
According to Kurt Eggert, a law professor at Chapman University, it is part of the servicers' job description to do loan modifications where appropriate. Basically, the government is using our tax dollars to pay servicers to do something that they would already be doing regardless of Obama's $50 billion mortgage-modification program! However, the government says it has "no choice" but to pay the servivers to do their job since "they are the only link between borrowers and the investors who indirectly own their mortgages through securities."
When President Barack Obama announced the plan, called the Home Affordable Modification Program, in March, he said it would help up to 4 million homeowners avoid foreclosure. But only about 200,000 loan modifications are under way. Last week, 25 mortgage-servicing executives were summoned to the Treasury Department for meetings at which they promised to deliver 300,000 more loan modifications by Nov. 1.
It looks like yet another Democrat-issued use of our tax money has gone to waste!