Obama Lies About Real Estate
[ We apologize for this post. We normally keep opinion out of all our economic news, but this is just too ridiculous not to call attention to it. The president of the United States stood in front of millions and lied to the citizens. While he is not the first president to do so, the News Media will not point out the lie, nor inform anyone of it. ]
The Obama administration is trying to boost his very low approval rating and polls. He is trying to appear to do new things, but it is really more of the same thing. For instance he is trying to revamp HARP
What is HARP? The Obama administration in 2009 rolled out HARP to refinance borrowers whose loans were backed by Fannie Mae and Freddie Mac and who were current on their payments. The idea was simple: If you were making your payments on time but didn’t have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance.
Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes.
But a series of unforeseen “frictions” have led fewer borrowers to take up on the offer of lower rates. Fewer than 900,000 homeowners have refinanced under HARP over the past 2½ years, and just 72,000 of those borrowers have loan-to-value ratios between 105% and 125%.
Last week Democratic President Barack Obama visited Las Vegas, Nevada. While visiting local areas of Vegas and taking plenty of photo opportunities, he outlined new rhetoric aimed at easing the war torn housing graveyard of Las Vegas.
The president outlined the three basic parts to his new mortgage refinancing plan when he visited Las Vegas:
- Responsible homeowners will be able to refinance government-backed mortgages regardless of how much their home’s value has dropped.
- The closing costs will be lower and even some refinancing fees will be done away with completely. There are times when such fees are so prohibitive that they cancel out any benefit of refinancing.
- Consumers will have the opportunity to shop around to get the best rates. Currently, those homeowners with underwater mortgages have to refinance with their current lenders. That not only precludes competition, but it also means homeowners are at the mercy of their lenders.
This will do to the private sector in real estate investing, as it did to the private sector in indigent care, i.e. homeless shelters and soup kitchens. They had to close en masse, because the government got in on the project and people stopped donating to them.
I see the small private real estate investors being squeezed out because the government gets involved. We literally have to fight this tooth and nail. It is a lie to say real estate is not speculative and an risky business. The potential home owner walks into this area blindly thinking the market will always go up. Since I’ve been alive there has been a crash every decade.
On the back end of his speech however, details have emerged which have shown Obama’s true colors once again. His glorious plan only applies to those who have lost only 10% of their home value after 2008. So in fact no one in Las Vegas will benefit from his plan. It was all just pure rhetoric. Also the plan only applies to those who have FANNIE MAE and FREDDIE MAC backed loans.
After doing some number crunching, Obama’s new refinance plan will only potentially help about 1,000,000 more people.