Politicians Playing Foreclosure Games

February 6th, 2008

All the political bigwigs and stalwarts – President Bush, Obama, John Edwards, Mitt Romnay, Hillary Clinton and John McCain – are singing the same tune about foreclosures. All agree that the government must do something to put a check. All agree that the borrowers occupying houses are innocent and that the lender is the predator. It will be suicidal to say otherwise when votes are going to be counted this year. It is the year of pander mania!

The Hope Now Alliance convened by Bush is winning laurels. Foreclosure victims have become national figures. Hillary Clinton was loudly ticking off statistics that last year foreclosure rates reached 79%. She called for a ban and freeze and stoutly claimed that the brokers and mortgage companies lured borrowers into this sub-prime trap.

On his part Senator Chuck Schumer is advocating for more mortgage counseling for free. Already $180 million has been granted for this purpose but he wants $200 million in addition to it. Needless to say that a significant chunk of it will be diverted to government approved counselors connected to left wing groups like La Raza and Acorn.

The ground reality is that for every predatory lender there had been a predatory borrower who suppressed facts about personal income and tried to grab a property knowing fully well that it was beyond affordability limits. Today Washington is silent on this point. So far it has turned a Nelson’s eye on this irresponsible behaviour. It smacks of tacit encouragement.

News is trickling in from California that some of these borrowers are blatantly declaring that they will live free during the foreclosing months and then just walk away abandoning a worthless house and all contractual agreements. Default is no longer an ugly word – the stigma has gone. It is the politicians that ushered in this era of frenetic spending. It is this that has led the people on. Federal legislation has encouraged it by passing a law last year that would scrap the previous clause of taxing mortgage forgiveness. The amount comes to a whopping $1 million for two years.

According to latest reports many foreclosed victims are just walking away voluntarily from their houses. Many have the capacity to pay but since the houses have lost equity they are no longer interested. With a hint of sarcasm the keys of the units are mailed to the banks!