More Mortgage Woes and Burying the Lede

The latest reports indicate that 5.4 million Americans are behind on payments or are in some stage of foreclosure. That's not a good place to be, but just how many of these people are in foreclosure because of their own bad judgment? How many bought more home than they could ever hope to afford?

How many are facing foreclosure because federal, state, and local tax burdens have overwhelmed their ability to afford their homes?

The new figures also suggest that the problems have spread from the adjustable rate mortgage and subprimes into fixed rate mortgages. They have also spread from the primary hot zones of foreclosure - Florida, Nevada, California, and Arizona, into states where the financial meltdown is having the greatest effect, including Louisiana, New York, Georgia, Texas and Mississippi.

For a President who said that he was going to focus on rescuing families who've played by the rules and acted responsibly, it certainly looks like he's doing anything but.

Obama's home mortgage program isn't going to solve this mess. The primary thing that will get the real estate market back on to firm ground is letting the market shake out what the reasonable value of properties are. It means that home prices will continue trending down in many parts of the country - even as other parts of the country are already seeing a recovering and stabilization of home prices as supply and demand reflect reasonable levels and no longer include the inflated demand due to expanding the base of potential homeowners to include those who had no business ever owning homes because of a lack of credit and the ability to repay mortgage obligations.

Interest rates for new and refinancing mortgages is still close to historic lows, and that's a function of Federal Reserve policy. The homeownership program may help some who are finding it difficult to get refinancing because they are underwater, but many of these people will find that the banks can refinance their mortgages although it usually means that they will have to take PMI to cover the difference between their loan obligation and interest in the property, they will have to pay out of pocket to cover the difference, or find that they can't get lines of credit or equity taken out of their property as just a few months ago.

We'd also have to ignore the part about how pushing those rates to low levels following the 9/11 attacks helped initiate the current problem by seeding the market with insanely low APR ARM that are now in the process of resetting to much higher levels at a time when the markets values are dropping precipitously. We're going to be back in this very position within three to seven years as the current batch of ARMs reset, unless the government plans on destroying the Fed's ability to manage the economy through adjustments to the interest rates.

Many of the people who are in dire straits will not be helped by the mortgage assistance programs because they simply are in over their heads - they lack the ability to repay regardless of how much their mortgages are renegotiated.

Then, there's the whole notion that the mortgage assistance program will enable those people who took out second mortgages and home equity lines to buy expensive toys and engage in home improvements will get those obligations covered by the plan. These people should have never been given the lines of credit in the first place, but for lax credit lending standards and yet those of us who managed their money carefully will be paying off these people's debts.

Lest we think that President Obama's primary goal is to fix the economy, you would be wrong. He'd much rather impose his ideological agenda. Ace notes that Politico buries the lede.

“Even if we’re busting the budget, we’ve got to solve some of these problems,” said a member of his inner circle. “I’d rather live with a debt than have people go without health care.”

This isn't about fiscal responsibility, but advancing an agenda that is actually a strawman.

Americans aren't going without health care. Americans have all access to health care one can possibly imagine. People just don't like what it costs. They rail against the costs of health care insurance and what happens when people lose that health care insurance. Imposing a government health care program isn't going to improve the situation - it may provide universal care, but the cost is going to be obscene and the quality is going to suffer tremendously.