There's a new mortgage assistance program that will feed interest money to the banks and is guaranteed to saddle American's with even more unpayable
I read about this program being launched on Monday (6/20) and realized it would really help a couple of my friends out if they were able to qualify.
I've since had the opportunity to REALLY think about the terms of this program and as a taxpayer, I'm really not happy about this. The way it is
structured, it almost guarantees that the loan will never be repaid.
In a nutshell, if you qualify and are selected (lottery style) you are eligible for up to $50K in mortgage assistance as follows:
They review your current income levels and reset your payment to 31% of your current income. They then bring you current and pay the difference
between your original payment and your modified payment, up to the $50K or 24 months, whichever comes first.
The terms of repayment... if you continue to live in your home for 5 years and pay as agreed per the modification agreement, the principal is reduced
by 20% each year leaving a balance of -0- for the homeowner.
Of course if the borrower defaults, again the balance that will be repaid is I'm sure -0-
Don't get me wrong, I'm all for helping the person in need but this is just insane. My biggest problem with this is that most of these people in
trouble will have bought during the “bubble” years and their mortgages are still in their early years... when 2/3 of your payment (with a 30 year)
is going to interest.
What I have come to realize is that the 31% the homeowner is paying is the only amount being applied to the principal on their loan and the
difference, being provided by the taxpayer is going to the banks as interest.
Probably doesn't help that I'm reading The Creature from Jekyll Island (loaned to me by a banker no less) and I'm learning how the American
taxpayer is the co-signer on everyone's debt... not only the outright government obligations but now 2 years worth of interest for upside down
homeowners, a goodly percentage of the corporations in this country and the debt of foreign nations as well.
I will say, this has got to be one of the best kick the can programs to date.