Done in the name of helping homeowners, of course!
First Posted: 10/24/11 02:19 PM ET Updated: 10/24/11 04:02 PM ET
WASHINGTON -- The Obama administration is introducing a new program on Monday designed to lower monthly mortgage payments for more troubled homeowners.
But a key new condition in the plan would shift the financial liability for refinanced loans from Wall Street banks to the American taxpayer. And by focusing on lower payments, the program does not confront what housing experts view as the core problem in the foreclosure crisis -- borrower debt that exceeds the value of one's home.
[...]
But one of the program's new terms will benefit private-sector Wall Street banks, potentially at the expense of taxpayers.
The newly expanded program would expunge legal liabilities associated with mortgages refinanced through the program for the original lenders of the mortgages. Each time a bank sent a loan to Fannie and Freddie, it certified that the loan met Fannie and Freddie's safe lending criteria. But many loans sent to the mortgage giants did not, in fact, meet those criteria. Currently, when borrowers default on those ineligible loans, the mortgage giants can "put back" the resulting losses onto the banks that pushed the loans.
Under the modified plan, "put back" liability at banks will be erased for any underwater mortgage that is refinanced through HARP, eliminating Fannie and Freddie's ability to sack lenders with losses in the event that the mortgage does not pan out.
Read More:
http://www.huffingtonpost.com/2011/10/24/foreclosure-plan-obama-harp-refinancing_n_1028554.html
