National Mortgage Settlement: Some States Using Mortgage Deal Funds To Close Budget Gaps

http://www.huffingtonpost.com/2012/02/10/national-mortgage-settlement_n_1269560.html

... it'll trickle down... eventually.

http://www.jsonline.com/business/walker-van-hollen-chunk-of-mortgage-relief-going-to-state-budget-uj45185-139070349.html

He's not even pretending anymore.

Who has kept track of where former homeowners are who lost their homes by foreclosure? Have the banks? I doubt it. Has the government? Why would they? Do they still have a mailing address? Are they living in a shelter, with relatives, in their cars? Foreclosures forced a considerable number of former homeowners into being homeless or having very transitional living arrangements.

The government says the "checks will be in the mail." Can just imagine banks saying, "we tried to find them, but, too bad...guess we'll just have to hang onto the money."

The biggest part of this deal - writing down up to $20,000 of the principle amount of a mortage - will be a good deal for some. But does create somewhat of a moral issue and may create some anomosity between people. There's the person who's house is upside down but they're paying as they agreed. They see their neighbor gets a $20,000 write-off. For some this may seem like a rotten deal.

First, there's the question of finding people. I do remember reading that if the banks don't do such a hot job of that, they have to give more to the state governments. I'm sure that will make those governments a bit less cooperative in helping to find the rightful parties. Who gets the cash in the case of a deceased foreclosed homeowner?

Also, I think there's going to be some identity fraud involved. Since the banks have to give it away quickly, and there may not be a lot of money for fact-checking, no doubt some scamsters are going to be crawling through county records offices looking for people who have probably moved out of state to impersonate. We see tons of fraud when it comes to Earned Income Credits that are for invented children, and there were similar frauds with the homebuyer's credit of recent years.

And besides the moral hazard issue that you mention is: What effect will this have on housing prices? I suppose that there are a goodly number of people who cannot sell because they're underwater. Once they can sell, what happens when they dump a load of extra houses on the market? Don't prices just decline on other homes, continuing the death spiral?

Government housing policies, including tax breaks for mortgage interest and tax free treatment of profits on sales helped create this mess, I don't really see government getting us out of it without criminal action against the worst of the perpetrators.

but there was a marketing campaign for quite awhile, selling people on the get rich quick idea.

There's never been a guarantee that the value of houses would only go up. People seem to accept that when they pay $50,000 for a new car that its value will depreciate from 15-20% each year. But somehow we're lured into the notion that housing values were always going to go up.

There was the lure of day traders and making millions on the stock market. Once that bubble collapsed and wiped out millions of investors - including millions of people's retirement nest eggs - we were moved onto the next get rich bubble.

Millions of Americans bought into the idea that home prices could only go up. The marketing campaign included the realtors, the Feds who dropped interest rates, banks and mortgage brokers who made people with $30,000 annual incomes able to purchase $400,000 houses. TV programs spured on the greed with showing the riches to be gained by buying multiple houses, slapping on some paint, granite and tile and flipping the property; why, even Bush gave speeches about home ownership. Besides, it created plenty of work for the millions of illegal workers to pour concrete, pound nails, put on roofs and landscape the new neighborhoods - they were the cheap labor developers depended on to up their profits.

But like other schemes fraught with lies, it got too big and is still breaking.

Everyone needs a safe decent, warm in the winter, cool in the summer, place to call home. Home ownership is good thing, so I'm torn as to how it can be fixed to make things right. It does bug me that the President's latest Chief of Staff, having this intimate knowledge of the housing loan debacle, wll make the good sales pitch to pass the "bundle all the bad loans and sell them real cheap to investors who can either rent them or tear them down to make room for mcmansions bill" to congress.

Come on! You don't really believe anything you read in a government press release during an election cycle, do you?

Where I'm at, the governor has already stated that the settlement money is going to be used to fund higher education. Thus, the budget cut from higher ed is only going to be seventy million instead of a hundred and ten million.