Obama's new housing plan: more government

The new plan is the same as the old plan. Obama announced his big new housing initiative today aimed at stemming the foreclosure crisis. Essentially, the government is going to lean on lenders to decrease the value of loans held by borrowers who are struggling financially.

The administration’s earlier efforts to stem foreclosures have largely been directed at borrowers who were experiencing financial hardship. But the biggest new initiative, which is also likely to be the most controversial, will involve the government, through the Federal Housing Administration, refinancing loans for borrowers who simply owe more than their houses are worth.

About 11 million households, or a fifth of those with mortgages, are in this position, known as being underwater. Some of these borrowers refinanced their houses during the boom and took cash out, leaving them vulnerable when prices declined. Others simply had the misfortune to buy at the peak.

Many of these loans have been bundled together and sold to investors. Under the new program, the investors would have to swallow losses, but would probably be assured of getting more in the long run than if the borrowers went into foreclosure. The F.H.A. would insure the new loans against the risk of default. The borrower would once again have a reason to make payments instead of walking away from a property.

The government tried to run its own lending companies before and you'll recall what happened with Fannie Mae and Freddie Mac. Now they're going to start refinancing loans for struggling families. This is the first government program in memory that forces companies not to collect money that's owed to them. With the economy tough and very few loans going out as it is, what will be the economic impact of forcing lenders to take massive losses?

And then there's this problem.

This much was clear, however: the plan, if successful, could put taxpayers at increased risk. If many additional borrowers move into F.H.A. loans, a renewed downturn in the housing market could send that government agency into the red.

If the program gets bigger, as do most government programs, a substantial portion of the lending section could become tied to the mast of the F.H.A. Any losses would inherently become the government's losses and could require massive injections of cash to keep the F.H.A. afloat -- cash the government doesn't have. In other words, it's just more creep into the economy by a government that doesn't have any money to begin with.

As the House plans to approve a plan to nationalize the entire student loan industry, how long until Obama just nationalizes the entire lending sector?

Civil Rights Division sues over 21+ apartment age requirement

Another Friday, another dump of outrageous press releases from the Justice Department Civil Rights Division, thanks to its leadership under race-baiting radical Thomas Perez. This one particularly stood out.

Under the terms of the consent decree, filed today in federal court in Scranton, Pa., defendants Gerard Joyce, Katie Joyce, Daniel Joyce, Normandy Holdings LLC, Lofts at the Mill LP and Lofts GP LLC, are required to pay $35,000 in monetary relief to two victims of discrimination and to the United States.

The department’s complaint, which originated from an investigation by the U.S. Department of Housing and Urban Development (HUD), alleged that the owners, property managers and management company for "The Mill" luxury apartments violated the Fair Housing Act by refusing to rent apartments to persons with children and by advertising discriminatory, "21 years or older," tenant policies in multiple Scranton newspapers. On Nov. 16, 2009, the court granted the United States’ motion for summary judgment on liability.

The Fair Housing Act does forbid housing discrimination, but I'm not sure banning 16-year-olds was what they had in mind. The Mill apartments don't allow children specifically because they're geared toward recent college graduates and are attempting to attract a younger crowd. The lawsuit has been settled and The Mill has agreed to pay a total of $35,000 in penalties. They learned the lesson the hard way: In Barack Obama's America, you don't have the right to do business your own way.

Obama pays back housing bubble creators

Barack Obama has a long history of rewarding failure. One of the most spectacular failures in our nation's history was the collapse of the housing market that triggered the current recession. As Pajamas Media reports, one of the architects of that recession is a close Obama ally: Andrew Cuomo.

But catching up with Cuomo is his relationship with the mortgage meltdown that nearly destroyed the American economy. Appointed by Bill Clinton as secretary of the U.S. Department for Housing and Urban Development (HUD), Andrew Cuomo has been called “the father of the subprime crisis” for the policies he orchestrated.

It was Cuomo’s directives that mandated HUD to vastly increase the amount of risky home loans bought by quasi-governmental housing giants Fannie Mae and Freddie Mac. Now, Cuomo may be haunted by his tenure as HUD secretary, where he planted the seeds for the nation’s housing collapse.

Though America’s financial fortunes suffered after Cuomo’s time at HUD, his own personal fortune soared. The bulk of this financial “windfall” came courtesy of Andrew Farkas, the billionaire real estate developer who helped Cuomo amass his wealth as a business partner and campaign fundraiser. Farkas — now Cuomo’s financial chairman as he circles the governorship — has personally given Cuomo at least $1.8 million in cash.

As New Yorkers are beginning to discover, Andrew Cuomo personifies the long reach of many at the top of the Democratic Party who built their fortunes on the mortgage bubble and the sub-prime collapse, but have yet to be tarred and feathered as architects of the nation’s worst housing crisis.

It was Cuomo's HUD that, in 1996, issued a directive that 42% of loans from Fannie Mae and Freddie Mac had to be to individuals with a lower income than the median in their area. This began pumping air into the housing bubble and it never stopped. As PJM points out, Cuomo also appointed another Obama friend, Rahm Emanuel, to the board of directors at Freddie Mac. Emanuel reportedly earned at least $320,000 during his disastrous tenure.

Cuomo is currently running for governor of New York and is the White House's undisputed choice for the position. Obama is such a fan of Cuomo that key Democrats have gone to great lengths to kneecap the current governor, David Paterson, in order to clear Cuomo's path.

It's not just Cuomo and Rahm. Shaun Donovan, the current Secretary of HUD, was a deputy assistant secretary at HUD under Clinton where he helped carry out Cuomo's catastrophic policies. Donovan later moved on to head up the New York City Department of Housing Preservation and Development during the Bush Administration. There he worked with Mayor Michael Bloomberg to open up an unprecedented amount of new cheap housing to low-income families -- the same housing being offered with HUD's subprime mortgages.

In New York, Donovan was closely tied to perhaps the biggest villain of the housing crisis: ACORN. From the New York Times:

A complex of 125 apartments had fallen into such disrepair that Bush administration housing officials had foreclosed on the building and transferred it to a group they and Mr. Donovan had come to trust: the New York Acorn Housing Company.

“These renovations will transform this once-troubled property into a remarkable asset,” Mr. Donovan declared in a city news release trumpeting the apartments’ “rescue” by Acorn and its development partners.

Donovan has since disavowed his connections with ACORN, but his close work with them in the Bronx speaks volumes. Since its foundation, ACORN has spent its time shaking down mortgage companies and enforcing the Community Reinvestment Act of 1977. The group, since revealed to be a criminal organization, enacted a spate of activism that pushed the CRA farther and farther down the mortgage industry's throat. Fannie Mae and Freddie Mac were particularly compliant. In 2001, Fannie Mae announced it had rushed to make over $10 billion in CRA loans, but that was just the beginning. The government mortgage lender wanted $500 billion in CRA loans by 2010, more than one-third of the total loans it made. Fannie Mae collapsed under the weight of those junk loans two years before its deadline.

And of course, Barack Obama himself fought with ACORN as a community activist in Chicago for fair housing. One of his closest political advisors, Valerie Jarrett, was a Chicago slumlord.

Justice Department looking forward to causing another mortgage meltdown

Our favorite racist activist lawyers at the Justice Department Civil Rights Division are back. Last week, the CRD reached a settlement with two subsidiaries of American International Group (AIG) for at least $6.1 million. (Talk about kicking a dead horse.) The lawsuit, as with almost every lawsuit brought by the Civil Rights Division, was based on race.

The settlement was filed today in conjunction with a complaint made by the Justice Department in U.S. District Court in Delaware. Brought under the federal Fair Housing and Equal Credit Opportunity Acts, the complaint alleges African American borrowers nationwide were charged higher fees on wholesale loans made by AIG Federal Savings Bank (FSB) and Wilmington Finance Inc. (WFI), an affiliated mortgage lending company.

AIG didn't intentionally charge African-Americans with higher fees. The CRD's complaint was on the basis of disparate impact, which bans lending practices where the intent isn't discriminatory but the outcome is. What probably happens is that black homeowners are charged more by insurance companies in general, not because of their race, but because the actuaries assess this demographic as being poorer and a higher risk.

Maybe the CRD thinks we should just crash the entire housing industry all over again? The single largest factor in the housing bubble collapse was the Community Reinvestment Act, which mandated that a certain percentage of loans be made to minorities. The hope was that more blacks and Latinos would end up able to purchase homes. The result was that mortgage companies were forced to make countless subprime loans that couldn't be paid back. This pumped more and more air into the bubble until it finally popped.

The CRD proudly announced that this is the first time a mortgage company has been sued based on racial factors and that it won't be the last. Under disparate impact, they can sue pretty much any company that charges an average of one cent more for minorities than whites. The Obama Administration and its executioners have, it seems, learned nothing.