The President's Mortgage Bailout Program and the Undeserving Poor

Conservatives claim that the President’s mortgage bailout program (the “Homeowner Affordability and Stability Plan”) will help undeserving losers keep their homes at the expense of responsible borrowers who live within their means. They contend that millions of poor, unqualified people (especially detested minority people) were able to get homes and mortgages because of the bleeding hearts of liberals like Bill Clinton, Chris Dodd, and Barney Frank. They believe that poor people deserve to live only in crowded, grimy, putrid slums.

Most of these conservatives know nothing about the causes of the mortgage crisis in America. They assume that all of the foreclosures taking place today were caused by irresponsible poor people getting mortgages they did not deserve. They do not consider the fact that this country has lost 4.4 million jobs since the Bush Recession began. People without jobs tend to have trouble paying their mortgages and other obligations.

These conservatives also fail to consider the fact that the economic downturn has resulted in a sharp decline in housing values, causing houses to be worth less than the principal amount of many people’s mortgages. This prevents people from refinancing or selling their homes. Moreover, the skyrocketing costs of medical care in America have driven large numbers of people into bankruptcy and default on mortgage obligations. More than half of the 1.1 million bankruptcies filed in America in 2008 were the result of people being crushed by staggering medical bills.

While right-wingers bristle with contempt for the less affluent people who had the effrontery to ache for their own homes, lawns, and gardens, they ignore the real culprits. The real culprits are Bush and his gang who catered to the fat cats. They deregulated the banking and securities industries, thereby allowing predatory lenders to prey on innocent homebuyers, stockbrokers to bundle sub-prime mortgages into gigantic risky bonds, and banks to buy-up billions of dollars of such shaky investments.

Yes, there are irresponsible people out there who knew they could not afford the houses they were buying. But President Obama is not trying to rescue them. The President said: “The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly. It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans. This plan will not save every home.” The plan will not help those who took risky bets by buying homes for the purpose of resale, or buyers who signed-on for loans they knew they could not afford.

The program has two parts: One is to work with lenders to modify the loan terms for up to 4 million responsible homeowners who have made their monthly payments and fulfilled their obligations but have seen their property values fall. They want to refinance into lower interest rates but are unable to do so because their homes’ values have sunk below the amount of their mortgages. The second part is to enable over 5 million homeowners who have suffered financial reversals such as losing their jobs or having their hours cut back, and who are now struggling to stay current on their mortgage payments but are facing possible foreclosure, to refinance into more affordable fixed-rate loans.

Under the President’s plan, many homeowners could see their mortgage payments drop by over $1,000 a month. The plan will also give bankruptcy judges the power to order changes in mortgages on primary residences. The criteria for eligibility will include having sufficient income to make the new payments.

I find it tiresome listening to moralists like Cal Thomas talk about how we are losing our sense of personal responsibility. Perhaps, heaven forbid, the President’s plan will help some irresponsible people as well those who have been responsible. While these Puritans wring their ice-cold hands over the loss of tax money to help the undeserving few, I will rejoice for the over 9 million homeowners whose homes will be saved.