As all of you know, the Congress of the United States wound up passing the “Bailout Legislation” which has been touted as being in the best interests of those in foreclosure, as being legislation which will help homeowners, and which will reduce foreclosures. However, a close reading of this bill reveals that these claims are dubious at best, and that a significant portion of that version of the bill which was passed (for $840 billion, over the original $700 billion) concerns payments for things such as wooden arrows, tax reimbursements on rum imports, etc. that have nothing to do with helping homeowners facing foreclosure.
The bill essentially provides for the creation of an entity controlled by the Secretary of the Treasury and other politicians for the purpose of purchasing “troubled assets” with your tax dollars on the alleged premise that the infusing of this money into those institutions selling the troubled assets will loosen credit markets and make monies available for loans to homeowners. However, there are no conditions or restrictions, which require those entities receiving funds to use the funds for purposes of creating loan availability. Given the overall state of the economy, the institutions receiving these monies will probably wind up using most if not all of the funds to pay their own mounting debts including interest on loans or lines of credit and operating expenses, leaving little or no funds to loan to borrowers.
Whether particular assets will be purchased is the subject of investigation, review, and reports to Congress before any such purchase is approved. The entity has the discretion to purchase specific “troubled assets” after making a determination as to whether such purchase will, in the end, benefit the entity. As part of this discretion, the entity may determine that it will make more money by foreclosing on an asset than entering into a loan workout agreement with the borrower. Again, the decision is in the discretion of the entity.
The entity may also receive “reasonable requests” for a modification of the terms of the mortgage loan, but again, the entity has the discretion to approve or deny such request, which, if even considered, has to be approved by Congress.
There are no provisions in the bill to halt, slow, cease, or impose a moratorium on foreclosures generally. Having the entity formed, staffed, and implementing procedures for asset purchase will take months if not longer, especially given that this is an election year. As such, the current rampage of foreclosures will continue unabated despite the taxpayers forking over $840 billion of their money to bail out those who, in many instances, perpetrated the mortgage meltdown in the first place.
Jeff Barnes, Esq.