The Obama Housing Plan (known as ‘Homeowner Affordability and Stability Plan’ or ‘HASP’) is simply “more of the same” when it comes to helping those who President Obama admitted in his speech are responsible for over half of all foreclosures: the subprime mortgage borrower.

The subprime mortgage borrowers are the ones who actually need help, yet the Obama housing plan seems to focus on Fannie Mae and Freddie Mac refinances and stimulating the GSEs activity by keeping rates lower.

Obama Housing Plan No Help for Subprime

Fannie Mae and Freddie Mac did not originate nor do they insure subprime mortgage loans. So Obama’s plan focusing on the now nationalized GSEs maybe good for the government but it’s not any help for the subprime borrower.

If you don’t know what companies own subprime loans or what companies service subprime loans, take a look in our Mortgage Servicing and Mortgage Company categories. Read some of the comments from those subprime borrowers stuck trying to negotiate loan modifications with subprime lenders and servicers.

It’s heart-breaking…truly.

Sadly, when Obama said we will “encourage” the subprime servicers to modify loans …my heart sank again. This is no better than the Bush administration’s creation of the Hope Now initiative which also “encouraged” but did not mandate loan modification help to keep subprime borrowers in their homes.

Homeowner Affordability and Stability Plan Only “Encourages” Loan Mods

The Obama housing plan offers a cash incentive up to $2,000 for servicers to modify loans, but let’s get real. A subprime loan modified down from 12% to 5%…costs the lenders 10′s of thousands in lost interest…and they are simple NOT going to do that with a $2,000 government incentive.

Bloomberg puts it this way,

“The new housing program will set a common standard for mortgage modifications, and will operate along with programs started last year including Hope Now and Hope for Homeowners, a person familiar with the plan said. Obama’s plan will be voluntary for lenders and investors, the person said, and borrowers wouldn’t have to be in default to qualify, a condition in previous plans, according to people briefed on the plan.”

If the Obama housing plan was really designed to work it would have REQUIRED subprime mortgage lenders and servicers to execute wholesale loan modifications which included principal reduction along with rate reductions….this did NOT happen.

Once again Bloomberg reports…

“The government will subsidize interest-rate reductions by working with the companies that handle mortgages, known as servicers. The proposal will provide incentives for those companies to cut the monthly payments for households without shortchanging investors, said one person familiar with the plan.”

This is report perpetuates the rumor the government would “subsidize” the loss if a lender or servicers modified rates to allow a borrowers to pay only 31% of their monthly income. As I said above, the loss to the lender when cutting a rate on a subprime loan from 12% to 5% to meet this standard, would costs $100′s of billions….maybe even trillions of dollars.

So I doubt it’s real.

Sounds like more of the same to me…big talk, little action. If the President keeps this type of behavior up, I’m going to starting referring to him as Barrack O’Bush.

Good Luck!

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