Mortgaging Our Future: The Hardest Hit Fund Initiative

Imagine for a moment that the top wage earners in the land were forced to throw their funds into a common pot that would be shaken up and redistributed to those less fortunate than themselves – a sort of a take from the rich and give to the poor scheme.

No, it’s not a promo for the new Robin Hood movie. It’s the next big bailout in the US: the Hardest Hit Fund Initiative.

The initiative represents pretty groundbreaking stuff: a blatant redistribution of the wealth. Sure, we’ve had social programming in our tax structures for years. Wealth redistribution has been a key element of many of our tax schemes (the federal estate tax, for example, was founded on that very premise). But Congress’ efforts to spend our tax dollars have taken yet another remarkable turn with this initiative. Let’s see if we can work through this newest scheme together…

The federal government has divvied up billions of dollars as part of a plan to help the unemployed (this I get) and help homeowners keep their houses (okay, I’m still with you) by giving people free money to pay their mortgages. And you see, there, you just lost me completely.

Despite the fact that the economy is making what appears to be a recovery, and despite the fact that the media has been screaming about the “surge” in housing sales during the month of March, Congress is still fiddling with ways to boost the housing market. Yes, the housing lobby is apparently *that* powerful.

So this is what they’ve come up with. Four states (Florida, Michigan, California and Arizona) are going to get $1.4 billion in aid part of which they propose to hand over – for free, no repayment required – up to $50,000 each to homeowners to pay off their mortgages. The funds are targeted for those homeowners who don’t qualify for one of many loan modification programs floating around – remember, the criteria for this round of funding is that it’s for folks who don’t qualify for the previous loan modification programs, which covers a mortgage of up to $729,750 for a conventional, one unit home – almost twice that for certain other properties (see eligibility requirements here). The hope, in this rosy world that Congress has painted, is that the loan investors will turn around and reduce the amount owed by the homeowners by a matching amount, thus saving the house. A double win for the homeowner!

And yes, a win for the banks! Free money from the government (cause that’s where the money is coming from), no real restrictions, no public TARP taint and no need for messy and expensive foreclosures.

Everybody wins!

Oh wait. So, not everybody wins. Those taxpayers who are paying their own mortgages don’t win. But it’s all for the common good, right? We’re all in this together? Rah, rah, rah?

Yep. Even I can’t muster up the enthusiasm for yet another short-sighted bill. Throwing dollars at a problem doesn’t make it go away (unless that problem is Rachel Uchitel, but that’s a whole other blog). It’s clearly a lesson that Congress hasn’t learned since another slew of banks states will be getting money, too: ten states including Nevada, North Carolina, South Carolina, Rhode Island, Ohio and Oregon (some of the hardest hit, according to data) will split an additional $2.1 billion to do more or less the same thing. You can read how states are being selected and what differentiates a “first round state” from a “second round state” on the NCSHA website.

But then, I could be wrong. This whole taking from the rich and giving to the poor thing worked out for Robin Hood, right? Ooh, wait, no, it didn’t. Ironically, he bled to death.