Is Harris Mortgage Forgiveness Next?

Is Harris Mortgage Forgiveness Next?

– By Howard Sierer –

Fool me once, shame on you. Fool me twice, shame on me. Pres. Biden tried to fool us by shifting college student loans to taxpayers. He was slapped down by the Supreme Court and a second attempt has been blocked by a federal judge. Now Vice President Harris is setting up taxpayers for another, similar scam.  Don’t say you weren’t warned.

The student loan scam unfolded like this. The liberal media began publicizing how lower income citizens, and minorities in particular, were unable to afford a college education. Congress responded in 1965 by subsidizing banks to make student loans. At first, this was widely supported since a college degree was seen as a ticket to a middle class lifestyle.

When increasing numbers of students showed up with loan money in their pockets, colleges responded to the incentive as predicted by Economics 101: they began raising tuition and fees. They used the new income to raise faculty pay and hire armies of administrators. And they began competing for students by building new student activity centers, upscale dorms and recreation facilities.

Democrats objected to allowing banks to profit on student loans and in 2010, Congress and Pres. Obama ended the program. From that date forward, all student loans were made directly by the federal government on the mistaken belief that government bureaucrats could administer the loans more efficiently than could banks. And since these were loans, they have never shown up on the national debt.

In a nutshell, taxpayer dollars were passed through students to colleges who used them to expand both their staffs and their physical facilities while leaving students with increasingly large loans to repay. Going to college was “free” in the short term and the prospect of repaying the loans “far off.”

Vice President Harris wants to fool us a second time. She has proposed an approach not unlike the federal student loan fiasco. She wants to expand opportunities for lower income households to purchase homes in today’s challenging housing market. Once again, the idea of helping these families achieve their American dreams is appealing at first blush. But we now know only too well that the road to you-know-where is paved with good intentions.

How her housing plans and their unintended consequences would play out can be predicted with certainty since in many respects, they repeat the same disastrous housing mistakes made by the government in the mid-2000s that led to the Great Recession of 2008-09. Her plan: subsidize Americans so they can take out bigger mortgages and then if they can’t pay for them, simply transfer the burden to taxpayers.

The federal government is already so deeply involved in housing finance that it can play havoc while claiming to do good. About $13.1 trillion in single-family mortgages are outstanding and $9.1 trillion of these are guaranteed by federal agencies or government-sponsored enterprises such as Fannie Mae,  Freddie Mac and the Veterans Administration.

Fannie and Freddie currently allow buyers to take out mortgages with down payments as low as 3%, despite the fact that risk of default increases substantially when buyers with have little equity in their homes. Harris would exacerbate this problem with $25,000 in government “down payment assistance” for “first-time” buyers.

More buyers stretching to buy higher-priced homes will increase housing prices and keep mortgage rates higher, the same effect that student loans had on college tuition.

Harris can extend the tactics of both the Obama and Biden administrations in easing credit standards for lower income – read “risky” – borrowers. In a classic case of “do as I say, not as I do,” the Consumer Finance Protection Bureau doesn’t allow lenders to extend loans to borrowers when loan payments would exceed 43% of income. But its rule is waived for the 70% of borrowers that have riskier federally-backed loans.

Unsurprisingly, delinquencies are on the rise, exacerbated by the 20.3% Biden-Harris inflation of the last 3 ½ years. The Biden-Harris solution: having enabled riskier borrowers to qualify for mortgages they can’t afford, lower their monthly payments at taxpayer expense to stop defaults.

The FHA instituted a “home retention” plan last winter that covers the late payments of delinquent borrowers and up to 25% of their principal and interest on monthly payments for three years. The Veterans Affairs Department has extended its foreclosure moratorium through December and directed loan servicers to reduce interest rates for struggling borrowers to 2.5%.

Joining in the fun, the Federal Housing Finance Agency in May instructed Fannie and Freddie to extend the duration of mortgages and cut principal and interest payments by 20% for homeowners facing “hardships.” The FHFA reports some 1.4 million “home retention” actions by lenders since 2021.

All this largesse with taxpayer money is mortgage forgiveness by another name. Buyers don’t have to worry about taking on larger mortgages since the government has told loan servicers to reduce payments if anyone runs into trouble. Hence buyers are willing to stretch to purchase homes beyond their means, contributing  to today’s shortage of homes on the market. Homes for sale have dropped from 1.5 million in 2017 to 900,000 today.

Harris brags that she “took on the big banks” as California’s attorney general after the 2008-09 housing meltdown. The mortgage settlements she helped negotiate forced banks to write down government-backed mortgages for underwater borrowers. Expect expanded mortgage forgiveness nationwide from a President Harris when the next economic “hiccup” pushes many of these borrowers into delinquency, adding hundreds of billions of dollars to taxpayers’ backs.