Media Advisory: Budget/Tax Expert Doubts Wisdom Of New Obama Mortgage Plan

Published March 4, 2009

The Obama administration announced today its “Making Home Affordable” program, through which proponents say as many as 9 million borrowers will receive assistance through refinanced mortgages or loans that are modified to lower monthly payments.

Steve Stanek, a research fellow for The Heartland Institute and managing editor of its Budget & Tax News, doubts the plan will work. You may quote from Stanek’s comments below or connect him directly at 815/385-5602 or [email protected].

“The Obama administration may not know much about economics, but it apparently knows a lot about irony.

“The administration today announced its ‘Making Home Affordable’ program—whose goals include driving up housing prices. And in California, Florida, and other states with the most battered housing markets, many stressed homeowners will not be eligible for help.

“The program would work with lenders to modify the loan terms for up to 4 million homeowners and refinance up to 5 million homeowners into more affordable fixed-rate loans. The aim is to reduce the foreclosure rate and keep housing prices from falling more.

“Government manipulation to keep interest rates artificially low, and various kinds of ‘liar loans’ helped drive up housing prices, causing a bubble that burst. The Making Home Affordable program would allow some mortgages to be reworked without property appraisals, giving us the potential for more liar loans. It also would allow interest rates on these new loans to be as low as 2 percent.

“The vast majority of families who are making their mortgage payments will pay for all this as the government throws billions of taxpayer dollars at institutions to encourage them to rewrite loans with easy terms that most families cannot hope to receive.”

Nothing in this Media Advisory is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information, contact Dan Miller, executive vice president, The Heartland Institute, at 312/377-4000, or [email protected].