Our Government: A Living Oxymoron

When you slam two words that mean opposite things together to form one name, we call it an oxymoron. Jumbo shrimp is a classic example. When you claim to be trying to help, but you take actions that basically guarantee the opposite result, I call that oxymoronic. Now, our own government has given us a perfect example.

Many of you saw the news earlier this week that HUD would launch a new Emergency Homeowners’ Loan Program (EHLP).

Under this program, HUD will offer “a zero interest, forgivable bridge loan to any homeowner who has experienced a substantial loss of income (a reduction of at least 15%) due to unemployment or underemployment caused by adverse economic conditions or medical condition.”

The program can be used in some cases to bring a delinquent borrower current and will then offer ongoing monthly assistance. This assistance will last for up to 2 years and will doubtless cost billions of dollars.

Now, at the same time the government will send billions of dollars worth of taxypayer money to folks who are already likely to be on unemployment, the same Agency is allegedly telling one of the nation’s largest banks to foreclose on reverse mortgage borrowers who fail to make timely property tax payments.

Despite the fact that these older Americans have already bought their homes and paid off their loans and who are now taking out reverse mortgages, often with the intention of using the proceeds to help their children make their own mortgage payments, HUD would like to take them out of the game because they failed to make a $2,000 property tax payment and then turn around and give away billions in taxpayer money to people who can’t find jobs--and then never ask for it back! With reverse mortgages, that equity must be repaid when the home is sold or the borrower dies.

Can there be any other prescription for this ailment than to get the bureaucrats out of the housing business?

We have expert originators who are backing out of the reverse mortgage lending business because the government won’t let them do their jobs. Who can blame them? They can’t stand up to the media firestorm that would surely result the first time they foreclosed on an American elderly couple who were just trying to make the most of their greatest asset.

These large financial institutions have loan officers who are experts at loan origination, who have studied the rules for reverse mortgage lending and who are actually trying to make loans, but the government can’t get out of the way.

Those of you have been in this industry for more than a cycle know that HUD’s enforcement of Community Reinvestment Act lending drove the industry into the subprime sector and forced banks to lend money to people who had no capacity to repay it. That, more than anything Wall Street did, led us to the financial crash.

What will EHLP lead us to? I look forward to your comments.