Mr. Mortgage just wrote up a great summary of the soon to be released pending legislation on the free mortgage bill.   The good news is that government “leaders” are finally realizing that the housing “boom” of the last 8 years was fake.  Part of the massive bailout program occuring now is a mandate to dig deeper into the ridiculous housing loans made during the last 8 years, and assess the magnitude of insanity.  The bad news is that it ain’t pretty!

They now realize that the entire housing “boom” was aritificial and brought upon by mortgage loan programs and leverage that were only available for a brief period of time and that will never exist again. Most of the loan programs contained fraud because the way the programs were structered. Ultimate affordibility through creative financing made it so everyone in the nation earned $150k a year and housing prices reacted accordingly.  Unsuspecting buyers who really earned $150k bought homes under fraudulent conditions and are now 50% underwater in their homes. They will be asking for a bailout as well.


And now the really bad news.  Initial attempts to restructure failing mortgages are failing.  New lending standards require that people have actual jobs with real and verifiable income in order to refinance, and can no longer count the anticipated appreciation in their homes as “income” as they once so commonly did.  (DUH!!)

Many banks are all of a sudden coming out with pre-emptive loan modification plans.  This is because they have finally realized that everything the housing market was built upon in the past six years was fake.   Wachovia was one of the first.  But from early reports I am getting the program is failing miserably. Apparently Wachovia’s close ratio is less than 10%.  This is because they did not estimate how many ‘liar loans’ were really out there or how far housing values have fallen.

And now the really really really bad news.  There are massive lobbying efforts going on now to create an unprecedented homeowner bailout, including the possibility of fully subsidizing mortgage payments for three years.

The Next Bubble - If such a program is passed, it will encourage ALL borrowers to stop all mortgage payments, because there would no longer be risk of default.  What do you get when millions of financially strapped borrowers no longer need to make their $2000-$5000 mortgage payments?  Answer - Wind fall free cash flow to buy new televisions, cars, vacations and more.  Just when you thought the debt ridden consumer was finally dead, trillions of dollars will soon be pumped into irresponsible borrowers hands with the explicit instructions to SPEND, SPEND, SPEND!

What Happens After Three Years - Hint.  It’s not going to be pretty.  If you thought the 2008 financial crisis was fun to watch, stay tuned for the next version - the 2011 Financial Crisis!