In what can infer as a setback to the sociable Obama government, the US housing regulators have turned down a proposal aimed at justifying the woes of homeowners. In an election year, this rejection can turn the tables on President Obama’s moves to woo the voters.
The Obama administration has proposed to cut mortgages held by struggling homeowners and transfer taxpayer funds to Fannie Mae and Freddie Mac-regulator. The regulator believes that using taxpayer-funded bank bailout money could encourage defaults. This move would fail to bring down foreclosures in a cost-effective way, the regulator added. .
The government, however, begged to differ. In a letter released to the media Treasury Secretary Timothy Geithner said the regulator’s analysis cannot be in the best interest of the nation. Analysts say that though such a move would go a long way to fix the country’s housing sector problems, it can only be compared to cutting the nose to spite the face. Any move that aims to stabilize the market at a higher cost to the exchequer can never be supported said trade analysts. Policies, they said, should not rebound in the long run.
The deteriorating housing market wiped out trillions of dollars in equity since it started in 2006. Today over 11 million house owners owe more than what their properties are worth All taxpayer-funded programs initiated by the government has failed to help people save their homes.
The regulator has estimated that the bailout funds could provide relief to about 74,000 to 248,000 borrowers. But it still opposed it because it believes that all of this benefit would be an outright transfer from taxpayers and would increase taxpayers cost.
After a detailed study the agency has concluded that the program would not only be too demanding on the exchequer but could also encourage troubled borrowers to default on their loans to win a mortgage reduction.