Monday, August 20, 2012

Hardest Hit Housing Market fund hits taxpayers hardest...

When President Obama created the Hardest Hit Housing Market fund, banks and lending institutions were supposed to match the principal write down on severely underwater home loans in exchange for the taxpayers chipping in. In California, that didn't happen. When banks and lending institutions balked at their share, California used federal taxpayer money to pay down a $100,000 for 9000 lucky homeowners and the banks got off free.

Via FOX News:
Contrary to what voters were led to believe, California took the unprecedented step this month to give banks and struggling homeowners up to $100,000 in taxpayer funds to reduce underwater mortgages.

Originally, banks and lenders were supposed to pay 50 percent of the cost of reducing the principal for those whose homes are worth less than their mortgage. But when the banks refused, California took the controversial step of paying the entire amount, up to $100,000.

"We thought, you know, 50-50 was much more attractive and we'd have much more traction with lenders, and it just didn't turn out to work as well as we would have liked," said Diane Richardson, legislative director of the California Housing Finance Agency.

The program, known as the Hardest Hit Housing Market fund, is part of a $7.6 billion federal effort to help underwater homeowners in 18 states. California received $2 billion. But when banks and lenders who service loans refused to write down even a small portion of the negative equity loans, California decided to use the taxpayer money to pay 100 percent of the mortgage reduction.

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