Second Liens Forgiven: Are You Kidding Me?
From a Reality Check with Diana Olick of CNBC.
Amid the dozens of pages of details of the Obama mortgage modification plan, one new element will likely not make it into the headlines because it’s something of an afterthought.
It has to do with second liens, that is piggy back loans or home equity lines of credit.
Deep deep in the pages of the plan, is paragraph vi. Second Liens: While eligibly loan modifications will not require any participation by second lien holders, the program will include additional incentives to extinguish second liens on loans modified under the program in order to reduce the overall indebtedness of the borrower and improve loan performance. Servicers will be eligible to receive compensation when they contact second lien holders and extinguish valid junior liens. Servicers will be reimbursed for the release according to the specified schedule, and will also receive an extra $250 for obtaining a release of a valid second lien.
So in an effort to help borrowers stay current on their newly modified loan, which is at a nice new 31% debt to income ratio, the government is also going to pay cash money to get servicers to totally wipe out second liens.
...why stop there? What about car loans? Student loans?? The second liens, in general, were used by borrowers to either buy more home than they could really afford or to use their homes as ATM machines.
Which brings me to this from my friend Cal, Freedom's Pal...
You cannot legislate the poor into freedom by legislating the wealthy out of freedom.
What one person receives without working for another person must work for without receiving.
The government cannot give to anybody anything that the government does not first take from somebody else.
When half of the people get the idea that they do not have to work because the other half is going to take care of them and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is about the end of any nation.
You cannot multiply wealth by dividing it.