President Obama Unveils $75 Billion Mortgage Relief Plan

President Obama rolled out a very aggressive mortgage relief plan today that is a step in the right direction to stopping the tsunami of real estate foreclosures. The plan includes $75 billion in assistance for troubled borrowers...up from the original projected $50 billion budget.

The key lies in forcing the banking industry to capitulate and work with home owners that are in trouble of losing their homes. Banks have only recently begun to work with home owners to modify their loans, thus allowing them to remain in them. It is a bit of a "Catch 22" though...it is in the best interest of the banks to work out extended terms with customers who are in financial stress due to hardship. Even though the banks will take a reduced rate or payment, they will get the revenue back over a longer period of time. The banks will get their money, but what about the contracts they have with secondary investors who are the real owners of the loans, unless it is Fannie or Freddie? Will the banks be protected from investor lawsuit?

One way that the Obama administration is forcing the banks to capitulate by this measure is through TARP. Those that took TARP money, have to comply and work with borrowers. Again...the "Catch 22"...this can be good on one hand due to the fact that previously the banks were not willing to work out terms with troubled borrowers. With proper negotiation, we should see a decrease in foreclosures. Banks will receive incentives from the federal government to go along with this mandate. However, the caveat is...by doing this, the government is taking more control of our lives...do we want this? Is this necessary? Is it prudent? My opinion is this...I do not believe that government should play an active part controlling our lives in a free capitalistic society. That being said, we are in a crisis that we have not seen since the Great Depression of the 30's. All of us have been hit financially in one way or another. Sometimes more drastic measures have to come into play to resolve issues...this is one of those times.

Unfortunately we are mortgaging our future in terms of debt and tax issues. The current economic crisis can be brought under control with this type of regulation being temporary in nature, but not a permanent solution. It is very important that we do not become more government controlled on a continuum.