CalHFA’s $2 Billion Home Rescue Program… Here’s How Stupid They Think We Are.

The California Housing Finance Agency (CalHFA) has announced the details of “Keep Your Home California,” a new program allegedly designed to help some of the state’s distressed homeowners.  According to the L.A. Times…

“More than 100,000 struggling homeowners could get help from a $2-billion program that California is launching, including about 25,000 borrowers who owe more than their properties are worth and could see their mortgages shrink.”

It’s even got a name… “The Keep Your Home California Program,” which like “Making Home Affordable,” is yet another program obviously named by someone for whom English is a second language.  Not that there’s anything wrong with English being a second language, it’s just that I can’t understand why, if we can’t design a program that will actually work, why we can’t at least come up with a name for a program that’s grammatically correct.

The L.A. Times story says that the new program, “has the potential to make a sizable dent in California’s foreclosure crisis and help the general housing market.”

Okay, Charlie Brown… come on… give it another go… kick the heck out of it this time, Charlie Brown… I swear, I won’t move it this time… you can do it, Charlie Brown… kick it as far as you can.

The money that won’t be needed for the program’s ultimate failure are said to come from the TARP funds, although I have no idea why they continue to lie about how TARP funds are not being used when most of us saw the Fed’s reports showing that we’ve pumped trillions into the banks in 2010, on top of the trillions we pumped into the banks in 2009, so who cares about the $700 billion rounding error at this point?

Why can’t they treat us like adults and just tell the truth: The money for the program, which won’t be spent anyway, was recently printed up by the Federal Reserve.  What are they afraid of, that collectively we’d all go, “Oh my Lord!  I think I’m having a stroke”?

State officials, choosing to ignore the lessons about forecasting that should have been learned from the spectacular failures of all preceding housing rescue programs, say that the program “hopes” to prevent 95,000 foreclosures throughout the state, and also provides moving assistance for the 6,500 homeowners who will be losing their homes regardless, although it’s not clear as to why or how they know this will be the case.

(Just a sec… quick question… have you ever played tee-ball?  It’s a game for young kids who couldn’t hit a ball pitched to them, so they place the ball up on a “T” and let them whack it from there.  I only bring that up because… well, you’ll see in a minute.)

The Times story says that the state’s new program, “aims to address the two central issues facing California’s beleaguered housing market: the state’s stubborn joblessness problem and the massive number of underwater homeowners.”

Okay, fair enough… two real good problems at which to take aim, I think we’d all agree.  So, now that we’ve taken aim, what exactly will be shooting at these worthy problems?

The program has four compelling parts…

The largest part of the program makes available $875 million in temporary financial assistance for people whose incomes have dropped or that have lost their jobs, providing AS MUCH AS $3,000 a month for six months to cover “mortgage payments and associated costs,” which I assume to be things like taxes and insurance.

And to that I can only say… okay, fine… so how about you just leave the people in the houses alone and just cut checks to the banks for the $875 million, if that’s what you want to do.  Oh, lookie, lookie… another bank bailout… fabulous.  Isn’t this fun?

And before anyone gets too excited at even seeing said funds go through their hands before landing in the bank coffers, to qualify for the assistance in LA County, a family can’t earn more than $75,600 a year, own more than one property, or have taken cash out of their home through refinancing… and the maximum amount of the benefit, as if this number matters in the least, is $50,000.

The second-largest part of the program, in dollar terms, slates $790 million for principal reductions that some developmentally challenged individual says, “would write down the value of an estimated 25,135 underwater mortgages.”

So, doing the math… that’s twenty-five into seventy-nine, carry the three… I come up with $31,430.27 in potential principal reduction per home with underwater mortgage.  I’m not saying it’s good or bad, just trying to keep up with the cyphering going on around me.

And not that I would qualify for the program, or more to the point would ever even consider wasting my time applying for such a unadulterated pile of claptrap, but were I to receive a principal reduction of $31, 430.27, by my calculations, I’d only be underwater by… let’s see… nine minus seven, carry the five… just a hair under $200,000.  Well… Spingle!

So, how does it all work, pray tell… this is my favorite part of all these nifty state rescue programs, after all.  Well, best I can tell from the plethora of detailed information provided by the Times…

“The principal-reduction component would pay lenders $1 for every dollar of mortgage debt forgiven.”

Why, you don’t mean to say that if my servicer agrees to reduce my principal by one dollar, the State of California will go ahead and give that servicer that dollar right back, do you?  Why, it’s sheer genius, I tell you.  When did we hire Harvard grads in Sacramento?  I just had no idea we were operating with this kind of brain trust up there.

Now, there does seem to be a couple of minor glitches in the whole principal reduction aspect of the program.  Nothing to be terribly concerned about, mind you, but probably worth mentioning nonetheless.  I think the story in the Times put it pretty succinctly…

“Out of the five major mortgage servicers — Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Ally Financial and Citigroup Inc. — only Ally has formally signed on to a key part of the plan: reducing mortgage principal on homes that are “underwater,” or worth less than the size of the mortgage.”

Oh, well… Jiminy Cricket, will you look at that?  It’s a great program, it really is, the only problem is that none of the banks want to participate in it.  Well, that’s not an insurmountable obstacle to the program’s success, is it?  Certainly not.  We’ll just get the principal balances reduced by some other industry… oil and gas, perhaps… they’ve got dough… they might go for it.

However, all is not lost… apparently, a Bank of America spokesmoron has said that…

“… the bank intends to participate but hasn’t yet reached a formal agreement with the California Housing Finance Agency, which designed the program.”

But look… it’s clearly on their list of things to get done this millennium, so stop being so cynical.  It’s really not that attractive a quality, by the way.

I’m feel quite sure that as soon as the banks get around to participating in the new HAMP Principal Reduction Alternative program, which was scheduled to go live last October 1st, but has obviously stalled somewhere along its birthing canal, that they’ll make this the next thing on their list.  Well, there’s also the 2MP program that was supposed to modify second mortgages as part of HAMP, and that none of the banks are participating in either, so after they get going on that one then they’ll get right on this one for sure.

Hey, I’m serious… it could happen.

Moving right along, the third part of the program is offering to make available $129 million… up to $15,000 per homeowner to help them get current on their now delinquent mortgages.  I have no clue how this additional bank bailout will work, as no details were provided by the Times, and I’m sure as hell not going to waste even a minute of my time trying to look it up.  But, whatever it is… I guess there’s the potential that up to 8,600 homeowners will be able to send a few more payments into the banks before they lose their homes to foreclosure.  Yowza!

And the fourth part of this four-part monstrosity proposes to take $32 million and give it away as “moving assistance for people who can’t afford to remain in their homes.”  Unbelievable… you mean the people who haven’t made a mortgage payment in well over a year need the state’s help to come up with the dough to hire a U-Haul?

I swear to God… if I ever find out the name of the imbecile who was in charge of developing the fourth part of this testament to utter senselessness and folly, I’m going to make sure that his or her name comes up at the top of Google in an article by me that warns potential suitors not to spawn due to apparent genetic defect.

Okay, I can only keep this up so long before my mind starts looking for ways to hurt myself in order to make the pain stop, so I’ll just throw in a few quotes from the usual suspects, just to remind everyone what kind of people the L.A. Times considers “experts” and therefore solicits comments for inclusion in such an important story, such as we’ve got right here.

According to the story in the Times, so called “consumer advocates” say that they were “heartened by the scope of California’s effort but concerned it would be hampered if the state can’t get major banks on board.”

Are these people intentionally screwing with us… the consumer advocates are concerned the program will be HAMPERED if the banks aren’t on board?  HAMPERED?  Is that what we’re calling utter failure now… HAMPERED?  Great, that’s just great.  Yes, you cadre of Einsteins, I supposed it would be hampered if the banks decide to give us the finger once again… and nice phraseology, by the way.  I guess you could also say that if the banks won’t play ball, the program could end up being an “Obama”.

And here’s another gem from the Times…

“Many experts have said reducing principal on such underwater loans would go far toward reducing foreclosures because home values have fallen so steeply that homeowners are tempted to walk away from their obligations.”

Many experts, huh?  What makes you think that any of us actually believe that when it comes to preventing foreclosures in this country, there exist “many experts”?  I’m finding it impossible to believe that there exists even one expert, in that regard.  And if there is one, it’s obvious that he’s either on vacation or incarcerated, because he or she has obviously not been consulted to-date.

Here’s a lovely sentiment from some guy named Paul Leonard, who is apparently the California director for the Center for Responsible Lending…

“Two billion dollars in total for the state to provide assistance to help borrowers avoid foreclosure is a substantial amount of money, and we hope that it will have some significant impacts in achieving its goals.”

Do you hope so, Paul?  Me too.  In fact, let’s all join Paul in hoping.  I love to hope.

And now let’s hear from Preeti Vissa, the community reinvestment director for the Greenlining Institute… she referred to lender involvement as being…

“Pretty dismal.”

And then adding… “The key to this program is how much the banks are willing to participate and be flexible toward homeowners’ needs.”

Thank the good Lord you’re here, Preeti… now I can rest easy knowing we’re on the right track.  Because prior to learning from your insightful theory, I would have said the key to the program was E flat.

Look, at least we’re not a state in any sort of major crisis as related to foreclosures, you know, like Nevada or Arizona.  At least reading the Times story made me feel better in that regard…

“The size of the Golden State’s foreclosure problem was underscored by data slated to be released Thursday, showing 15,893 California homes seized by big banks last month, the third-worst performance in the nation.”

See… you doom and gloomers… we’re only third worst in the nation, so there.  We’ve got time… no reason to do anything competent just yet.  Wake me when we hit number two, and we’ll start to take this whole foreclosure thing seriously.  But what about the trend line?

January’s tally was a 32% increase from the previous month… and nationwide, lenders took back 78,133 properties in January, up 12% from the previous month.

Well, that doesn’t exactly reassure me that things are headed in the right direction.  I’m trying to find a silver lining here, and you guys at the Times just won’t let me find one.  But wait… Rick Sharga from RealtyTrac must be lurking around somewhere… he’s never seen an article he wouldn’t be quoted in… oh look… there he is…

“We are not out of the woods by a long shot,” said Rick Sharga, RealtyTrac senior vice president. “Economic factors are what are driving most foreclosures right now, and so the state’s economy being what it is, it doesn’t appear that there is going to be a near-term correction either.”

So, right now it’s the “economic factors” that are driving the foreclosures?  Have I got that about right, Ricky-boy?  Well, good.  As long as we know what’s causing the problem, that’s the first step towards solving it, isn’t that what they say, Ricky?

And I don’t know or care who said this, but it came straight from the Times story…

“By keeping some cheap foreclosed properties from reaching the market, the program could give a boost to home values in general.”

Oh yeah… well, I would have to say that under the circumstances were the program’s underpinnings to show the sort of inactivity one might expect using more reasonable tenets, it seems clear that rabbits eating parsley can’t expect excessive investment returns.

Honestly, you guys at the Times are trying to kill me, aren’t you?  Just come out and say it, I’ll feel better.

The other morning my wife woke me up standing by my bedside holding coffee and a Danish, and when I saw her, all I could think to say was: “Oh no.  Honey, the next time you have the chance, if you think of it… would you please just place a pillow over my face and push down hard until my feet stop kicking?”

But, I can’t go yet, because I don’t know what Stan Humphries, Chief Economist at has to say about California’s new program.

“If they can actually stave off foreclosures and the people stay in the homes, then that is a great thing for the market.  It would be great because the continuing flow of foreclosures on the marketplace exerts downward pressure on home prices, and it also creates more supply of inventory on the marketplace, so foreclosures are really a double whammy.”

Foreclosures are really “a double whammy”?  Sheesh… you economists and your technical talk.  That’s why no one ever understands what you’re saying.

And finally the Times starts to touch on the heart of the matter…

But banks have been reluctant to significantly reduce principal on loans…

“You hear a lot of people calling for it, but there are not a lot of people in the mortgage industry who favor it,” said Guy Cecala, publisher of Inside Mortgage Finance. “There are a lot of issues around who deserves principal forgiveness.”

Oh, are there now?  Well, there were a lot of issues around which failed banks that defrauded our nation and destroyed the global financial system and credit markets, deserved any sort of forgiveness too.  And I can think of quite a few issues surrounding why said failed, insolvent, insanely leveraged financial institutions are still being permitted to pay out multi-billion bonuses using taxpayer dollars.  A lot of issues, Guy… lots and lots of issues.

When do we get to talk about any of those issues, Guy, you piece of itinerant garbage?

Okay, so if the banks aren’t signing on to participate in California’s new program, at least the now-entirely-taxpayer-supported GSEs… Fannie and Freddie… are on board, right?  We;;, according to the Times…

“The nation’s largest mortgage investors, Fannie Mae and Freddie Mac, also aren’t taking part in the principal-reduction program. That’s not surprising, Cecala said, because the two are in government conservatorship and billions of taxpayer dollars already have been spent rescuing them.”

Oh, so not Fannie and Freddie either, huh?  So, the principal reduction component of the new California foreclosure rescue program is perfect, as long as your loan isn’t Fannie, Freddie, Bank of America, JPMorgan Chase, Wells Fargo, or Citigroup?  Do I have that right, as we sit here today?  I thought so, okay let’s wrap this up so I can go lay down in traffic on the 405 South.

The Times did finally find someone with an upbeat view of the new program…

“Diane Richardson, director of legislation for the state’s housing finance agency, said she expects other lenders to join the principal-reduction program.”

“We are continuing to have conversations with other lenders about coming on board,” she said.  Money will be reallocated to other parts of the program if it isn’t spent on principal reduction.”

Oh, now that is a relief.  Why didn’t you say that sooner, Diane?  You guys are still having conversations with lenders?  Well, that changes everything, at least in my mind.

Sorry to get everyone all worked up about this new California foreclosure rescue program… it’s nowhere near as bad as I’d thought.  Diane is still having conversations with the bankers, so relax… it’s not over yet.  She still expects them to come along and be good corporate citizens.

As do I, Diane, as do I.

And, should the money not be needed for the principal reduction part of the program… fear not, good people.  The money will simply be reallocated to the other three parts of the program, so we win no matter what.

So, let’s just recap quickly… the principal reduction thing was the second part of the program, so what were the other three parts of the program… let’s see…

The first part was the one where families earning less than $75,600 a year, that haven’t taken cash out of their home through refinancing, can be given some money so they can pay it to the banks to cover mortgage payments they can’t afford because they’re unemployed or whatever.

Good… money for banks, got it.

The third part was the one that would make an additional $129 million available for up to 8600 homeowners to bring their mortgages current, before finally falling into foreclosure and lose their homes.

Again, more money for banks… got it.

And the fourth part… what was the fourth part… oh yeah… it’s the $32 million in moving assistance for people who can’t afford to remain in their homes… you know… the money they’re planning to give to people who haven’t made a mortgage payment in over a year, but now can’t afford a U-Haul.

You see, it’s a very well thought out no-lose proposition, this new California foreclosure rescue program… because if the banks refuse to participate in it, which would kill the whole principal reduction aspect of the plan, it’s really not a problem because the $2 billion in funding that came from the TARP money, will simply be reallocated into $2 billion minus $32 million that will go straight into the banks… and the $32 million will cover U-Haul rentals for the people that can’t afford a mortgage payment or the renting of a U-Haul.

So… let’s just try to think like a banker here… hmmm…

If I participate I have to write down principal balances, which means I have to write down the ridiculously inflated values of those loans on my books, and I won’t be able to foreclose on those homes anymore.  And if I don’t participate… I get all of the $2 billion… except for the pocket change that the state wants to give away to people that can’t afford to rent U-Hauls to move their crap after I evict them, which will save me money anyway because then I won’t have to move their crap when they leave it behind.

Okay, I’m ready… I’m sorry, but the banks are going to pass on this one… thanks for thinking of us though… and do keep in touch.

So, we funded TARP from taxpayer dollars to bail out banks.  We gave the TARP funds to the banks, but they placed restrictions on CEO pay and executive bonuses, so we also gave the banks scads of other money, so they could pay the TARP funds back and then pay themselves whatever they wanted using our taxpayer dollars.  Now, thanks to California’s foreclosure rescue plan, we get to send $2 billion of the same TARP funds back to the banks only this time they don’t have to repay anything.  Oh yeah, and $32 million for U-Hauls… I keep forgetting that.

As always, here’s a link to this morning’s story in the L.A. Times, lest you think that I made up even one word of what you just read.  I assure you I did not.  Click it and weep, people… click it and weep. California plans $2-billion program to help distressed homeowners

I should say something about why its important that you call your state senator or whatever, but I don’t give a damn what you do about this… I’m going to watch reruns of Bonanza and drink until I don’t care anymore.

Mandelman out.

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