Obama’s $1.5 Billion Housing Crisis Hush Money Plan

President Obama's recently announced allocation won't do much for the Housing Crisis, something he's well aware of.  He's just trying to quiet his critics.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

On February 19th in Nevada, Obama announced the $1.5 billion allocation to help the 5 states hit hardest by the Housing Crisis and with the highest percentage of upside down homes - Nevada (70%), Arizona (51%), Florida (48%), Michigan (39%) & California (35%).  Not only have these states suffered the sharpest drop in real estate values, all but Arizona are well above the nation's unemployment average.

The $1.5 billion is coming from the infamous TARP bank bailout funds and will be distributed to housing agencies in the targeted states.  They're being directed to use the money to assist jobless homeowners avoid foreclosure and those who are upside down in their homes.  Additionally, the money can be used to assist homeowners stymied on loan modification approval due to second mortgages.

The White House is pretty much leaving it up to each individual state on how they will use the money.  Florida, Arizona & Michigan weren't even aware the money was coming and have no plans on how to use it yet.

What effect will this money really have on the Housing Crisis?

According to First American CoreLogic's most recent report (for 3rd quarter 2009), released February 23rd, close to 25% of the nation's mortgaged properties are upside down.  That's an estimated 10.7 million homes.  What's more, these upside down homeowners are in the negative by an average of $70,000.

So, Obama's $1.5 billion would only help 21, 428 of the 10.7 million homeowners upside down.  That works out to be a whopping 0.2%.

Michigan alone has 513,278 upside down homeowners, so even if the full $1.5 billion came to Michigan, it would only help 4.2% of them.

Do you understand why this is just "hush money" and Obama's just trying to pacify his critics?

This problem needs to be thrown back into the laps of the banks and Wall Street firms that created it in the first place through their greed.  The federal government basically bailed out the rich and stuck the middle class with the bill.

Make sure to tell your government what you think of this arrangement the next time you vote.

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In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries.  He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor.  He's presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA's, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications.  For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com.  He also publishes his own blog:  http://DrewsMortgageNews.com & has a FaceBook FanPage: www.FaceBook.com/TheLendingEdge.