My cynicism about the foreclosure bill I referenced last week on WINA is starting be proven justified.
The streamlined process looks only at income, not assets. If you refinanced your home to buy a Mercedes or own another home, you won’t be expected to sell them to pay your mortgage.
Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.
â€œThis is a once-in-a-lifetime opportunity,â€ Schiff says. â€œPeople are going to feel like complete morons if they don’t participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn’t afford.â€
The government is offering loan servicers $800 for every homeowner they get into the plan.
Schiff predicts that loan agents â€œwill be cold-calling people trying to get them into it. Just like they encouraged people to overstate their income to get a bigger loan in the first place, now they will encourage them to understate their income to qualify for a smaller loan.â€
Before you dismiss this as unnecessarily jaded cynicism, watch this video.