What is up with this "Hardest Hit Fund" program?

By Frank Louis

I just can't believe it. States are getting millions and millions of our dollars to "help" those "hardest hit" by the mortgage and housing crisis by giving the money to the banks. Huh? Some states have gotten over $600 million (in the first $1.5 billion phase), others, like Rhode Island, will get less than $30 million (in this $600 million second phase). The total dollar amount in this giveaway of our tax dollars to the banks is $2.1 billion. Yes, we pay the government, the government lends it back to us and we give it to the banks, along with TARP Bailout dollars and... well you get the picture. The second phase targets unemployed folks. Read the March 29, 2010 Treasury Department's press release to see for yourself. Neither phase targeted "hard hit" folks who put their savings down in a real estate investment.

But I am missing something here with this program. How is "hardest hit" defined? Does no one use English any longer, at least the way I learned it? Granted, someone who lost their job is pretty hard hit. I agree with that. But this individual is "hit" by unemployment, not the housing crisis. And, while I hate to say it, giving a few months of reduced mortgage payments to someone in this situation is probably only going to postpone the foreclosure or short sale, and result in a further decline in property values; not secure the property or its value.

If you have followed my articles here or listen to my radio show weekly, you would know where I am coming from here. Isn't an individual who worked for years, who is approaching retirement perhaps, and saved for decades to have that $80,000 needed to put 30% down on the retirement or second home that was appraised for around $400,000 in 2004 or 2005 only to lose it and more pretty "hard hit?"

Let me go over this again: How is "hardest Hit" defined? OK, take the person who worked and saved their entire life, and put $60,000 or $70,000 or $80,000 down on a property in 2004-05 or 06. A property that was appraised by the crooked real estate industry for $250,000 — $400,000. The property is now (only a few years later) upside down and worth only $50,000 in a foreclosure or short sale. Wouldn't you agree that this person was pretty "hard hit?" In fact they were robbed. Not that I do not feel sorry for someone who is unemployed as I stated, but they are suffering from unemployment, not the housing crisis that was created by no-doc, no-money-down loans and the "straw buyers" realtors and mortgage brokers brought to (or pretended were at) the table. If you feel I am repeating myself here, I am. I am just checking that you are reading closely and that you get my point. Why isn't there any requirement that the people who qualify as being "hardest hit" actually paid down payments on these properties? In my "short keep" plan, having placed a substantial down payment on your investment is all you need to have done to qualify.

Now, if you did put your savings down on a real estate investment, perhaps for your retirement, maybe to leave to your children, you are probably broke even if you do not realize it. The mortgage is upside down by maybe $200,000 and even if you make the payments now, when you die the bank will want the money. Which family member is going to buy a totally valueless piece of property? The value will be negative, maybe in the hundreds of thousands of dollars negative. Your children will be left with nothing but a debt. Think about it your last activity on earth will be bankruptcy. You are pretty hard hit but there is no program for you. But what if you had really scrimped and saved for years, have 2 children to leave an investment to and bought 2 properties in 2005 with 20% down on both of them. You are really "hard hit" I would say. Who is fighting for you? This is the real truth about the wealth redistribution that is going on. It is happening by eliminating every American's long earned real estate equity and life savings, in the open, with no one noticing. No one but Frank Louis that is.

In fact, if you read the Treasury Department's initial press release on the first phase of the "Hardest Hit Fund" it sort of adds insult to injury if you did put 20% down on your real estate. The original benchmark to get this federal money (my money, your money, our money) was that the property value had to have already declined 20% in value to be eligible. (Humm, 20%) So, if you did put 20% down, it had to be gone already, "poof." But, if you "bought" with no-doc, no-money-down, you were now even with the folks who actually saved and paid to buy property. Their money was gone, you never lost a penny and, you were eligible for taxpayer money(you know, from the 47% of Americans who actually pay taxes). If you put money down, well just too bad say "bye!" Wealth redistribution at its finest. No one sees this but me?

So, here is my "hard hit" proposal, in addition to the "short Keep" that I write about every month. I write with hopes that some national radio or TV show will pick up on this and ask me about the concept. Like I say, I have a great suggestion for how to use our tax dollars right now for this "hard hit" program; here it is. Give it back to us. Give us our down payments back with this money. Make us "equal" with the people who did not put a penny of their hard earned money on the table as a down payment. The loans that created the crisis, the people who were often paid at the closing.

We have been the "hardest hit" by far if you think about it; having life savings and then some stolen by a real estate scam. Yet not a soul (or a sole reporter) makes mention of this blatant fact. It flies under the radar. I told someone just the other day that this is breaking news. However, since so many of us are being robbed of our life's hard work and earnings in the open it just gets overlooked. Like I said, paying your payments is not going to get you anywhere until "values" come back. I do not see that happening any time soon.

The articles I read, even the Treasury Department press release touting this program just do not get it. Face it, most all "reporters" just "report" they do not analyze despite what they tell you. Or, these news shows and articles are the child of a realtor or loan broker, selling their products; not "helping" like they claim. For example, I quoted an article recently which suggested you "do research" when seeking a firm to represent you in negotiating a modification to a loan. It suggested you ask for a list of satisfied customers. Have you tried that yet? How is this working for you? Now the articles on this "Hardest Hit Fund," including the Treasury Dept's own PR information suggests we "negotiate with the banks" early on as the funds will not be around until the fall.

Negotiate how? Like the couple I wrote about recently that offered to re-buy their underwater house from Citi for $190,000 when the mortgage amount was over $250,000. Remember, they had placed a $50,000 down payment on it when they bought it in 2003. The bank turned them down. The bank made a "business decision" on the property, so did this couple. They let Citi have it back. Citi sold it recently for $85,000 in a short sale. The couple had to file bankruptcy. Explain this to me- please. Negotiate? How? This is all a big joke. The mortgage holders try to feed us guilt about owing the money, having signed our names to a note. They do not care to mention that they lied to us about the value of the property. Face it, it is more about business (albeit in "bad business") and less about our "moral" obligation. Believe me, these very people who tell us we have a debt obligation on these notes would not bat an eye to put their companies in Chapter 11 if it would help them out personally.

So, use this "Hard Hit" money to return out down payments, then institute the short keep and end this crisis that is ruining this country tomorrow.

© Frank Louis