Main Street Might Be Rescued By A Housing Bailout

Main Street may be about to get its own gigantic bailout from the government. Rumors are flying from Washington to Wall Street, that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth- homes that are underwater.

An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. On Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. It is felt that the actualvehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.

The Republican leaders believe this rumor will become reality since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on Stimulus. This latest housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening. Wall Street bankers believe this rumor too and are alerting their clients privately to this possibility. If this rumor is true case workers are going to be working overtime trying to determine the how much is owed anf how to effectively disperse 800 billion to 15 million homeowners.

The president’s approval ratings are continuing to erode and Democrats are in real danger of losing the House and almost losing the Senate. The mortgage bailout would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes. So, it stands to reason that this is not just a rumor but a fact. We wait to see….Do leave your comments and feedback..