Republicans' 4% Mortgage "Stimulus" Is Latest Ponzi Scheme

Does the Republican ploy to provide 4% home mortgages to boost the economy and address the home foreclosure crisis sound too good to be true? It is. Buyer Beware!

Their 4% false promise is the modern version of "40 acres and a mule." They'll never deliver.

The quiet caveat is that only people with top FICO scores would qualify while banks pocket huge fees. But they're not saying too much about that.

Given the mass layoffs occurring and the difficulty that so many Americans have in paying their bills, credit ratings are falling faster than the Dow Jones. But Republicans make it sound like they really care about what happens to the average homeowner who "plays by the rules." They don't.

If they did, why haven't they proposed cutting Credit Card rates so that people can spend money immediately while freeing themselves from the debt slavery exacerbating the crisis? Because the Credit Card companies are "playing by the rules." Their rules. Just like the Credit Rating Agencies played by their rules and allowed the subprime mortgage crisis to unfold and create so much wealth for Wall Street, Banking and Credit Card Company executives and mortgage brokers and bankers everywhere.

The fact is that the Republican proposal is a public relations ploy that wouldn't benefit ordinary Americans. That's why they're gearing up to throw sand in our collective eyes. They want us to think that it's minorities and liberal Democrats and people who didn't "play by the rules" that are standing in the way of your getting a 4% mortgage. In other words, they're counting on your prejudice to come through for them.

Check out my letter to President Obama... If the Republicans are really about stimulus, fairness, and solving the housing and credit crisis for average Americans, they'll get behind the effort to reform credit scoring and the Credit Card industry.
That would go along way to stimulating the economy and addressing the housing and foreclosure crisis.

Their ploy goes along with all of their other tax-cut crazed, top-down approaches to all our economic woes. In other words, the same predatory politics and economics that got us into this fix in the first place. It's time for some bottom-up "real talk."

Mitch McConnell, Rush Limbaugh and the Republicans are gearing up for a campaign to commandeer the stimulus, banking and housing/mortgage reform plans, not to benefit the middle class, but to benefit their wealthiest constituency and scapegoat minorities.

The secret that they're not telling the American people is that their main backers are the very Banks and Credit Card companies whose executives they just gave $350 billion to and who paid themselves $18 billion in bonuses. Yet Republicans are blocking efforts to limit the bonuses these executives give themselves with our bailout money in the future!

Welcome to the Republican Redlining of America and the RNC's Return to First Principles!

Wake up! Don't be bamboozled by them again!

They're even going back to the playbook conservatives used to exclude Blacks from wealth accumulating opportunities during the "New Deal." Only now, they intend to use the most restrictive forms of "credit worthiness" to determine your worth as a human being, regardless of your race, almost like they're trying to socially engineer a Republican, 21st Century version of a master card race.

But unlike the past, vast numbers of White middle and working class folks will be left behind, many because they were late on paying bills because Republican mismanagement of the economy and the country helped push them over the economic edge.

It's a form of "economic eugenics," where "playing by the rules" is code not for having enough resources and wealth to be able to pay your mortgage and bills on time now and still save some money. Rather, it means that you already have the kind of investment income that during these hard times very few people actually have or have hopes of accumulating. And the numbers are getting worse by the day.

It's a con job to prey on your collective vulnerabilities and insecurities during these highly unsecure times. They are experts at selling folks a bill of goods - like the used car salesman who's already moved on when you realize he sold you a lemon and you go back to find him and he's vanished. And they sold us a lemon and that's why we're in this mess.

They got folks to vote for them in the past with their false promises time and time again and they're doing it again. They figure they can get away with it and score some political points against the Democrats and scapegoat minorities, divide and conquer, but deliver nothing. Don't fall for it again.

If you do, there will be more people redlined than ever before, hoodwinked by the false 4% promise just like ex-slaves were bamboozled by the "40 acres and mule" pledge after the Civil War. You'll never get it just like they never got it. And they never got it because conservatives in those days used the property provision of the 5th Amendment to reward ex-confederates who had committed treason against the very Constitution of which the 5th Amendment is part rather than help ex-slaves get an economic footing and have any chance of achieving substantive equality in this country!!! We're still dealing with this conservative betrayal to this day.

To them, "playing by the rules" meant that the property you owned and wealth you had from owning human beings needed to be protected and rewarded first, even though you had just waged a terrorist war against the country causing millions of casualties and untold destruction. Sounds like how they've rewarded the Bankers and Credit Card companies today. Remember, conservatives have never renounced Jefferson Davis and the kind of "rules" they used to reward the wealthiest of his followers and companies that benefitted from the institution of slavery. Even those who backed the assassination of President Lincoln. And they intend to use similar "rules" to keep the average American in perpetual "debt slavery" to the banks and Credit Card companies today.

Don't fall for the rosy picture of all the new housing construction projects and jobs that will be stimulated. It's a fig leaf for their radical tax cutting, upward redistribution Ponzi schemes ala Bernie Madoff, but writ much larger and with public policy, legislation and money. And don't fall for their slick, scapegoating ploy to make it look like people who didn't play by the rules got what they deserve and that you're better than them.

A whole lot of those folks, especially those in minority communities were not given the option of choosing safe, low-interest, fixed rate, long term mortgages like other Americans. They're not the irresponsible, greedy people who didn't "play by the rules" that conservatives are falsely portraying to get you to feel good about yourself, better than them and lure you into the conservative trap like they've been doing since the "40 acres and a mule" times.

That's why it's time for a little history lesson about wealth, property, housing, post-Civil War period and the New Deal, since there are many parallels to what happened after the Civil War and during the Great Depression. If we don't learn from this history, we will make the same mistakes -- like cave to the Republican strategy, which excludes Americans of all races who don't fit their profile. Here's a bit of what renowned expert, Professor Melvin Oliver had to say about this history in his famed 2003 PBS interview

I think a prime example has been what happened when blacks were freed from slavery, the period in which there was great hope. One of the things that many of us hear about is the broken promise of forty acres and a mule. And that was an important promise, because those forty acres, that was wealth. That was what could have secured a foundation for a generation of people that had had little wealth. But as we know, those forty acres promised at the end of the Civil War did not materialize.

However, during the same period, a large land reform did occur in America, and that was homesteading. A whole generation of Americans moved from east to west and secured land as far away as California that served as a basis for wealth that has been passed down from generation to generation. For a large part of that time, African Americans were excluded from that benefit...

If you add that up over time, what you get is a situation in which public policy provides opportunities for some and [denies] opportunities for another. This is how America became racialized -- it is the meaning of race in America.

And it's interesting that a lot of these racialized outcomes came out of the most progressive legislation in American history -- the whole set of legislation during the New Deal which created Social Security, created Aid to Families with Dependent Children, created the mortgage markets that make it possible for buying homes. For example, Social Security was originally set up to exclude all agricultural workers. Well, at the time most African Americans were still working in agricultural sectors. So up until the change in Social Security, most African Americans were not covered.

If there's one thing I want people to understand about the wealth gap in America, it is that this was a gap created by public institutions that gave different opportunities for different people to create, nurture and gain assets...

I think one of the most interesting sets of decisions has to do with the realm of housing. In order to purchase a house in America prior to the 1930s, you had to pay up to 50% of the sales price up front. The rest was subject to interest, and at the end of five years you had to pay the remaining balance as a lump sum. Obviously, with that type of arrangement, there were very few middle class people who could buy a home in America. Mainly buying homes was an upper middle class and upper class phenomenon.

But the 1930s created a whole new set of opportunities for Americans to purchase homes. The federal government came in to create and sustain the construction industry. And to do that, they created the Federal Housing Administration, whose job it was to provide loans, or the backing for loans, to average Americans so they could purchase a home.

The tables were turned completely around. The new terms of purchasing a home was that you put 10% or 20% down, and the bank financed 80% of it - not over five years, but over thirty years - at relatively low rates. This opened up the opportunities for Americans to own homes like never before. The average person could own a home. Furthermore, the FHA allowed no or low down payments for certain kinds of homes. So as a consequence the housing industry boomed in the midst of the Depression, because the federal government was trying to create jobs for people, boost the housing industry.

So you had this great opportunity. But it was a color-coded opportunity. How? In order for homes to receive financing, they would have to be certified by home appraisers. The appraisers were given written criteria that assigned colors to different types of homes. Green was the highest value - green homes were homes that were in all-white neighborhoods, usually suburban, and far away from communities that were either integrated or all black. Red was the lowest value - red neighborhoods were in all-minority or mixed communities and were usually in inner cities. These homes rarely got mortgages.

The vast majority of mortgages were reserved for homes in all-white suburban areas. This appraisal method came to be known as redlining. This color-coded criteria was central in determining who got loans and who didn't. They didn't say blacks couldn't get loans. But they did say communities in which there were few blacks could get loans. As a consequence, most of the mortgages went to suburbanizing America, and it suburbanized it racially. Today metropolitan America is made up of white suburbs and African American inner cities.

This appraisal system has greatly influenced the net worth or wealth of the average American today. Today, the value of the suburban house that was purchased in 1940 has gone up tremendously. So much so that the discrepancy between the net worth of these homeowners and the net worth of the inner-city residents and minorities that were excluded from these programs is astounding...

Comments

[k3nn3th]

Good lord, what's with the fear of someone making a profit??? I would love to get a 4% mortgage. It would help move the inventory of houses on the market, plus it would help out people, like myself, who bought houses we could afford and aren't facing foreclosure.

A 4% mortgage would put hundreds of dollars in my pocket each month and it would be better than the short term $20-a-week crap that's in the stimulus bill now. I could count on those dollars each month for the longterm and I would use it to not only pay off bills but I'd also buy that new things I've been putting off.

We've gotten stuck in this mode of only rewarding the irresponsible people. Meanwhile the people carrying the load are getting tired as hell.

[Ronald B. Robinson - Huffpost Blogger]

When you say "only rewarding irresponsible people" you're right. We've rewarded the mortgage brokers and bankers, Wall Street bundlers, Credit Rating agency executives, etc. with hundreds of billions..­.

Average Americans who've been thrown out of work by the millions are missing or making late payments on their credit cards, doctor bills, utilities, mortgages.­..not because they're irresponsible but because the economy is in near collapse and they don't have the money.

That means their credit scores are collapsing as well and they won't get the mortgage relief they need because they won't have the FICO scores to qualify. See my article: http://www.huffingtonpost.com/ronald-b-robinson/dear-pres-obama-change-fi_b_164329.html

If you have a low fixed rate mortgage, job security and can pay your bills and still save, you're not carrying the load for those less fortunate than you and are out of work. Forgive me, but that sounds like snobbery.

YOU would benefit from a reform of the FICO rules done properly. More people would qualify for loans and housing values would go up. YOUR net worth would increase.

Republican's ploy does nothing but make people resentful of others who don't have the highest FICO scores by scapegoating them as "irrespons­ible." Republicans are brilliant. They know how to tap into people's prejudices and feelings of superiority on the cheap and gain political capital.

They know how to be make people hateful, but not grateful for their blessings too.

[k3nn3th]

I appreciate your thoughts and I'm anything but a snob. I'm not for corporate welfare from the government any more than anyone else.

As far as the FICO score, we need some standard to denote credit worthiness. Without a FICO score then people will have to either pay cash or pay 50% down. I will read the article for sure.

I can't say that Republicans are the only people who play the hate game. I've been called the n-word more times by Democrats. I've been attacked viciously for not fitting into preconceived notions of how I should think.

[dnpvd51]

The real problem is the mortgage interest deduction and all the other government giveaways to homeowners. The transfer of wealth to homeowners is a transfer of wealth upwards. Minorities for the most part on fewer homes and less expensive homes.

Also the mortgage interest deduction is a barrier to owning a home as it forces people not only to pay for a home, but also to pay for the mortgage interest deduction that comes with the home.

Also this 4% plan will raise the price of housing which raises the costs to rent furthering hurting poor people.

[KPaso]

Do you own a house Ronald B Robinson? If so what's your interest rate? Ours is 6.5 fixed. We put 20% down and made sure not to choose an adjustable loan. We are not "the wealthy" just average, responsible citizens. Democrats

This proposed 2% reduction in our mortgage rate would mean a reduction of $700 per month in our mortgage bill. It would provide instant economic relief to our family. With the pressure reduced, we can consider spending normally again. And thus the economy rebounds.

Consumer spending drives the whole economy. But you knew that. After all you are a University Scholar.

[Ronald B. Robinson - Huffpost Blogger]

Check out my letter to the President. If he's able to get what I'm proposing done, you'll get a real 4% mortgage and we'll get the economy rolling AND cut you credit card payments. The Republican proposal is pure ploy.

http://www.huffingtonpost.com/ronald-b-robinson/dear-pres-obama-change-fi_b_164329.html

[Ronald B. Robinson - Huffpost Blogger]

As you say, "We put 20% down and made sure not to choose an adjustable loan."

Unfortunately, so many other people did not have the option to choose a relatively low fixed rate loan like your were. If they were, we probably would not be in the mess that we're in. But then again, that would have meant less profits for those who "played by the rules" promoted by Republicans and conservatives, Wall Street, and the Credit Rating Agencies that allowed predatory, subprime loans to be packaged and sold as Triple A rated securities. You don't have to be a University Scholar to know that :-)

[KPaso]

It's not about blaming Republicans for the financial collapse. It's about solving it. If your loan is unstable this would stabilize it. If you are considering purchasing, this will make it much more attractive. If you are a bank these loans reduce the risk of your borrower heading to foreclosure. With more money in the consumers pockets, the economic tide rises and in general unemployment reduces. We are all in this game together. Describing ithis finacial crisis in political terms is useless.

[vgirl1]

Sorry but the 4% offer is for new home buyers only. Your mortgage rate will not change under the Repugnants.

Moreover, what good is a 4% mortgage offer if you do not have a job or are worried about being laid off from your job. Under either of these scenarios one is not likely to buy a home.

[KPaso]

The proposal was for new buyers and refinances. And the proposal by Sen. Ensign of Nevada was voted down. This issue will be revisited as a direct approach to the mortgage/h­ousing/len­ding crisis. This proposal helps everybody involved; Sub-prime borrowers, families with higher fixed rates, banks with potential foreclosures, the entire housing industry with an incentive to buy again.