Obama Mortgage Plan, How People Are Lying For Aid

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Mortgage Aid is a nightmare to administer. Well, any kind of aid is hard to administer well and fairly. I have lived some years in Nicaragua a country that pretty much subsists on financial aid from the United States, the European Union and Japan. These countries try to provide Aid in a fair and effective way I’m sure, but this is hardly the case. In most situations the poor never saw any benefits and if they did it was only a portion of the original amount while the powers that be or savvy businessmen take the cream of the aid.

Mortgage Aid in the United States or any other developed country is hardly easier, which is why the Obama Mortgage plan is being played with for the profit of some savvy homeowners that are willing to lie.

How does this work?
The current Mortgage Plan provides help for homeowners that are in “imminent default” they will get help from the government that will rework their mortgage by lowering interest rates and lengthening the loan or even lowering the principal of the mortgage in order to reduce the monthly mortgage payments to under a third of the homeowner’s income.

This idea is great. It helps homeowners that spent too much on their home and helps them avoid foreclosure. Estimates place the number of Americans that will lose their homes at 5 million in the next three years even with government help.
The problem is that borrowers are lying on their income and expenses in order to get a better deal just as they lied to get a better house. It is much easier to make yourself look poor than rich.

The Obama administration aims to help 4 million borrowers, one in fifteen Americans with a mortgage, an amazing goal, through mortgage modifications. Up to now they have helped around 200,000 homeowners with trial modifications. The BIG question is how many of these homeowners really need the help and which are just playing the system.

The thing is that the lying is very easy for many Americans as it might not even seem dishonest to many. Millions of Americans are self employed. They pay themselves a wage from their business. If it is better to have a lower income in order to qualify for Mortgage Aid then they can decide to pay themselves a lower wage and invest more in their business. Many might not see anything wrong in this and I am not sure I could make a compelling argument to browbeat a plumber who decides to invest in a new van and pay himself a lower wage this year in order to get some help on the mortgage.

The real hazard is that those that need help will be pushed aside by savvier homeowners that can play the system and make their cases look “better” and have the resources and the knowhow to get the mortgage aid they want.