2/20/2009 5:59:00 PM How stimulus plan creates nation of squatters Obama gives force of law to ACORN tactics
By Steve Stanek
The Heartland Institute
Soon after signing a $787 billion economic "stimulus" bill that has little actual stimulus in it, President Barack Obama announced a $75 billion plan the chief aim of which apparently is to turn millions of homeowners into squatters.
Obama's Homeowner Affordability and Stability Plan follows the urgings of some of his most ardent supporters. The squatter movement is being led by the president's old friends at ACORN, the national organization best known for its massive voter registration fraud schemes and as the place where Obama once toiled as a lawyer and "community organizer."
"On Feb. 19, ACORN members will launch a new tactic in fighting foreclosures: civil disobedience," the organization has announced in a press statement. "Participants in the ACORN Home Savers campaign nationwide will simply refuse to move out of foreclosed homes, or in some cases, will move back in. ACORN homesteaders intend to squat in their homes until a comprehensive, federal solution for people facing foreclosure is put in place."
Less than three weeks earlier this movement received encouragement from Rep. Marcy Kaptur (D-OH), who said during a House floor debate, "Stay in your homes. If the American people, anybody out there is being foreclosed, don't leave. ..."
ACORN and Kaptur are turning civil disobedience on its head. Civil disobedience is defiance of immoral or unjust laws, impositions by government. Contracts, by contrast, are entered into willingly, and the moral obligation of someone who signs one is to fulfill its terms. ACORN and Kaptur are openly calling for a particularly destructive form of personal irresponsibility.
The president's plan, unfortunately, does the same, but through force of law. Obama would permit Fannie Mae and Freddie Mac to modify mortgages for homeowners who owe between 80 and 105 percent of the market value of their houses. Obama also wants to force lenders to lower home mortgage interest rates to something in the neighborhood of 4 percent.
As carrots, his plan would allow lenders to receive subsidies for cutting monthly mortgage payments to 31 percent of a borrower's income and would offer up to $5,000 to borrowers who stay current on their reworked mortgages for five years.
Thus tens of billions of dollars would flow from homeowners who have been making their payments regardless of personal sacrifices involved, to the relative few who cannot or will not make their payments.
Then there are the lenders and buyers of "mortgage-backed securities" and other esoteric financial instruments who took ridiculous risks and were complicit in the issuance of "liar loans" and the destruction of basic underwriting standards. They too would receive huge amounts of taxpayer money.
There is every reason to expect all of this to bring on more failures. Six months after having their mortgages reworked as part of a government effort to reduce the number of foreclosures and firm up the housing market, more than half of the defaulting homeowners are back in default, according to U.S. Comptroller of the Currency John Dugan.
As Bob Davis, executive vice president of the American Bankers Association, noted, "The single biggest indicator of future default is past default, because this is behavioral." Those who have behaved well-borrowers who took on only debt they could afford and lenders who employed sensible loan practices-are paying for these people's poor choices.
With ACORN and at least one lawmaker calling for people to squat in homes they have not paid for, and with the president planning to reward borrowers and lenders for taking bad risks, we're likely to see worse behavior in the months ahead.
Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute.
