God help us from the socialist politicians of the world in a capitalistic system.

That is all that I can say after reading about Governor Deval Patrick of Massachusetts plan to help people with homes in foreclosure. Patrick looks like he will be the poster child for the law of unintended consequences if his new plan is enacted.

Instead of holding homebuyers accountable for their bad decisions, fully their right in a capitalistic society, Deval Patrick is now trying to push the onus of bad borrowing decisions onto the lenders.

But lenders have balked at the part of the administration’s plan that calls for them to let customers sell their homes at the lower prices of the current real estate market and pay off a reduced mortgage balance. In such cases – known as short sales – lenders would take a loss on the loan. The administration also asked subprime lenders to pay $5,000 for each house they foreclose on. The money would pay the expenses of moving the occupants to a rental property.
Kevin Cuff, director of the Massachusetts Mortgage Bankers Association, said the Patrick administration has not spelled out the circumstances under which lenders would be required to provide such assistance to homeowners. Agreeing to a “blanket policy” for short sales or transition assistance “would be an imprudent business decision,” he said. via The Boston Globe.

Doesn’t Patrick know that allowing every borrower who is upside down in a home to enter foreclosure and then gain many additional rights will significantly increase the pool of foreclosures in the state and make lenders avoid Massachusetts going forward?

Think about it for a second. If I was a  buyer in Massachusetts in 2005 and am now upside down in my home. I do have the ability to pay for the property but then money will be tight for a while. What Patrick will do is allow me to take a short term hit to my credit rating but then essentially get out of their home. In the meantime by allowing almost indiscriminate short selling the markets will have a hard time recovering and housing prices will be depressed beyond the normal cycle.

So the honest person is unable to sell their home because all of Deval Patrick has created a false market on the backs of mortgage lenders in Massachusetts. God save us from the morons, especially ones who are elected to public office.

Click here to for a Free Foreclosure search in your area if you are still interested in getting into the foreclosure game to find properties near your home.

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3. Why The Chrysler and GM Deals Will Raise Mortgage Rates
4. White House’s Foreclosure Plan Failing?