Fact #1 Homeowners Affordibility and Stability Plan

First is Obamas Homeowners Affordibility and Stability Plan(As it is called on wikepedia). The plan essentially provides taxpayer money to help with people that bought more house than they could afford through Fannie Mae and Freddie Mac(We will call Fannie Mac from here).

A lender(bank) will be "encouraged"(We should be concerned about Government encouraging anything) to reduce someones mortgage to 38% of their yearly income. The tax payer will then pay additional money so the mortgage is now 31% of their income. Those that lied about their income on their mortgage application are still eligible. Yes, read that again, those that lied on their application are still eligible.

Example:
Billy Bob bought a house through Fannie Mac and lied on his application to state he makes $4,000.00 per month($48k/yr). He actually makes $2,000.00 per month($24k/yr).

His mortgage payment is $1,000.00 per month which he could afford if he actually made $4,000.00 per month.

Now the government is going to "encourage" the lender to reduce the mortgage to 38% of his income which is .38 x $2,000.00 or $760.00 per month.

The taxpayer will pay the remainder to get the mortgage payment to 31% of Billy Bobs income. 31% of $2,000.00 is $620.00 per month.

Essentially the taxpayer will give Billy Bob $140.00 per month($760.00-$620.00) to fund the home he could not afford and lied about on his application. Billy Bob will pay only $620.00 for a house he could not afford. People that bought a house they could afford will give Billy Bob money so he can stay in the house he could not afford.

How do you like that one. More to come.