26 Billion More Down The Drain

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26 Billion More Down The Drain

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February 15, 2012

It's official. After months of challenging negotiations, government authorities announced last Thursday that they reached a $26 billion settlement with five of the nation's biggest banks over their flawed and fraudulent foreclosure practices. The goal as it was spun to us the public was that this 26 billion dollar deal is intended to help troubled borrowers by lowering the amounts they owe on their homes and their overall mortgage payments. So how is this deal going to work and why do I say another 26 billion down the drain?

First off, 1.5 billion of the 26 billion is earmarked for some 750,000 homeowners who lost their homes to foreclosure between 2008 and 2011. If you do the math, it's roughly $2,000 per person. Was I the only one in America who knew someone who just decided to stop making payments and let the bank take back their property? In the meantime, some of these people were going on vacation instead of making even part of their mortgage payment? Besides, how far is $2,000 going to get a person whose home got foreclosed anyway? Sounds like one more vacation to me.

About 17 billion is intended to go toward helping millions of homeowners get their mortgages lowered on their homes that are currently underwater (and may not have the chance to refinance). I wonder how many Americans have bought a first home or a rental property that would like to get in on some of this action? Think about it. If you bought a home for $600,000 and mistakenly borrowed $600,000 (because of those darn greedy banks) and now your property is valued at $450,000, what are you going to do? If your mortgage payment lowers by $100 or $200, is that still going to make you want to stay in the home for the long haul? It just seems like our answer to every failed decision big companies or small individuals make is to give them a handout or a bailout. As a side note, only Oklahoma didn't sign off on the deal yet, so OKC may not be so OK.

3 billion of these cash resources are supposed to allow people to refinance their mortgages to take advantage of these historically low interest rates. Have you tried to call one of these banks to do this as of late? It takes nothing short of an Act of Congress (and this is one) to get someone to lift a finger and get a deal done. So many refinance deals are not happening because of people losing their jobs, but simply because the large banks still appraise the property values in such a way that most homeowners can't get to an 80% Loan To Value making it near impossible for them to refinance at these low rates unless they come up with more cash at the close.

There's another 5 billion of direct cash penalties, and then some drips and drabs of millions for some other small items. Add it all up and what do you have? In my opinion, one large can of 26 billion dollars of DRAIN-O that won't work on cleaning up the real blockage in the drain. Fixing the clog all traces back to creating job growth. 26 billion in bailout or 26 billion in the hands of small business owners to create jobs . . . which sounds like a better business decision to you?

Written by:

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder of oXYGen Financial, Inc

Visit to www.oxygenfinancial.net to request a free consultation with the leading financial experts for people in their 20's, 30's, and 40's in the country.

Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS. NFPAS does not provide tax or legal advice. This site is published for residents of the United States only. Registered Representatives and Investment Advisor Representatives of NFP Advisor Services, LLC (NFPAS) may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact NFPAS Compliance Department at 512-697-6000. PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. NFP Advisor Services, LLC makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is NFP Advisor Services, LLC liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

This site is published for residents of the United States only. Registered Representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact Kestra IS Compliance Department at 844-553-7872.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. Kestra IS and Kestra AS makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is Kestra IS and Kestra AS liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.