Boats All Around

Or vacations. Or home remodeling. Or a down payment. Whatever a second home mortgage will buy.

Today's Washington Post reports that taxpayers will be picking up part of the cost of these goodies for distressed (second) mortgagors.

The Obama administration unveiled an expansion of its $75 billion foreclosure prevention plan yesterday, providing new subsidies to mortgage lenders and investors.

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The administration's housing plan pays lenders to help borrowers stay in their homes by modifying their mortgages to an affordable level. But, the plan as first announced in February applied only to primary mortgages. Now, lenders will be eligible for payments when they modify the terms of a second mortgage, including a home-equity line.

About 50 percent of at-risk borrowers have a second mortgage, which can make it difficult for them to afford their homes even after payments are cut on their primary mortgages. Second mortgages were popular during the housing boom for buyers who could not afford big down payments.

Under the new plan, lenders would receive $500 for modifying the second mortgage, plus $250 a year for three years if the loan remains current. The borrower would be eligible for $250 a year for five years to lower their principal balance. The borrower could have the interest rate lowered to 1 percent, depending on the type of loan, with the government sharing the cost of the rate reduction.

How will this expansion of an already bad program be funded, you ask? That part's okay.

The program ... will be paid for through bailout funds already allocated to the program, officials said.

See, if the money has already been allocated, it really doesn't count as public spending.

The point of this post is, what about undistressed mortgagors? This Congress, the Obama administration and many of their supporters are big on "fair". But not everyone who owns their home was stupid smart enough to take out a second mortgage and buy that big ticket item. Wouldn't it only be fair if all of those people got to do so now? Then they can jump into this program, too. (Eventually, of course, we have to figure out how to get us apartment rats in on the action. Why should we get left out of "fair" just because we don't own our homes?)