A nationwide mortgage-foreclosure settlement to help those underwater homeowners refinance will damage the housing system, not help it, says Charles Gasparino, a Fox Business Network senior correspondent.
The agreement between the Obama administration and state governments and big banks, under which the latter will fork over $26 billion to aid struggling homeowners, will create a new housing bubble.
"The worse part of the deal is that it will prevent the housing market from recovering anytime soon while sowing the seeds for another bubble. Much of the $26 billion will be used to refinance underwater mortgages," Gasparino writes in a New York Post column.
Editor's Note: Exposed: You Owe It to Yourself to Learn What Obama and Bernanke Are Hiding From Americans
This gripping Newsmax investigative report reveals the truth about America's economic future and the disastrous path that Obama’s and Bernanke’s reckless policies are taking us down. Watch, learn, and receive a free Survival Guide ($49 value) for your personal financial future. Click Here Now.
"All of which sounds harmless — until you realize that foreclosures are a necessary ingredient to the housing market’s recovery, because they allow prices to hit bottom and entice people who can afford homes to buy them and bid up prices again."
The bailout, Gasparino adds, will also encourage reckless borrowing and spending, which threw the country into the Great Recession in the first place.
"We're also teaching a generation of homeowners that there are no risks to their decisions because the government will bail them out. If there are no consequences to risk, why not just roll the dice again and again?"
Noted banking analyst Dick Bove, of Rochdale Securities, agrees.
"Those people lucky or smart enough to stop making payments on their homes may get their loan balances reduced," Bove tells CNBC.
"Other beneficiaries of the agreement may be homeowners who have seen the value of their houses drop below the size of their mortgages. They get a freebie that other homeowners who have paid their mortgages down will not get," Bove adds, describing the policy as "the mortgage deal from hell."
© 2014 Moneynews. All rights reserved.