Last week State Attorney General Kamela Harris was reportedly whooping up what the Wall Street Journal calls an “election windfall” for California from the Obama Administration’s new $25 billion foreclosure settlement with commercial banks.

◼ Loan Bailout Rips Off Middle Class - Wayne Lusvardi/Cal Watchdog

Reportedly, $18 billion of this shadow bailout will be for California. Only $5 billion will be in actual cash. The rest will be in loan write-downs. Of the $5 billion, only $1.5 billion will be to compensate borrowers who suffered foreclosures from 2008 to 2011. This will be in the form of $2,000 “gifts” having no connection to the unpaid balance on loans or anything else.

The other $3.5 billion will be for state and local government regulatory programs. So government will end up getting 70 percent of the cash. Big whoop!

Liberal columnist Michael Hiltzik of the Los Angeles Times calls the Obama foreclosure bailout “the Big Whoop” –- a slang term sarcastically meaning “big deal,” typically used in the negative to indicate something is not a big deal (“So you got $2,000 from Obama four years after you lost your house? — Big whoop!”.)

...The loan write-offs are likely to eventually lead to more, not fewer, foreclosures. Forgiven homeowners will face the reality that they still can’t make payments even on lowered loan balances with even lower interest rates. Without incomes from well-paying jobs, all this will be is a tax write-off for commercial banks....

There is an indication that banks have already begun processing foreclosures in preparation for Obama’s “Big Deal.” In the fourth quarter of 2011 in California, 61,517 Notices of Default were filed, according to the Dataquick real estate data service. Of these, 60,289, or 98 percent, were homeowners who were delinquent on multiple loans, such as a primary mortgage and a home equity loan....

And loan-defaulted homeowners with Fannie Mae and Freddie Mac loans cannot participate in this bailout, which may lead to more voter outrage....

Another huge problem with the foreclosure bailout program is the component to help those with “underwater” mortgages — meaning the loan is more than the market value of the home.

Any public housing agency in California is required to include a clause in any subsidy program that any increase in value of the property has to go to the agency. Otherwise, it would be a violation of the “gift of public funds” prohibitions. More at the link.