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Talk of gaming White House mortgage plan emerges
marketwatch.com ^ | Decembe 7, 2007 | Alistair Barr

Posted on 12/07/2007 5:57:26 PM PST by jiggyboy

A day after the White House unveiled a program to salvage the mortgage market, people are already talking about how borrowers might game the system.

To qualify for the fast-track program, borrowers must have a FICO score of less than 660 and it can't have increased by more than 10% since they took out their original subprime mortgage.

Because income isn't checked, some experts worry that borrowers who might otherwise be able to afford higher payments will try to lower their FICO score to qualify for a rate freeze.

"The message here is to get your FICO score down," Mark Adelson, a structured finance expert, said. "Don't pay some bills, but keep up with mortgage payments."

(Excerpt) Read more at marketwatch.com ...


TOPICS: Business/Economy; News/Current Events
KEYWORDS: bailout; bush; credit; fico; mortgage; scams; votebuying; voterfraud; youwillpayforthis
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BTW, the dirty little secret of getting bailed out under this plan is that you must have less than 3% equity in the property. The only borrowers it "helps" are those whose most financially rewarding course of action would be to walk away from their white elephant.
1 posted on 12/07/2007 5:57:27 PM PST by jiggyboy
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To: jiggyboy

Why should people with bad credit ratings get rewarded?


2 posted on 12/07/2007 5:59:45 PM PST by ladyjane
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To: jiggyboy
BTW, the dirty little secret of getting bailed out under this plan is that you must have less than 3% equity in the property. The only borrowers it "helps" are those whose most financially rewarding course of action would be to walk away from their white elephant.

my head spins. it seems like those are the sort of people that need the most help and is it a bad thing if they take an incentive and don't walk away?

3 posted on 12/07/2007 6:01:09 PM PST by the invisib1e hand (hillary clinton is vladimir putin in drag.)
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To: jiggyboy

If someone has a FICO score of better than 660 and a reasonable downpayment, they should have no problem refinancing. I imagine the problem may come if their house appraises for less than they owe though.


4 posted on 12/07/2007 6:04:10 PM PST by Always Right
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To: jiggyboy

But credit scores are tracked. They should look at the score they had the day the announcement was made.


5 posted on 12/07/2007 6:06:08 PM PST by CaptainK (...please make it stop. Shake a can of pennies at it.)
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To: jiggyboy
Yep. That's pretty easy to do. Just wait til housing becomes a federal entitlement. You ain't seen nothing yet.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

6 posted on 12/07/2007 6:09:04 PM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: jiggyboy
The only borrowers it "helps" are those whose most financially rewarding course of action would be to walk away from their white elephant.

That was the plan. These loans in many cases are held in funds and can not be easily renegotiated unless it is in the best interest of the fund investors. So yes, legally only those that are most likely to walk away can be given the option.

7 posted on 12/07/2007 6:10:24 PM PST by Always Right
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To: the invisib1e hand
it seems like those are the sort of people that need the most help and is it a bad thing if they take an incentive and don't walk away?

I think it's a fair bet that somebody who has virtually no money down in the property was a late entrant into the housing bubble. It follows that they bought their house at a price far higher than it is now or will be for a number of years. In this case, the offer to continue paying off an overpriced asset is no incentive at all.

8 posted on 12/07/2007 6:18:34 PM PST by jiggyboy (Ten per cent of poll respondents are either lying or insane)
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To: jiggyboy
I think it's a fair bet that somebody who has virtually no money down in the property was a late entrant into the housing bubble.

It'd be fair to me, if I could take it.

There was no point tying up cash in equity when money was so easy. It didn't make sense.

9 posted on 12/07/2007 6:22:13 PM PST by the invisib1e hand (hillary clinton is vladimir putin in drag.)
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To: jiggyboy

I fail to see why the federal government should concern itself with these contract matters or what authority they have to do so.


10 posted on 12/07/2007 6:26:25 PM PST by elkfersupper
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To: Always Right

My question:

This is supposed to help ONLY owner-occupants, NOT speculators.

What exactly will be done to enforce that?

And... my understanding is that there have already been many mortgage loans made under the condition that the borrower was the occupant, but the system was “gamed” and the borrower was actually a speculator. What is supposed to be different this time that will keep this from happening (when mortgage lenders couldn’t enforce it the first time around)?


11 posted on 12/07/2007 6:26:52 PM PST by Nervous Tick (Retire Ron Paul! Support Chris Peden (www.chrispeden.org))
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To: Nervous Tick

Good points. Look for the FBI to begin investigating that kind of fraud sometime in 2015 or so.


12 posted on 12/07/2007 6:32:13 PM PST by jiggyboy (Ten per cent of poll respondents are either lying or insane)
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To: jiggyboy
The only borrowers it "helps" are those whose most financially rewarding course of action would be to walk away from their white elephant.

And sooner are later during the five years they will figure it out!

13 posted on 12/07/2007 6:34:41 PM PST by org.whodat (What's the difference between a Democrat and a republican????)
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To: jiggyboy

So what? The government is not funding this. The mortgage companies are, and they went into it with their eyes wide open.


14 posted on 12/07/2007 6:35:03 PM PST by Brilliant
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To: elkfersupper
what authority they have to do so.

????????????????????????????????????????????

15 posted on 12/07/2007 6:35:35 PM PST by B4Ranch (( "Freedom is not free, but don't worry the U.S. Marine Corps will pay most of your share." ))
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To: Nervous Tick

All players involved were gaming the system. The borrower who was getting more house than they should have qualified for. The mortgage brokers for convincing people these were good loans so they could collect their big fees and pass the loans to someone else. The banks and investors who bought these loans because of the higher than usual returns for mortgage backed loans. The mortgage broker is long gone and out of the picture, now we have investors and banks and borrowers who are stuck between a rock and a hard place. Now we have these crappy loans that no one can afford (and believe me, the rates these subprime loans carry are no bargain, even the so-called ‘teaser’ rates are above normal fixed rate loans). This is really only a small bandaid for the problem. Banks and investors should be happy if as many borrowers as possible wish to scam the system to keep paying their mortgage. Foreclosing on a house that has lost 20% in value and had little equity is a losing proposition, big time.


16 posted on 12/07/2007 6:37:12 PM PST by Always Right
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To: Brilliant
The government is not funding this. The mortgage companies are, and they went into it with their eyes wide open.

It is neither the government nor the mortgage companies. It is the banks' other customers, who will pay the difference.

17 posted on 12/07/2007 6:38:26 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: jiggyboy

This plan is deader than an aborted Dodo bird.


18 posted on 12/07/2007 6:41:36 PM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Brilliant

“Mortgage companies” are off the hook as they are no longer performing as funding agencies but have become mere order-takers.

The losers here are the institutions who bought the mortgages expecting to get a higher post-teaser rate for the bulk of the loan. Now they’re getting screwed out of that higher rate for five years.

It remains to be seen whether that is better for them than losing some amount of interest and principal as homes go into foreclosure, which is as widely and frequently stated, and without any real analysis, as any Democrat talking point.


19 posted on 12/07/2007 6:42:31 PM PST by jiggyboy (Ten per cent of poll respondents are either lying or insane)
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To: steve86
It is neither the government nor the mortgage companies. It is the banks' other customers, who will pay the difference.

What difference??? You think banks are doing this because they are gonna lose money? This deal is trying to save the banks from losing a heck of a lot more money. And beside, the theory that banks are entitled to make "x" dollar is not how things work.

20 posted on 12/07/2007 6:43:42 PM PST by Always Right
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To: Brilliant

“The mortgage companies are, and they went into it with their eyes wide open.”

More correctly, it is the funds that hold the arms pools that will be financing much of this, though I can hardly see how renegotiating terms on a tranche is even possible mortgage by mortgage....


21 posted on 12/07/2007 6:45:40 PM PST by WoofDog123
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To: Always Right

I guess you missed the post last night in which British Bank(s) were seen to keep fixed rates high to compensate for losses in ARMs. Same deal. No one said they were entitled to a given rate of return but their shareholders expect it and rating agencies expect it. Any less and its a disappointment and downgrade. Spend more time reading and lay off those weekend cartoon shows.


22 posted on 12/07/2007 6:46:39 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: jiggyboy
Now they’re getting screwed out of that higher rate for five years.

They will be lucky if they get their principle returned at this point. They should be doing back flips at the prospects of getting any return at all. These funds are losing hundreds of billions of dollars due to foreclosures.

23 posted on 12/07/2007 6:46:46 PM PST by Always Right
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To: jiggyboy

THIS is the plan???
This plan is designed to help ONLY the bums and like anything else, if you want more of something subsidize it!

Wow. This just floors me.


24 posted on 12/07/2007 6:47:16 PM PST by Lancey Howard
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To: steve86
I guess you missed the post last night in which British Bank(s) were seen to keep fixed rates high to compensate for losses in ARMs.

Good luck with that. It don't work that way.

25 posted on 12/07/2007 6:47:39 PM PST by Always Right
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To: Nervous Tick

It can be rather easily proven whether or not someone lives in the property.


26 posted on 12/07/2007 6:48:30 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: WoofDog123

It is a curious thing that those funds and other holders of the tranches didn’t seem to be consulted prior to this agreement being made. Were they?


27 posted on 12/07/2007 6:48:55 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: RockinRight
The first thing they ask before they extend a loan is whether you intend to occupy the property.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

28 posted on 12/07/2007 6:49:47 PM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Nervous Tick
And... my understanding is that there have already been many mortgage loans made under the condition that the borrower was the occupant, but the system was “gamed” and the borrower was actually a speculator. What is supposed to be different this time that will keep this from happening (when mortgage lenders couldn’t enforce it the first time around)?

Not sure about it for this plan, but I know that if someone owns more than one property and is doing a loan that is for a supposed owner-occupied property, lenders are really making people jump through some major hoops to prove it. Now they are. A year ago, not so much.

29 posted on 12/07/2007 6:50:28 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: goldstategop

Of course. I’m referring to people already in loans that are trying for this “extension.”


30 posted on 12/07/2007 6:50:52 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: goldstategop
The first thing they ask before they extend a loan is whether you intend to occupy the property.

And the first thing speculators learn is to say "Yes, sir, I do" in response to that question.

31 posted on 12/07/2007 6:51:54 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: Travis McGee

What a visual. This plan selects a group that got caught up in their own greed. There is no way you can select a certain group like this, given the many that went conventional without balloons and are paying on time. The government needs to stay out of the property business.


32 posted on 12/07/2007 6:55:12 PM PST by eyedigress
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To: steve86
Spend more time reading and lay off those weekend cartoon shows.

And you should learn something about real world business and not believe everything you read by some expert in some paper.

33 posted on 12/07/2007 6:55:30 PM PST by Always Right
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To: steve86

They’d probably pay more if most of those homes ended up foreclosed. Not to mention, the intent was never to make the interest off the loans when the rate adjusted, since the idea was that the loan would be refinanced at or soon after adjustment.


34 posted on 12/07/2007 6:55:53 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: steve86
its = its

I’m going to quit posting on this topic, go to Costco and buy enough bulk microwave popcorn to last a couple years along with some beer, and prepare to watch a slow motion nuke detonation as the credit/housing bubble unwinds. Government efforts to intervene only throw premium octane on the fire.

35 posted on 12/07/2007 6:56:51 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: jiggyboy
Didn’t Reagan say something along the line that if someone knocks on your door and says “We’re the U.S. gov’t and we are here to help” run for the hills.
36 posted on 12/07/2007 6:57:12 PM PST by BluH2o
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To: Lancey Howard

Actually, while you have to have a credit score under 660, which, by the way isn’t that bad anyway, you still have to have paid the mortgage on time every month since it was taken out.

Wouldn’t say those are deadbeats.

The ones who were late don’t qualify.


37 posted on 12/07/2007 6:57:30 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: B4Ranch

You read it right.


38 posted on 12/07/2007 6:59:50 PM PST by elkfersupper
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To: steve86

I have, in the past, had a client (or should I say, POTENTIAL client) say they lived in a property or planned to live in a property that I soon discovered they had NO intention of occupying. If it’s a refinance it’s easiest to tell, things like the home address on a paystub or bank statement not matching, or the home in question is in a horrible neighborhood and another property they own is in a nice area, etc.

On a purchase it’s harder to tell, but there are clues that can often be confirmed by the way they answer questions.

If I suspect they’re lying, I call them on it. In a professional way of course. And then if my hunch is right I tell them either I do the loan as an investor loan or not at all.


39 posted on 12/07/2007 7:00:11 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: RockinRight
They’d probably pay more if most of those homes ended up foreclosed.

Better that those financial institutions would be shuttered and their remaining loan portfolios sold off for pennies on the dollar. As it should be. As the free market would have it.

40 posted on 12/07/2007 7:01:23 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: steve86

I find it funny that you feel that THIS will have a worse end result than these properties being foreclosed.

First off, the qualifications given here guarantee it’s probably less than about 2% of all mortgage holders that qualify anyway...secondly, even if it prevents half of the homes that would have been foreclosed from being foreclosed, then it’s a win for the banks, not a lose.


41 posted on 12/07/2007 7:01:42 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: jiggyboy
BTW, the dirty little secret of getting bailed out under this plan is that you must have less than 3% equity in the property.

Well isn't that special! 3% of what? If Joe McMansion owes 300K on his transitional colonial ranch, against what value shall we measure his equity? Against what he (over)paid? Against what he could sell it for in a forced sale? This scheme is a half-baked mess which only preserves the mortgage processors' flow. I'm confident that the next bailout for people who owe more than their homes are worth will be better conceived.

BTW, what's so wrong with foreclosure on people who bought and borrowed too much house? It's not like they're going to lose an arm or go to debtors' prison. So they have to move to a rental. Big deal. Be smarter next time.

42 posted on 12/07/2007 7:02:15 PM PST by nj_pilot
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To: steve86

It’s a small number, I’d guess less than 2%, of all the mortgages out there that are even affected.

Hardly a bane.


43 posted on 12/07/2007 7:02:24 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: RockinRight
If I suspect they’re lying, I call them on it. In a professional way of course. And then if my hunch is right I tell them either I do the loan as an investor loan or not at all.

Many loan processors could care less, though, and even encourage applicants to be dishonest.

44 posted on 12/07/2007 7:02:56 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: elkfersupper
I fail to see why the federal government should concern itself with these contract matters or what authority they have to do so.

You can bet your bottom dollar that interstate commerce was involved in this housing market mess.

45 posted on 12/07/2007 7:03:04 PM PST by jude24 (Quis custodiet ipsos custodes?)
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To: elkfersupper
You read it right.

Actually the government is not using any authority and passing no law or providing no funding. All the government did was provide cover so these banks/fund managers can change loan terms without getting in trouble with their investors.

46 posted on 12/07/2007 7:03:13 PM PST by Always Right
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To: steve86

Many do. I choose to be above-board.


47 posted on 12/07/2007 7:03:22 PM PST by RockinRight (Rumors of Fred Thompson's death have been greatly exaggerated.)
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To: goldstategop

>>Just wait til housing becomes a federal entitlement.

It’s not? I thought that was what Section 8 was about.


48 posted on 12/07/2007 7:03:57 PM PST by FreedomPoster (Guns themselves are fairly robust; their chief enemies are rust and politicians) (NRA)
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To: RockinRight
I find it funny that you feel that THIS will have a worse end result than these properties being foreclosed.

I didn't say it would be worse financially. It is worse in terms of moral hazard.

49 posted on 12/07/2007 7:04:18 PM PST by steve86 (Acerbic by nature, not nurture™)
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To: nj_pilot
BTW, what's so wrong with foreclosure on people who bought and borrowed too much house? It's not like they're going to lose an arm or go to debtors' prison. So they have to move to a rental. Big deal. Be smarter next time.

It is the banks and investors who make out on this deal, that's the real secret.

50 posted on 12/07/2007 7:05:33 PM PST by Always Right
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