Skip to comments.Senate deal struck on mortgage aid
Posted on 05/19/2008 4:49:38 PM PDT by lainie
NEW YORK (CNNMoney.com) -- Senate Banking Committee leaders said Monday that they have come to a deal on a housing bill that would prevent foreclosures, create affordable housing and revamp oversight of two of the mortgage market's biggest players: Fannie Mae and Freddie Mac.
A major part of the legislation would allow the Federal Housing Administration to insure $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers' homes.
The deal was struck between the top Democrat and Republican on the Banking Committee: Chairman Christopher Dodd, D-Conn., and Ranking Member Richard Shelby, R-Ala.
"This legislation is good news for both the markets and homeowners," Dodd said in a statement. "The bill addresses the root of our current economic problems - the foreclosure crisis - by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes."
(Excerpt) Read more at money.cnn.com ...
“new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers’ homes.”
Are you ^%*^^%$#^%$# me? Well gee.
“taxpayers will not be on the hook if loans go bad.”
They intend to bundle the toxic waste and let the Treasury buy it, issue bonds against it and get some sap to stick it in his retirement fund.
I can’t tell you what I’d like to do to our congressional vermin.
There was a story in the LA Times business section this morning on a bad real estate investment made by CALPERS, which is the California public employee retirement fund. Calpers is apparently on the hook for around a billion dollars on this investment. I was stunned, by the way, to learn from this article that the fund has holdings worth 242 BILLION dollars. Somebody tell me again why the state of California has to raise everybody else’s taxes (you know, “the rich”) to bail itself out of debt when its own employees are this fat.
At any rate, I wonder if the 300 billion the feds are going to put up on this giveaway is intended to bail out Calpers and outfits like it, among other speculators.
This plan is a real winner. I wonder how long it will take before people realize that government is the problem.
How do they figure that one?
So I buy a house I can afford at 300,000. I protect my credit, save for a down payment, and pay a point to get 5% fixed for 30 years.
Asswipe with crap credit because he defaulted on his boat loan, and has meager savings because he got new jetskis, goes and buys a 500,000 new home he can’t afford with a low BS intro rate of 1.5% for the first year.
So he gets in trouble, I work hard to make it...and the government will use my tax dollars to help...... him?
O don’t worry, if he defaults, we won’t be on the hook....because instead of owing 500,000 on that new house now he only owes 400,000 because thats the new appraisal.
My house that is now worth 50,000 less in the down market? Silly me, I have to still pay the full amount due.
Did I miss anything?
Nothing except 'compassionate conservatism'. Don't you love it?
O, I forgot to mention asswipe sends his kids to free government school that my tax dollars pay for. I see him in the morning when I’m rushing to drive my kids to the school I pay tuition for. He’s there waiting for the free bus (that my tax dollars also pay for) that picks his kids up right in front of his house.
On Saturdays I also see him at the gas station when I’m filling up for the coming school week...he’s there gassing up his 2 jetskis.
Bipartisanship = Perserverence, compromise and a healthy dose of Astroglide
Would this gain for the borrower be taxable? If so, would that be at the time that mortgage was re-originated with the new FHA insurance attached, or is this debt forgiveness to have special tax rules?
Funny enough, none of the news stories with the big blaring headlines actually have much in the way of details.
The proposed legislation would a create a Federal Housing Administration program to insure up to $300 billion in refinanced mortgages for struggling borrowers after loan holders reduce principal. The Banking Committee is scheduled to debate and vote on the plan tomorrow.
Lawmakers in Congress have been at odds over whether to use government funds to stem foreclosures amid the worst housing slump in a quarter century. Republicans oppose using taxpayer funds, saying they would flow to rescue speculators and irresponsible lenders. Democrats say government spending is needed to stabilize neighborhoods and help struggling borrowers.
If approved by the full Senate, the package would be combined with a bill passed this month by the U.S. House of Representatives over a White House veto threat. Congressional analysts had estimated the House bill would cost taxpayers $1.7 billion.
``It's a pretty creative solution to the administration's objections to using taxpayer money to what they perceive to be a bailout,''[*] said Gilbert Schwartz, a former Federal Reserve attorney and a partner at Washington law firm Schwartz & Ballen LLP. ``If you use Fannie and Freddie's money, that resolves that issue and it seems to me that the administration should not object to it.''`
Shelby, an Alabama Republican, said he thinks President George W. Bush will support the Senate measure.
``This is a victory for the taxpayers,'' Shelby said today in an interview with CNBC. ``I think it's a win-win, a double win for all of us.''
Dodd said he planned to get it to the president's desk by July 4, adding that he didn't know whether Bush would support it.
``We appreciate and encourage the efforts to create a strong, independent regulator for the GSEs,'' White House spokesman Tony Fratto said today.
``We look forward to seeing the details of the bill as it goes through Senate markup -- especially provisions to expand programs of the Federal Housing Administration,'' he said.
[*] = I'll say!
O.K. If I’m a borrower and my house is underwater, I stop making payments. Then I make a deal with my lender and refi with FHA. Sounds like a deal.
I’m sure if it was possible to raid the pension fund to solve the general fund deficit it would have been done long ago, and the pension fund would be just as broke as the rest of California state government. But CALPERS has been well managed, as far as I know, and despite this loss they are doing fine. You could change the pension plans, contribution amounts, payout amounts for new hires if that makes sense, but if it ain’t broke, don’t fix it.
Do lenders pay property taxes on the new, lowered value or on the old, original value? Something smells.
I’m replying to my own post in order to correct something. I was under the impression that CALPERS was well-managed but I had no direct knowledge of that. I just read an article (today’s wrap up on FinancialSense.com by Rob Kirby)that indicates they may be in deep trouble. Their well-diversified portfolio includes tons of financial toxic waste: http://www.financialsense.com/Market/wrapup.htm
Good question, but what smells is liberalism.
Just when I started to understand a bit about what’s going on, the politicians turn to meaningless triplespeak.
I don’t know how this is written but I could see a scenario where someone who’s home has gone down considerably in value would be motivated to stop paying their mortgage. It can take 18 months to 3 years before they actually take your house.
Joe Homeowners house has dropped 20-25% in value, he stops paying, bank starts foreclosure proceedings after 3 months, Joe Homeowner calls bank and negotiates a new sales price for 30% less. Joe Homeowner makes tens of thousands of dollars, plus reduces his mortgage, the only thing at risk is credit rating, which can be recovered. When house goes back up, that is now all equity to Mr. Homeowner.