Obama to unveil $75B mortgage relief plan (Why didnt I buy a bigger house??)

MSNBC ^ | 2/18/09 | AP

[sickoflibs]

PHOENIX - President Barack Obama’s plan to tackle the foreclosure crisis will spend $75 billion in an effort to prevent up to 9 million Americans from losing their homes.

In tandem, the Treasury Department said it would double the size of its lifeline to Fannie Mae and Freddie Mac. The government, which seized the mortgage finance companies last fall, said Wednesday it would absorb up to $200 billion in losses at each company.

The plan, which Obama is releasing later Wednesday, is more ambitious than initially expected — and more expensive. It aims to aid borrowers who owe more on their mortgages than their homes are currently worth, and borrowers who are on the verge of foreclosure.

“All of us are paying a price for this home mortgage crisis,” Obama says in a prepared text of remarks scheduled shortly after 12 noon EST Wednesday at a Phoenix area high school.

Headlining the plan was a $75 billion Homeowner Stability Initiative, under which would provide incentives to lenders to cut monthly mortgage payments to sustainable levels. It defines this at no more than 31 percent of a homeowners income.

Another key component: a new program aimed at helping homeowners said to be “under water” — with dwellings whose value have sunk below the principal still owing on their mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 to 5 million families do just that.

Of the nearly 52 million U.S. homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their house is now worth, according to Moody’s Economy.com

[Freedom56v2]

Doesn’t he have to go to House for appropriations? Not that it matters, but is it too late to start a phone campaign to our Reps?

[mplsconservative]

They can rent until they can actually afford a mortgage again. You know, like responsible people do, or maybe you’re not familiar with that kind of behavior.

[sickoflibs]

I too was worried Republians would cave on this. McCain came out with the same idea this Fall. It might be stupid but more ‘free candy’ always has takers, it could be popular.

[cc2k]

acoulterfan wrote:

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Probably a dumb question, but how can the Government force these lenders to refi/restructure a loan to somebody that lost their job and there is no job for the lender in the near or far future?

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Well, first, I'm not the expert on this. I've just been reading Help For Homeowners which came from the Official White House web site.

If you go to either of those pages, and click the link what options might be available to you, depending on the circumstances of your mortgage, (or click the link right here), look at the third example, Family C.

How does Obama force the banks to do this? Any bank that has taken TARP money will probably get an ultimatum, "Do this, or pay the money back now."

Any smaller bank that hasn't taken TARP funds will probably get all their regulatory oversight requests delayed or rejected until they play along. Banks are highly regulated, and some decisions require government approval before they can proceed. Non conforming banks will probably find their requests put at the bottom of the pile.

And remember, the banks will be subsidized for half of their loss, according to the Obama proposal. The House or the Senate could increase that subsidy if they want.

I don't support any of this. I'm just forwarding what I've read.

And I've already made a prediction over on the other thread, but I'll make a few more.

Predictions:

• "Help For Homeowners" is not the actual legislation. It's an overview from the Obama white house. The actual legislation will probably be written by Pelosi and her committee chair cohorts. I'll stick my neck out here and say Bawney Fwank will probably write most of the bill. It will have additional pork added, and maybe a bit of "tuning."
• The 50/50 split of the loss is one area I can see where "tuning" will happen. I see it going 60/40 or 65/35. Who gets the short end depends on how good the lobbying is, and how much cash goes to the campaign coffers of Frank and Dodd. With adequate lobbying, the taxpayers get the big loss. If campaigns aren't funded, the banks get the big part of the loss.
• This will be signed into law on or before March 4, 2009. I'm repeating this prediction from the other thread.
• This is an Emergency Measure, and will go straight to the house floor.
• No Republicans will be involved in writing the bill. No Republican amendments will be accepted before the full House passes it.
• Two or three RINOs will probably help it through the Senate, with some minor Republican amendments.
• It will go to conference. The Dems will be the only ones invited to the conference committee.
• The final votes on the conference committee report will occur before anyone can read the final bill.

That recipe worked so well for the Generational Theft Act, I don't see where they will change anything for this.

[Cementjungle]

Probably a dumb question, but how can the Government force these lenders to refi/restructure a loan to somebody that lost their job and there is no job for the lender in the near or far future?

The rest of us will be picking up the tab for the difference. The mortgage companies will still get their profit, we will just be helping all the homeowners pay their monthly bills.

[Betis70]

Yeah suckers all of us. I bought a house that was 1/2 what I could afford.

I shoulda done the sub-prime tango and got one for twice what I could afford, for 0 down, with a 1/1 ARM.

[dennisw]

That is the dark side of human nature, to party in the present, at expense of the future. That happens publicly (nation debt, printing money) and privately, spending money we think we have we never earned(internet boom, housing boom equity) , partly because everyone else we know is. 

When we borrow we borrow from future production because that is when we repay the debt
If I borrow a lots of money then 25% of my future earnings and production is spoken for in advance to service the loan
When this bite out of future earnings/production gets too high and unsustainable with some borrowers defaulting, the general population loses confidence. The markets lose confidence.....

And the whole dishonest scheme comes crashing down
We have been postponing a great reckoning for years 
Postponing via borrowing from the future and getting on one mania (bubble) after another

With the Magic Kenyan's programs we are still trying to postpone this great reckoning because it will result in a lower standard of living for all Americans

[mellow velo]

+1

I read (or heard) last week that something in the neighborhood of 35% of the homeowners who have had their mortgages reworked since the bottom fell out of the market are already back in arrears.

[Fishtalk]

I think we need to ask which, at this moment, is the greater social ill: allowing people to escape the consequences of bad financial decisions, or removing them from their homes?

Now this is a good question and a springboard for Devil's Advocate discussion.

You make some good points. Homeowners make better citizens. They become more law-abiding, more rooted and involved in their community. Homeowners are part and parcel of the great Middle Class, that breadth of folks who carry this country on their backs whilst raising the citizens and soldiers of tomorrow. No great civilization ever survives and thrives without a vibrant Middle Class.

The problem with your argument is that the gubmint ALREADY gives homeowners many breaks to encourage home ownership. IE, your mortgage is fully deductible on your taxes, as are your property taxes, as is any home equity loan on the house.

THIS is the fairest way to encourage home ownership. To go about giving mortgage money to this one and that one and the other one, based on this and that and God knows what to a mass of confusion that will only cause resentment between Middle Class citizens across our fruited plains.

If Americans understand anything, it's home ownership and mortgages. The average guy is NOTHING....nothing and nobody, until they own a home and, ideally, grow into increasingly bigger homes as their family grows. It's the backbone of our society. Homeowners buy rugs, home improvement items, lawn goods, home decor, on and on and on.

Americans also understand fairness and this is not going to fly, not going to fly.

It's not fair to the guy who struggled and paid his mortgage, to the mother who worked two jobs to keep her home, to the young couple who shared their home with in-law to afford it....on and on and on. Americans have did many things in order to buy a home, we get it, we understand it, we've had to walk away from homes that we could not afford, we've started out with a row home and worked our way up.

We've did all sorts of things to buy and keep our homes. Obama is tugging apart the very fabric of America and this is one dangerous thing.

Give it time. Americans will be coming out of the woodwork telling out they already lost their home to foreclosure, how they're still renting until they can afford, you'll see them.

It's not going to be pretty. For those who purchased a home they could not afford, and I remind that lady who wanted Barack to give her a kitchen too had a home foreclosed, a home she purchased WITHOUT EVEN HAVING A JOB FIRST...."but I thought I would get one"....Americans are simply NOT going to have much sympathy for.

Democrats are going down with this boondoggle. You heard it here first.

[kenavi]

From what I gather the plan is to lower the interest rate of the mortgage in question to achieve 31% of income ratio.

On average the lender would chip in about 1% (which most are willing to do now) and YOU {via future taxes fronted by Chinese $$$ now} get to pay the mortgage company about $8,000 to cover the remaining 2-3% to arrive @ the 31% of income ratio.

Banks would be giving better terms on defaulted mortgages even without this gov't subsidy, they just can't afford to foreclose on so many homes when the market is so illiquid. All they needed to do this was some certainty on what the gov't's policies are.

[paulycy]

[topfile]

Peggy was right!!! See it here

[sickoflibs]

I posted that on my blog a while back, This classic video interviewed a dozen or so supporters (moochers) after a BoB rally

Barack Obama, Change we can believe in?

[SunkenCiv]

spend $75 billion in an effort to prevent up to 9 million Americans from losing their homes.

[ponygirl]

The plan is only for Fannie/Freddie compliant loans, only loans under 415, only helps for the portion of the loan that is in excess of the house value, only serves as an incentive to the lender, not a requirement...etc, etc.

I think this will be used for only certain select instances and as a program will have half its cost eaten up by the Federal staff trying to administer it. I think it will solve a tiny percentage of the problems out there a a nice big cost — sounds like a Democrat plan to me — all show and no substance at a big government program cost.

You're exactly right.

I am one of those homeowners in Phoenix who is "underwater," mostly due to three foreclosures in my (almost brand new) neighborhood. I'm not having any problems paying my mortgage NOW... but my problem is that I took out a 5 year, which expires just down the road a bit, because I originally wasn't planning on staying here over 5 years. Now that I'm $30k underwater, I won't be going anywhere anytime soon. No one at my mortgage company will even talk to me about a refi since I can't "declare a hardship."

The issue for me is that I can foresee that in the future when my rate expires, after this moron absolutely destroys the American economy, I won't be able to get an interest rate under 10% and will then lose my house.

What has The O HolyO Messiah done for people like me (and I know about a dozen others just like me)? NOTHING. The people he will help is those who shouldn't have been purchasing a home in the first place.

[XR7]

If they would just take the money from all the Porkuli: the BUSH BAILOUT (Porkulus), the money from the recent Obama signed "Stimulus" (Son of Porkulus), and the new Porkulus II that is coming up, there'd be almost enough funds to PAY-OFF every home mortgage in America!!!

Now that would stimulate things.

[Gandalf_The_Gray]

RE :”The bad news is that at 31% of income the number of payments exceeds the expected lifetime of the mortgagee!

“Could you spell out the math for us please? Thanks

I think it would be clearer if I rephrased that to say: The bad news is that at 31% of income the number of payments could very well exceed the expected lifetime of the mortgagee!

My original statement was a bit strong as it implied that you could never pay off such a mortgage. The point I was trying to make was that the new regulation is arbitrary and doesn't really address the central problem, you borrowed too much and don't have sufficient cash flow to get out from under the interest and start reducing the principal balance.

If you arbitrarily demand that the "reduced payment" not exceed 31% of income what do you do when the party claims say $500 a week as his income. That would peg his payment at $671.17/month. If he was trying to carry a loan that was demanding $1000/month as originally written and he wasn't too far into the amortization, he wouldn't even be covering the interest. If he made a bit more or his original payment were a bit lower, he might cover the interest and just a smidgen of the principal. That is he would be able to pay it off but certainly not within the original payment schedule.

Basically this plan lets a low income person "rent" a home in which he may or may not be building equity. In fact it's kicking the can down the road because it doesn't help him reduce the principal balance. Unless he somehow starts making double payments, where the second payment applies only against principal, he may very well pay till his dying day and never get to own the house.

Regards,
GtG

[RockinRight]

I like how he put them in two groups - those that could never afford them from day one, and those that are doing OK but feel they’re paying on an asset worth less than what they’re paying...and that the main reason the second group exists is because of the first group.

[RockinRight]

Are you f**king kidding me? $30,555?

This is insanity.

The only possible plus here is that I think it will cause just enough outrage to allow perhaps a turn of events in the 2010 election.

[Wisconsinlady]

I’m sick of playing by the rules, and scrimping and saving to pay my bills ontime. Too bad I have “pride” or I’d let it all go now.