Regulator throws lifeline to underwater borrowers (BHO= overlord in chief)

Reuters ^ | 10-24-11 | Margaret Chadbourn

[EVO X]

On the merits of it, am I the only one here who thinks this is a good idea? (1) It will only apply to those who are actually making their payments and have a verified source of income.

What happens if the economy hits take a nose dive again and housing prices drop another 20% in already underwater housing markets?

Would you loan your next door neighbor 125% of the house value at 4% for 30 years?

[Wuli]

“If the homeowner is current at a high interest rate, why would there be an increased risk of default (and hence the government having to pay on their guarantee) if the payments were lowered? (2) The money the homeowner saves can be (a) taxed, as there is less mortgage interest to deduct, and that not taxed can be (b) spent or saved.”

So this is a “rescue” of those least in apparent need of a “rescue” at the moment.

And yes there will be a “cost” to this - someone (Fannie, Freddie, the loan originator) were expecting to get X on the income from the interest rate, and for a capitalized loan amount of Y and now someone must take a haircut on one or both of those things under this program, no?

Because if it is only a matter of private lenders offering to privately offer new mortgages on these properties, using that new mortgage to pay-off in full what is owed to the original lender, whether Freddie, Fannie or another private lender, then why is there any government intervention needed at all? Unless, there is a cost (a haircut to someone) and the government is agreeing to subsidies it?

If I am right, then this program is a wasteful interference.

The housing market will begin to right itself AFTER the jobs market begins to right itself, not before. Housing is not the first, or the key thing to “fix”, job creation outside of housing is the critical job sector that needs to FIRST come up. Housing will follow as jobs and incomes rise. Leave it alone meanwhile. The artificial stimulus measures throw false signals to the housing market and slows it from obtaining the bottom it needs to get to, to unwind the balloon that was created by all the years of false stimulus.