Sounds to me like another bank bail out but being billed as help for the home owners.
Contracts? We don’t need no stinking contracts!
Who the %&*!!#$ does the “President” think he is telling banks what they can charge customers for loans???
I told my family about this last night, and my 15 year old daughter said, “But..... that’s unconstitutional.”
She has more knowledge than most of the people in Washington, including Obama.
How soon before everyone stops paying so we all get cheaper payments. If you are unemployed it’s one thing. But if you were stupid enough to buy a house on a 3-1 or 5-1 ARM or any other variable rate loan you should lose your house. Sorry. lets stop rewarding the stupid!!!
75% of the 5 - 7 million mortgages that are 6 months delinquent right now were originally packaged as “prime”.
By the early 2000’s, the average “prime” loan did not fit the traditional definition of a prime mortgage. (20% down payment, fully documented income, fixed rate, low debt-ratio).
A 2008 study of 4 million foreclosures found that “low or no down payment” is the #1 common denominator in foreclosed mortgages... 51% of the 4 million foreclosures in that study were originally packaged as “prime” loans.
By 2000, a down payment was not called an “investment”, it was “an obstacle to home ownership”.
When a person can grasp the fact that the vast majority of mortgages that were done when the market was completly over-heated were actually non-prime loans (even though they may have been called prime), then they will understand the scope of this problem and that this new program and all of the others programs cannot fix it.
The only answer is to let them go into foreclosure (or short sale) and let someone who can afford the payment buy them at the true market value.
The chances of the gummint doing that? Zero.
Prolonging the pain and creating yet another moral hazard is all they are doing.
They are desperately trying to get people who are underwater on their loans to re-set their loans and lock in lower fixed long-term rates -- even if it means reducing the base amount of the mortgage.
The rationale for this (and I have no opinion right now as to whether this is a good idea or a bad one) is simple . . . with interest rates set to rise dramatically in the future in order to inflate away much of this country's massive debt, the U.S. government is trying to ward off a scenario in which millions of people walk away from their homes and the entire real estate market collapses.
Another factor here is that all of this discussion involves people with first mortgages who are in financial trouble. There may be a dangerous issue lurking here that hasn't gotten a lot of attention because banks haven't necessarily been making a lot of noise about it . . . and that is the potentially huge number of second mortgages and HELOCs that are subordinated to first mortgages that are already in trouble.
Brought to you buy the incompetent dolts that now run your health care.
It sounds like now is the time to go buy a new house then refuse to make the payments until you get part of the principle written down and better refinancing terms.
From a quick check, I believe people who are at risk of defaulting on an underwater loan are eligible for forgiveness of principal.
However, those who are soldiering on, successfully making payments are not eligible.
This punishes success.
bump
From another thread [at # 22], but worth repeating:
As much as those who hate that these people are getting away scot free hate it, the truth is, if you yourself lost your job and got into that bind who’s to say you wouldn’t do the same. And it is a smart strategy. The courts are overloaded. Because they combined mortages into securities it is actually very questionable who holds title. I actually know of several commercial real estate enterprises avoiding foreclosure using the exact same tactics.
All you have said is very cogent. In my view, the way forward lies in accepting this type of analysis and moving away from the exclusive focus on "helping" those who, to be brutally honest, at this point cannot be "helped" *by the government* into true financial viability. Only a quickening of the entire economy can lift those who are truly out of money up.
As I see it, these people are already getting a lot of "help." Not only are so many government programs focused on "saving homes," "stopping foreclosures," etc., the real facts are just what this article (and your analysis) demonstrates: the system is already (and quite literally) supporting these people through a personally untenable situation --- not out of largess, but out of economic necessity. Allowing someone to live in their home for "free" for SEVEN YEARS and counting --- as the system, combined, is doing here --- is a HUGE "help," to them and, it must be said, to the process of washing out this horrendous debt.
The reality is: a crashed housing market + bankruptcy and lender-stalled foreclosures = free (to them) housing for millions of people. FREE housing? In their "own" homes? For SEVEN years and counting? Good grief, that's got to be the Cadillac of Cadillac "save your home" plans. Even the guvmint couldn't come up with a "save your home" program that worked that well. /s
Okay. So now isn't it time to STOP focusing on "stopping foreclosures" (which are not happening anyway) and "saving people's homes" (which the market will not allow to be taken from them anyway) and START focusing on those people who still have enough financial viability left to restart the real economy (Main Street)?
That's why I am on a tear to get a discussion going on ideas such as increasing the home mortgage interest deduction for homeowners current on their mortgage for the tax year. Ideas drawn from this article.