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Obama Rewards Sub-prime Borrowers and Society's Deadbeats with Housing Bill

Discussion in 'BBS Hangout: Debate & Discussion' started by El_Conquistador, Feb 19, 2009.

  1. El_Conquistador

    El_Conquistador King of the D&D, The Legend, #1 Ranking
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    For the intellectually lazy among you, which is almost all of you, The_Conquistador will simplify this bill for you.

    1) Obama is rewarding deadbeat borrowers who got us into this housing crisis by defaulting on their home loans, by sending them cash.
    2) Obama is pressuring banks to modify loans to make them cheaper for deadbeat borrows to pay back. Again, too-relaxed credit terms got us into this mess.
    3) Obama is giving judges influence over the banking system -- always a stupid idea
    4) Obama is making it more difficult to foreclose on houses, thereby adding to banks' problems -- another reason why we are in this mess.

    Why on earth is Obama rewarding the very people that caused this problem, and all the while, adding uncertainty to the banking system and sure losses to the lenders? This is nonsensical. But what is true, is that Obama, the ideologue with no practical experience, continues to do three things:
    1) Punish the wealthy by making them pay for idiotic programs such as this with their tax dollars.
    2) Punish the financial industry, arguably America's key advantage over other powerful countries
    3) Take money from society's earners and send it to low income, worthless individuals.

    I guess if you take enough money from the top 10% of income earners and hand it out to the poor people, then the poor people will vote for you and you'll be re-elected. Pay for play all over again. When you nationalize the banking industry, as Obama is trying to do, you then control all finances -- public and private -- and have the ability to continue to funnel money towards poor people and away from the people that earned it. This is a very dangerous game of class warfare/populism. Of course, Obama will then trot out Jamie Dimon's praise of the plant, but dumb Americans will not realize that TARP recipients pretty much have to publicly show support for Obama The Clown, less risk having their big shareholder clamp down on them. Government's rising influence in our lives is very troubling. Very troubling.

    Eh, at least this woman had her request for Obama to pay her mortgage answered:
    <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/P36x8rTb3jI&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/P36x8rTb3jI&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>

    Our great nation is being led by an idiot, ladies and gentlemen. A true idiot. Great voice, great marketing campaign, horrible ideas, horrible instincts.

    Proposal Is Heavy on Incentives to Modify Loans
    Challenges Include Dealing With Mortgages

    By RUTH SIMON and CARRICK MOLLENKAMP
    In its effort to address the foreclosure crisis, the Obama administration is relying heavily on the carrot rather than the stick.

    The administration's plan, announced Wednesday, tries to address one of the key weaknesses of previous voluntary efforts by providing financial incentives for mortgage servicers and investors to modify troubled loans.

    At the same time, it doesn't fully address some issues that have bedeviled previous attempts to fix the situation, including how to boost modifications of loans that were packaged into securities and sold to investors. Some also say it doesn't do enough to encourage reductions in principal for borrowers who owe far more than their homes are worth.

    One of the hallmarks of the administration's approach is a set of financial rewards designed to encourage mortgage companies and investors to modify delinquent mortgages. Mortgage servicers, for instance, will receive an upfront fee of $1,000 for each eligible modification and "pay for success" fees of up to $1,000 each year for three years if the borrower stays current on the loan. The plan also includes incentives for servicers and mortgage holders to modify loans of borrowers who are at risk of falling behind on payments, for instance because of a loss of income or an interest-rate increase.

    Borrowers, meanwhile, can receive a principal reduction of $1,000 a year for five years if they stay current on their modified loan.

    "This is the first real significant step to try to push servicers to modify loans rather than just cheerleading," said Kurt Eggert, a law professor at Chapman University in Orange, Calif.

    The effort also shares some of the cost of reducing borrowers' monthly payments between the mortgage lender and the government.

    Some analysts say the administration isn't doing enough to encourage lenders to write down loan balances instead of just reducing monthly payments. Recent studies by Credit Suisse and others suggest borrowers are less likely to fall behind again on their mortgages if both their principal and interest payments are reduced.

    Housing counselors praised the administration's focus on making loan payments affordable, but say that interest-rate reductions alone may not be enough to help many borrowers. "For about half the clients that come in to us, an interest-rate reduction down to zero" isn't going to save them from onerous debt, said Michael van Zalingen, director of homeownership services at Neighborhood Housing Services of Chicago. For the other half, he said, the Obama plan "could make a huge difference."

    Related Article
    Housing Bailout at $275 BillionThe plan also relies heavily on government-controlled housing-finance giants Fannie Mae and Freddie Mac to help more borrowers refinance loans, including those whose mortgages are near or exceed the current value of their homes. To help such efforts, the administration has agreed to allow the firms to hold up to $900 billion in mortgages and mortgage-backed securities until next year, and to ease rules that bar them from owning or guaranteeing mortgages for more than 80% of a home's value.

    But the plan wouldn't help borrowers refinance if their loans aren't already owned or guaranteed by Fannie or Freddie, or if they owe far more than their homes are now worth. Those restrictions could exclude many borrowers in some of the hardest-hit markets, such as California, Las Vegas and Florida, said Chris Mayer, senior vice dean of Columbia Business School. He argues that it wouldn't cost the government more to allow more loans owned or guaranteed by Fannie and Freddie to be refinanced.

    It also wasn't clear how far the administration's plan will go in pushing mortgage companies to rework troubled loans that have been packaged into securities and sold to investors. Securitized loans are being foreclosed on at a much faster rate than mortgages held by banks, according to a December analysis by Tomasz Piskorski of Columbia University, Amit Seru of the University of Chicago and Vikrant Vig at the London Business School.

    The Obama administration plans to create uniform guidance for loan modifications. "It's clear that the intent of the government is that it does get adopted by a broad cross-section" of the mortgage market, said Michael Heid, co-president of Wells Fargo Home Mortgage. But "private security holders will still have to agree to the principles that are laid out here."

    Mr. Heid believes the incentives will help bring investors on board. Other mortgage executives say that may not be enough to spur modifications of large mortgages and other loans that were sold to private investors.

    "In those private-label securities, servicers still have a problem, particularly without a safe harbor" that would protect them from lawsuits, said John Courson, president of the Mortgage Bankers Association.

    At least two lawsuits have been filed recently in New York and Connecticut courts by investors who have alleged that mortgage-servicing firms mishandled foreclosures or should bear the brunt of losses in modifying loans.

    Some investors, meanwhile, say they were disappointed by the announcement. "The whole thing seems like window dressing," said one major bond investor. He worries the program will encourage some borrowers who aren't yet delinquent to seek government help even though they could otherwise afford the payments.

    The plan also does little to solve a problem that occurs when different classes of mortgage investors disagree on whether a loan should be modified. "The securitization has split the interest in the home loan among so many different parties that it is difficult for servicers to make a modification without fear that some significant party may sue or do something else that hurts the servicers," said Mr. Eggert of Chapman University.

    One step toward making the latest proposal work, he said, would be enabling bankruptcy judges to modify loans, including those packaged into securities, to reduce principal balances and adjust payment plans. This could prove to be the stick needed to get mortgage investors to agree to modify a loan before bankruptcy-court proceedings begin.
     
    1 person likes this.
  2. basso

    basso Contributing Member
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    quelle surprise- yourchiref of staff served on the board of fan/fred during the the time of the greatest fraud, and got repaid with financing for his subsequent congressional run. and now, the government takes tax dollars to prop up the very entities that caused the crisis.

    sheesh.

    plus, does noone else see the irony in a situation where housing prices are in a freefall but the government is worried about how to improve "affordability?"

    these guys are making it up as they go along, with the emphasis of rewarding corrupt political cronies at taxpayer expense.
     
  3. DCkid

    DCkid Contributing Member

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    The thing that pisses me off about all this is my wife and I tried to things the right way. We tried to save 20% for a down payment (which is A LOT in the DC area), and make sure our finances are in order before we bought our first home. Now all these people who overextended themselves, got these no-money-down mortgages, and at least partially helped to drive up the home prices out of our price range in the first place are going to essentially get free money from the government. Meanwhile here I am three years later feeling like a schmuck, still saving up every penny I have to get that down payment. I'm not getting any money from the government for my good behavior, while my taxes go to help the people who were "behaving badly."

    I'm not pretending to say this mortgage bailout doesn't need to be done. All I'm saying is it is frustrating for people like me, who tried to do things the right way.
     
  4. El_Conquistador

    El_Conquistador King of the D&D, The Legend, #1 Ranking
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    Exactly. What is worse is that the re-default rate for those receiving government assistance on home loans is over 50%. So over half of the people receiving aid will likely be in need of more aid in the not-too-distant future. This program isn't just stupid -- it's OBSCENE.

    It doesn't help matters when Obama says he is rewarding people for 'playing by the rules' and people who have 'suffered misfortune'. What a load of BS. The victimization of society and lack of accountability is just galling.

    This housing program can be defined quite simply:

    THROWING GOOD MONEY AFTER BAD
     
  5. Bogey

    Bogey Contributing Member

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    Look on the bright side, you will probably have to pay a higher interest rate to offest the lower interest rate that will be given to those that can't afford their current mortgage. :rolleyes:
     
  6. pgabriel

    pgabriel Educated Negro

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    Several problems with your simplification for us simpletons. Banks do not want to foreclose, banks aren't in the business of selling real estate, and they don't want to be sitting on a bunch of houses they are going to lose 30 to 40% on.

    The plan provides financial incentives for mortgage companies to refinance loans.

    This money comes from funds already allocated by TARP, funny that you don't hold wall street (the financial experts that need to be bailed out) to the same standards you hold homeowners to. where was your outrage then?
     
    #6 pgabriel, Feb 19, 2009
    Last edited: Feb 19, 2009
  7. SamFisher

    SamFisher Contributing Member

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    Not only that but MBS holders are the ones that are ultimately screwed the most with rising default rates - guess who those people are, and guess how they benefit when foreclosures are down. Jorge is probably capable of understanding this due to his background but obviously chooses not to for laughs. basso on the other hand doesn't really exhibit a level of comprehension with the underlying concepts sufficient to realize this, though with some study and plagiarism, could someday sound knowledgeable.


    Edit: I will amend my statement with respect to basso - he obviously does understand the plan, as he endorsed a similar effort targeted at low income borrowers by House Republicans in lieu of TARP last September

    http://bbs.clutchfans.net/showthread.php?p=3916975&highlight=Cantor#post3916975

    Honestly....
     
    #7 SamFisher, Feb 19, 2009
    Last edited: Feb 19, 2009
  8. Bandwagoner

    Bandwagoner Contributing Member

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    It think most people understand the reasoning, but are just mad that it has come to rewarding people who were irresponsible. I supported the 700 billion that turned into TARP.

    It is also much easier for people to understand the situation of "i just got a job, my credit blows, NICE my check is in the mail" and be mad about it.
     
  9. mc mark

    mc mark Contributing Member

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    Are these some of the deadbeats you're talking about Jorge?

    Octuplets' grandmother faces foreclosure threat

    LOS ANGELES (Reuters) – The grandmother of California's newborn octuplets faces the threat of foreclosure on the house she has shared with her daughter and six of her grandchildren, property records revealed on Wednesday.
     
  10. RocketManJosh

    RocketManJosh Contributing Member

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    hmmmm ...

    I just bought a house in October here in San Diego, CA for a little over $300K and I did an FHA loan with 3% down at 6% interest. As some may know you have to pay almost 2% for up front mortgage, but it is rolled back into the mortgage. Since the value of my home has gone down marginally since then I am positive that I am slightly upside down, but it is irrelevant to me since I have a fixed payment and I bought it for a 10-15 year investment.

    However under this plan, am I reading it correct that I may be able to refinance for a low interest rate under this plan even though I am in no danger of foreclosure? If so, there are going to be a lot more than 9 Million people that go for this plan.
     
  11. DCkid

    DCkid Contributing Member

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    I'm not sure if that's a great example considering the daughter's story, who is pretty much the definition of a deadbeat.
     
  12. Bogey

    Bogey Contributing Member

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    Nothing like handouts, huh?
     
  13. Bandwagoner

    Bandwagoner Contributing Member

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    Is the process of getting an FHA loan still as hard as before? How much inspection did the house get before the loan was approved?
     
  14. rhadamanthus

    rhadamanthus Contributing Member

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    I don't read TJs posts, but I was skeptical of this plan too until I read yesterday that it came from TARP money.

    If we're going to blow billions, I'd rather it go to citizens than ginormous banks.v (Yes, I know that indirectly it will go back to the ginormous banks)
     
  15. rimrocker

    rimrocker Contributing Member

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    I am sympathetic to the general issues TJ raises here, if not the rhetoric employed. I just don't see any fair and equitable solution. If it were up to me, I'd probably let it play out, but that will cause a lot of people a lot more pain, including those who played it straight because if you did the right thing, but every house on your street is in foreclosure, you are most likely deep under as well.
     
  16. pgabriel

    pgabriel Educated Negro

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    I also agree, but as you suggest, no one benefits if these loans eventually go bad.

    the only problem i have with the politics in general is that alot of these homes, people are able to afford there mortgages. there shouldn't be an implied crisis of people walking away from houses because they may fall in value. the value of the home shouldn't be the issue, if the home can be paid for, then the person just keeps paying.
     
  17. RocketManJosh

    RocketManJosh Contributing Member

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    It was a pain in the rear, though supposedly not as bad as it used to be. Cosmetic damage no longer has to be fixed before the loan was approved.

    I had to get some electrical stuff fixed, and I also had to replace the dishwasher and garbage disposal before the loan would be approved. Since it was bank owned, of course I had to do it all and pay for it all myself. It felt very weird fixing up a home that I did not own, but given the FHA requirements, it was the only way.

    The biggest pain was getting a bank to accept FHA financing on a nice home, when other people in San Diego are taking equity out of houses and essentially paying cash. The bank called my lender and my lender had to convince them that I was low risk as far as getting the loan since it was FHA.
     
  18. El_Conquistador

    El_Conquistador King of the D&D, The Legend, #1 Ranking
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    So tells me who benefits when taxpayers pay for 'mortgage assistance', then the borrower re-defaults in 6 months, which there is a 50% likelihood that this scenario will occur... You are then left with a higher budget deficit, more tax money wasted, and the same darned problem. OOPS
     
  19. FranchiseBlade

    FranchiseBlade Contributing Member
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    I understand. I had to save up for a long time as well, and I ended up paying 20% down in LA which was incredibly high at the time.

    I wouldn't feel too bad though, if I was you. I bought at the peak, and after a few months of property value increasing, mine has now tanked. If you had bought like all of those you called irresponsible, the value of your home would be significantly less.

    So all of those that you call irresponsible, as well as any of the responsible ones see that now we could have gotten the same home for about 25% or more off of what we paid.

    It isn't bad that at an economic downturn like this you've managed to get a chunk of money saved up. This is a great market for a first time home buyer like yourself. It wasn't before, even though you are lamenting that others got in the market then while you didn't.
     
  20. conquistador#11

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    i suppose handing out a rifle and an MRE doesn't cost anyone anything.
     

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