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

Pfff...you are gonna need a case of MRE's and a bandolier of ammo at least.

 

Interestingly enough, the impression I got from reading about the proposal is that a lot of effort was put into helping the people who have been keeping up with their mortgages as opposed to those who stopped paying. It also doesn't help the people who are in way over their heads since any assistance is less likely to be enough to really help anyway.

http://www.time.com/time/business/article/0,8599,1880473,00.html
[rquoter]...

In crafting the plan, policymakers had to walk a fine line between helping borrowers who have been caught off-guard by tricky mortgage products and falling house prices, and those who simply made imprudent decisions and genuinely can't afford their homes. In order to avoid propping up the second group, Treasury won't subsidize loan modifications that reduce the interest rate below 2%. If you can't afford a 2% mortgage, in the eyes of the government you can't afford your house. The plan also doesn't apply to investors, or people with jumbo mortgages — those that historically have run more than $417,000. Loans on homes that would be more valuable to lenders if repossessed won't get modified.

Those attempts to avoid moral hazard, though, might make the plan less effective in stemming the tide of foreclosures. "This goes a long way, but not far enough," says Bruce Marks, who runs the Neighborhood Assistance Corporation of America, a non-profit that works with servicers to restructure loans. After five years, the interest rate on modified loans can again rise, up to the industry average at the time the change is made — even if that pushes borrowers above the 38% debt-to-income ratio. The plan also only encourages, but does not require, servicers to make adjustments to principal balance — the generally acknowledged best-way to keep people in their homes, especially when they owe more than their house is worth. In certain markets, where home prices have dropped most precipitously, or where investors make up a large portion of the homebuyers, the plan will likely fall far short of having much of an impact.

But that may simply reflect the reality that there are a lot of people in homes who aren't going to be in them long-term, and that trying to keep them there is throwing good money after bad. The plan allocates money that implicitly acknowledges that scenario: $1.5 billion to help displaced homeowners transition back to being renters and $2 billion to boost HUD's Neighborhood Stabilization Program, which lets cities and states deal with foreclosure fall-out.

...[/rquoter]

Both this article and the one in the OP state that a concern is that it doesn't do enough. I don't see any indication that this plan is intended for the "deadbeats".

 

Can someone post a synopsis of the plan? I just saw a snippet that stated it was trying to jump start the mortgage companies into action. Working as a loss mitigator for 3 years, I can tell you the companies are in full gear trying to cut things down. I routinely would cut mortgages in half, a $200K to $100K lien, and a $100K second lien to a $50K second lien.

Possible problems I see with this are volume really; it's going to take a lot of people to handle all these calls (the banks are already overworked); the incentive in some cases (current borrowers) for a company to rewrite their loan (government will give $1000) are not enough to actually do it (amount they will lose in interest on a current borrower who is paying and has no hardship). But I would like to see the bill. I just don't see why we need to pay the mortgage companies (the good ones at least) to keep doing what they are already doing at full tilt; maybe it will increase thankless jobs at mortgage companies where you slave away on the phone all day. I was doing 100 mods a month when I left and was certainly at the top of my department, I could see my company getting happy over one employee bringing in $100K per month from the government. Might lead to some incredibly crappy and unneeded loan mods though.

 

I wished the gov't went the other way and made the foreclosure process quicker for the banks. Get these idiots who overbought out of the homes now. These deadbeats sometimes live rent free for two years. Then the banks can resell the houses at a discount to buyers and clears out the excess inventory. This will bring back stability to the housing market and we can rebuild from there.

 

banks don't want to be sitting on a bunch of houses for sale. they will take huge losses, a bunch of cheap houses isn't going jump start the market, its just going to add to more glut. this program is intended to save people who can be saved.

 

This (pdf) is the summary from the white house: http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ExecutiveSummary.pdf

My impression is that the mortgage companies are not doing this at full tilt already. That's what the articles I've read say. Perhaps your experiences are not representative.

 

and if you do, it will improve your financial flexibility which will create more disposable wealth and your purchasing power will increase.

 

trader jorge you're a true american and i would like to buy a round of drinks and bash if you're ever in the houston area. Obama is nothing more than a joke but dems will always win in this country because of the simple fact of the sheer number of deadbeats who want handouts. People like me who waste money on college and an MBA are few and far in comparison. We deserve to be punished for working hard our whole lives and making smart,sound choices like saving for down payments on property. By the way im not racist, Im a minority myself but Obama is a joke, so are republicans, I just don't believe in anything being given away for free. I've worked my butt off my whole life and so should other people who want similar lifestyles. Now where is my $13 a week stimulus that would've barely parked my car last night with $12 valet at the hotel!!!!

 

This is your stellar analysis? Democrats win because deadbeats want handouts?

The more than 50% of the nation that voted for Obama did so because they are all deadbeats?

Nobody who voted for Obama or Democrats went to College and got a masters or saved for down payments?

Have checked the voting break down?

This post is one of the most hilarious I've seen this week. Keep it up.

 

Some mortgage companies are not handling loss mitigation seriously; namely Lehman who took forever to start doing mods. Most, if not all, have caught on now. I say the ones that don't should fail. I had more work than I could ever possibly do there.

 

I wonder what this guy had to say about bailing out banks?

 

Banks love it when they're not getting loan repayments for two years. They are going to take huge losses anyways. Kick the dead beats out and protect what's left of the integrity between lender and borrower.

If you start selling houses at >50% off, first time home buyers who got priced out the last five years will be able to buy in. Let housing prices crash down to reflect real life affordability. Keep lowering house prices until we reach an equilibrium.

I am against providing help on mortgages even for those who "played by the rules" and need a lift. These people will just be renters. Life goes on.

 

this people aren't deadbeats, they are paying the loan but struggling

this is happening anyway, maybe not >50%, but houses are being priced to normal levels. no need to let a bunch of people fail, and banks take losses if it can be prevented. There aren't many people out there who can afford to buy houses that don't have one already.

 

the argument to that is it might just create another bubble.

 

gotta say I disagree. I could afford a house and don't have one. The market got crazy.

 

the extent to which some people are so out of touch with everyday americans is really sad.

 

Isn't the point to slow the rate of foreclosures as an overall assist to the economy? My impression was that this program is not intended to help individuals, it is intended to help the overall economy. The fact that some individuals benefit as well is either a bonus or a necessary evil depending on how you look at it.

 

but you probably can afford one now.


this is an article on this subject just from yesterday's chronicle


One in three Houston-area homes sold last month was in foreclosure, contributing to the biggest monthly price decline on record, according to the Houston Association of Realtors.

These so-called “foreclosure sales” made up 34 percent of all single-family home sales during January, compared with 25 percent a year ago.

“That’s extraordinary,” said Jim Gaines, an economist at the Real Estate Center at Texas A&M University.

This increase helped drive down the median price of a single-family home to $127,850. That’s off 8.5 percent compared with last January and the fourth straight monthly dip, said the association, whose records go back to 1996. The median is the midpoint where half the homes sold for more and half for less.

While the number of foreclosure sales was up slightly from a year ago, this segment of the market made up a bigger slice of the pie because overall transactions were down considerably.

Single-family home sales last month tumbled 22.7  percent, falling for the 17th month in a row, as Houston’s housing market slipped further into negative territory.

Realtors sold 2,827 single-family homes through the association’s Multiple Listing Service. That’s down 31.3  percent from January 2007.

Gaines expects area sales to slip another 10 to 15 percent this year and prices to fall perhaps as much as 5  percent.

“We’re going to have a lot of distressed sales,” he said.

Fewer people have been able to qualify for loans as mortgage lenders tightened their underwriting guidelines after the subprime mortgage meltdown.

Consumer jitters over the national recession and slowing Houston economy are also keeping would-be buyers out of the local property market, which has been known for its slow and steady price increases.

“Just because Houston didn’t experience a huge run-up in prices doesn’t mean we’re immune from falling prices,” Ken Smith of KGS Properties said.

Getting a good deal
Real estate analysts said the foreclosures are being snapped up by investors and some consumers looking for good deals.

“I don’t believe in paying full price for anything,” said LaTonya Perry, who’s buying a three-bedroom, two-bath foreclosure in the City Park neighborhood along Texas 288.

She’s getting the property for $78,500, but it’s appraised at $97,000 and a builder is putting up new ones in the neighborhood starting at $115,000, said her broker, Kevin Riles, who gives bus tours of bank-owned properties.

To be sure, deeply discounted foreclosures have a broader effect on the market.

“If you own a house and you’re trying to sell it in a normal transaction, you’re having to compete with all these foreclosures,” Gaines said. “When it gets this large, it becomes a direct factor on the market. It’s a function of the times.”

Moratorium ends
Harris County foreclosures spiked last month as a federal moratorium on foreclosures of homes in areas affected by Hurricane Ike came to an end.

There were 789 foreclosures in January, according to Foreclosure Information & Listing Service of The Woodlands. That was up 30.6 percent over December.

But as banks impose new moratoriums and the government implements programs to help stem the tide of defaults, area foreclosures could begin to moderate.

And the nation’s economic recovery bill has a provision meant to reignite home sales that would give eligible first-time home buyers an $8,000 tax credit. While such efforts won’t cure the ailing housing market, they could do some good.

“Passage of the economic stimulus package will by no means trigger a home-buying frenzy, but ... the tax credit will help bring buyers to the market and further reduce housing inventory,” Vicki Fullerton, the association’s chairwoman and broker of record at RE/MAX of The Woodlands & Spring, said in a news release.