Posted on 09/23/2008 1:13:43 PM PDT by SE Mom
As Congressional Democrats and the Bush Administration wrangle over the need for aid to homeowners in the Wall Street bailout plan, both sides appear to have forgotten that Congress approved a $300 billion mortgage rescue package in late July. AP
“We already have a rescue package for homeowners,” says Nariman Behravesh, chief economist at Global Insight, sounding a bit dumbfounded by the development. “Things get so weird in a presidential election year.”
Among the provisions of the Housing And Economic Recovery Act of 2008 is the Hope for Homeowners program, which was designed to provide up to $300 billion for the refinancing of about 400,000 mortgages whose default might lead to foreclosure. The program starts Oct. 1 and runs for three years.
Expensive, too. Put together, The Hope for Housing program alone and the Wall Street mortgage securities bailout plan being driven by Treasury Secretary Henry Paulson total $1 trillion.
What’s also odd about the current debate is that The Hope for Homeowners program, closely resembles the Depression-era Home Owners' Loan Corp, which Congressional leaders have cited as a model for today’s problem.
...
You would think Paulson, who once again Tuesday called the housing correction “the root cause” of the credit crisis, would have reminded Congress of the government's commitment in deflecting criticism about the shortcomings of the Bush administration’s plan.
At the same time, you would think that Congressional Democrats and others at the first of two public hearings would have called for the need to supplement the Hope program, amend it or tie it in some way to the current crisis legislation.
It begs the question as to whether the program and its broader legislative parent have been forgotten in the heat of the crisis.
(Excerpt) Read more at cnbc.com ...
Hello?
Ok- someone tell me they created a $ 300 BILLION package for mortgage and homeowner relief that’s...been forgotten?
ping for another $300 BILLION to go into the housing/mortgage mess.
Read my lips. No New Bailouts!
So glad you posted this!! I kept yelling at the TV all morning that they had already passed measures to help the ‘home-owners’!! No we know how much!!
WTH is right!!
I’m dizzy.
hot sh**!!
http://www.mbaa.org/files/ResourceCenter/HERA/MBAHERASummary.pdf
Read it and weep folks. Our government is out to take us down.
But if the Repubs bring it up as a reason why no more should be given home-owners in the current bill, the Dems will scream and say "why did we get only 300 B when the corporations are getting 700 B? Then they will insist on 400 B more for homeowners, thereby defeating the purpose of this bill now before Congress.
Communism at its finest.
Not only that, but the bill established a huge, permanent slush fund for groups like ACORN and La Raza in the guise of counseling homeowners in re-doing their mortgages.
The problem is that, while they got most of the horrible provisions that they wanted, they didn’t get all of them, so they are back for another bite to get bankruptcy judges the right to renegotiate loans and other tasty tidbits.
((((shaking head))))
“Things get so weird in a presidential election year.”
There’s an understatement!
“Not only that, but the bill established a huge, permanent slush fund for groups like ACORN and La Raza in the guise of counseling homeowners in re-doing their mortgages.”
And I have not heard one word from any politician on this mess that they would stop outfits like Fannie Mae from contributing millions every year to groups like LaRaza, Maldef, Rainbow coalitions...and on and on...mostly left wing ‘community organizers’......
Q: How will the law help struggling homeowners keep their homes?
A: Through the Federal Housing Administration (FHA), an estimated 400,000 borrowers in danger of losing their homes will be able to refinance into more affordable government-insured mortgages. The program offers government insurance to lenders who voluntarily reduce mortgages for at-risk homeowners to at least 90% of the property's current value.
Q: When will the program begin?
A: The program will begin on October 1, 2008 and sunset on September 30, 2011. Homeowners in danger of losing their homes before October 1, however, should not wait to contact their loan servicers and should begin applying for federally insured mortgages now.
Q: Who is eligible?
A: To be eligible to participate in this program, a borrower must:
* Have a loan on an owner-occupied principal residence. Investors, speculators, or borrowers who own second homes cannot participate in this program.
* Have a monthly mortgage payment greater than at least 31 percent of the borrower's total monthly income, as of March 1, 2008.
* Certify that he or she has not intentionally defaulted on an existing mortgage, and did not obtain the existing loan fraudulently.
* Not have been convicted of fraud.
Q: How can a homeowner access this new program?
A: Homeowners or a servicer of an existing eligible loan need to contact an FHA-approved lender. The FHA-approved lender will determine the size of a loan that a borrower can reasonably repay and that meets the requirements of the program. If the current lender or mortgage holder agrees to write-down the amount of the existing mortgage and make the new loan affordable, the FHA lender will pay off the discounted existing mortgage. Loans provided under this program must be 30-year fixed rate loans.
Q: Are lenders required to participate in this program?
A: No. The program is completely voluntary for lenders, investors, loan servicers, and borrowers.
Q: How does this law help neighborhoods that have been hit by the foreclosure crisis?
A: The impact of the current crisis has not been isolated to individual borrowers or investors, but has been felt broadly by neighbors, communities, and governments across the nation. The law strengthens neighborhoods hit hardest by the foreclosure crisis by providing $3.9 billion in Community Development Block Grants to states and localities to buy foreclosed homes standing empty, rehabilitate foreclosed properties, and stabilize the housing market.
Q: Will this law be a bailout for speculators, homeowners, investors, and lenders?
A: No. It is narrowly tailored to keep families in their homes. For example:
* Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced.
* Investors and lenders must take big losses first in order even to participate. The owner of the old mortgage can get a maximum of 90% of the current value of the home (which presumably will be considerably less than the value of the original loan). In many cases the loss will be significantly greater, but 10% is the minimum.
* In addition, lenders must waive any penalties or fees, and help pay for the origination and closing costs of the new loans.
* Most homeowners will have seen the equity in their homes disappear before being able to refinance under this program. In addition, the FHA will get a portion of any future profits on the house, to make sure the government recoups its investment over the long run.
Q: Will this law reward families who bought homes they could not afford?
A: Many homeowners facing foreclosure were misled, were deceived, or were in other ways the victims of unfair lending practices.
To prevent future abuses by lenders, this law will establish a nationwide loan originator licensing and registration system to set minimum standards for all residential mortgage brokers and lenders. It also strengthens mortgage disclosure requirements to help ensure that borrowers understand their mortgage loan terms.
Q: How will this law make it more affordable to own a home?
A: There are a number of provisions that will make homeownership more affordable:
* Creates a refundable tax credit for first-time homebuyers that works like an interest-free loan of up to $7,500 (to be paid back over 15 years).
* Grants states $11 billion of additional tax-exempt bond authority in 2008 that they can use to refinance subprime loans, make loans to first-time homebuyers and to finance the building of affordable rental housing.
* Raises conforming loan limits for the FHA, Fannie Mae and Freddie Mac to $625,500. Because of the high cost of housing in California, a majority of the state's residents were previously shut out from these programs. Raising these loan limits will lead to lower interest rates on some loans, greater refinancing opportunities, and enable more borrowers in high cost areas to avoid the type of nontraditional and frequently abusive loans that led to the current crisis.
* Provides couples using the standard deduction with up to an additional $1,000 deduction for property taxes ($500 for individuals).
Q: Does the law provide help to those who still cannot afford to own a home?
A: Yes. The bill includes a number of provisions to increase the supply of affordable housing, which has been a major problem in California pre-dating the current foreclosure crisis. For example:
* The bill creates a new permanent affordable housing trust fund – financed by Fannie Mae and Freddie Mac and not by taxpayers – to fund the construction, maintenance and preservation of affordable rental housing for low and very low-income individuals and families nationwide in both rural and urban areas.
* In addition, the legislation provides a temporary increase in the Low-Income Housing Tax Credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.
” Q: Will this law reward families who bought homes they could not afford?
A: Many homeowners facing foreclosure were misled, were deceived, or were in other ways the victims of unfair lending practices.”
Oh, bull puckey! When my son was 3 years old and went into a store with a nickel and wanted something that cost a quarter, he KNEW he couldn’t afford it!
When you treat people as stupid, they will be!
But they were tricked, deceived, misled! /sarcasm
Ok- so add this $300 B to the proposed $700 B...to the soon to show up disaster hiding behind the unregulated $43 TRILLION credit default swap and you have...
The current proposal is to help lenders to survive the losses from defaults.
Say Alice the homeowner borrows $100,000 in a mortgage from Bob the banker.
Bob lends her $100,000 of deposits at interest in the hope that the net present value (NPV) of the mortgage is $110,000 - i.e. that he will make a profit off the mortgage over a 30 year period.
He pays the depositors interest at a $5,000 NPV, say - so $5,000 is profit - giving him a net interest margin of $5,000 or 5%.
On his balance sheet, Bob marks the loan as an asset (the loan is owed to him) and the deposits he used to make the loan as a liability (he is essentially owes the deposits to the depositors).
Now, let's say that Alice cannot handle her mortgage payments and appeals to the original homeowner's bailout for money. They help her renegotiate her loan at a lower rate and principal and give her money to help her pay at the reduced rate.
Due to the lower rate, the mortgage now has an NPV of $95,000 and not $110,000.
This means that Alice keeps her house, but it also means that Bob is now underwater on the loan - his loan asset is now significantly less than his deposit liability. Which is where the second bailout would come in.
Now if Bob's bank failed, Bob's depositor Chris has deposit insurance from the FDIC that would bail him out.
So ultimately what it comes down to is this:
Is it cheaper in the long run to partially bail out Alice and partially bail out Bob - or is it cheaper to allow Alice to default and Bob to fail so Chris can collect his own bailout?
Someone is being bailed out, regardless.
La Raza and ACORN...oh goody.
It just never ends...
This whole thing is such a disgrace, it unspeakable. We will lose our country because we are coddling the lowest common demnominator among us. If this bailout is approved, G-d know what they will ask for next. It will be used to help people with credit cards, car loans, etc, whether they are citizens or not.
There was a time when recessions were considered normal economic downturns. Part of our problem is that we have become obsessed with delaying one at all cost. Now, we have to live with the results of our bubble.
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