Wednesday, February 18, 2009

Details: Obama Housing Bailout Seeks to Help 9 Million Mortgage Debtors

CNN is reporting on the President's plan for "troubled" mortgage debtors, though Mr. Obama hasn't yet given his speech in Phoenix. Our comments are italicized:

*Helping borrowers who owe more than 80% of their home's value to refinance and reduce their monthly payments - Many borrowers owe more than 80% of their homes value since they put no money down AND the value of their homes has dropped.

*Creating a $75 billion homeowner stability initiative to reduce monthly payments for at-risk borrowers by subsidizing interest rates. The goal would be to bring payments to no more than 31% of a borrower's income - Many mortgages being written right now still allow a much higher Debt-to-Income ratio, which is risky .

*Providing multiple incentives to servicers to modify loans and to proactively help at-risk borrowers while they are still current in their payments - It will be interesting to see how "at risk borrowers current in their payments" will be defined. Those who have Option ARMs that are about to reset? Or, more understandable, unemployment?

*Creating a $10 billion fund to protect investors and servicers against further home price declines - Since investors and servicers are now bleeding money, some incentive is necessary, right?

*Requiring all financial institutions receiving government funds to participate in a standardized loan modification program, while seeking to have all federal agencies that own or guarantee loans also apply the guidelines - The Treasury and Fed seem pretty savvy now since they forced so many banks to take TARP funds last Fall. So this plan will involve "private" banks as well as Fannie, Freddie, etc.

*Allowing judges to modify mortgages during bankruptcy, a measure the financial industry has strongly opposed - Citi recently agreed to drop opposition to this, and where Citi goes, everybody follow.

*Providing more Treasury Department backing of Fannie Mae and Freddie Mac and expanding the number of mortgages the agencies back - F&F already own or back about 57% of US residential mortgages. Aiming for 100%?!

Mr. Obama said: “It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.” Keep the bubble alive!

The result: We all own bad mortgage debt now! And banks, and car companies, and insurance companies....

See the CNN story here.
White House Fact Sheet here.
Mr. Obama's Remarks here.
NYT article here.


James Huron said...

As a taxpayer and responsible citizen who did not buy more than I could afford, this disgusts me.

But I'm going to go ahead and sugggest that this is merely postponing the inevitable and that nowhere near nine million glorified renters are going to be helped.

The wreckage from the Bush years should be allowed to settle.

This is prolonging it.

Anonymous said...

Wondering how many people this will help in cville/albemarle. This plan will NOT help large mortgages. So it can't help somebody like that realtor who had those three foreclosures, two of which were in the Cville story (saw the other one in a sidebar link here). It doens't work for investors, and his own home had a huge mortgage (with an insane rate). How many people around here like him?

Plus it reduces principal by 1k per year. Peanuts.

sid said...

thank god the government can print as much money as it wants to what a wonderful world we live in

Anonymous said...

Seems like it would be cheaper and quicker to just supply free housing for every man, woman and child in America. Oh that's right, we also need to provide government 'make work' jobs to folks. . . I forgot.

Anonymous said...

To find out whether you qualify for the Obama Housing Bailoutt, check your financial statements and do the math. You’ll only qualify if your monthly payments are at least 38% of your income.