Housing rescue law. What do you think of the Gov. taking 50% of profit if you sell in 5 years?

[Blue Diadem]

http://www.msnbc.msn.com/id/25932640/

Will the housing-rescue law help you?
Legislation aims to help more borrowers avoid foreclosure

snip:
Q: What happens if I'm able to sell my home after I refinance?

A: If you sell during the next five years, you must agree to share 50 percent of any profits from the resale with the government. What's more, homeowners can only retain equity gains based on a sliding scale. The homeowner would have zero equity from a sale in the first year, with the amount rising 10 percent in each succeeding year and capping at 50 percent from a sale in year five and thereafter.

The equity must be repaid because the maximum amount on the new loans will be capped at 90 percent of the current market value, which automatically gives the previously troubled homeowner 10 percent equity in the home.

[mediaman007]

1. My math tells me that having 50% is way better than losing your home

and having nothing!

I think that there are a lot of people who will look at this new law and try to scam the system. This law was created to help people who want to work out a solution with a bank. Hopefully, it doesn't allow speculators to game the system.

[Blue Diadem]

2. That's true.

and with the current market, profit may not increase that much. I'm curious though if our Gov. does the same with the corporations/banks it bails out.

[lib2DaBone]

3. Exactly... K&R

I was thinking along those lines. Also consider the clamp-down to on-line business activity stuffed into this bill.. and it's amazing there is very little outcry on this POS legislation?

[donco6]

4. Sounds fair to me.

When you're earning artificial equity, you must expect to repay at least a part of it.

[Blue Diadem]

6. Can you explain what you mean by artificial equity. n/t

[donco6]

7. They shouldn't be earning ANY equity.

When you accumulate too much debt, normally you have to declare bankruptcy or walk away from your house and eventually pay the bank back for whatever you can negotiate. Either way, you wind up with NO equity - and usually a big liability.

In this case, people are being rescued with government funds (read: Our Money). This is money the government could be doing other things with. The rescued should be asked to share any equity with the rescuers. It's only fair.

[Blue Diadem]

10. Wouldn't they be better off declaring bankruptcy?

I don't know enough about it to really discuss it. It just surprised me that there was a 50% cap on equity. I'm thinking more of the people who may already have equity built up in their homes and have run into hard times with less pay or illness. Maybe this bill isn't meant for them. In some areas it's not always that people spent more than they could afford or got into variable rate loans, or they own more than the house is worth. They have equity in their homes but due to some unforseen circumstance, just can't afford to make the payments.

[donco6]

13. ABSOLUTELY NOT!!!!

No, no, no. Under this plan, if you did refinance your loan under the gov't program, and you ended up selling in 5 years, you just surrender 50% of your "profit". You still walk away with half of it, and considering the alternative, that's not bad at all.

Declaring bankruptcy is an absolute last resort. Under current conditions, you'll not only never be able to get a loan, you may not even qualify for a decent apartment.

[Clovis Sangrail]

5. unsure

If a homeowner is currently facing decision to sell their home and eek a small profit out it (or break even) or to struggle to hang on to it ... I think this is going to encourage some people to dump their homes.
I guess it would help folks who are already under water but not so much with those that are just bobbing at the surface.

I honestly don't know enough about this and should read more, but that's a first glance opinion.

[flamin lib]

8. The purpose of this kind of provision is to skew the rescue to the owner

occupant instead of the investor. There are speculators out there that could take advantage of a re-fi to recoup or minimize losses. The people who genuinely live in the property and who honestly bought a homestead will live there for five years.

It's pretty standard for grants. I got the little old widow woman next door a $25k grant to renovate her home. If she lives there for 5 years it's forgiven and she never has to repay it. If she, or her heirs, sell before 5 years the loan is pro-rated 20% per year.

[dems_rightnow]

9. I think it's very fair.

and the price of accepting the aid. They're not taking the money from the home sale, just a % of the PROFIT.

[enid602]

11. optimistic

Your question assumes that there will be a profit from home sales 5 years from now, which is perhaps a bit optimistic.

[rucky]

12. Bush raised taxes!

eom