Obama's new Mortgage program is just another bank bailout---and....

[trumad]

you can only get the assistance if you never missed a mortgage payment----and--- it doesn't do anything about negative equity.

WASHINGTON -- The Obama administration is introducing a new program on Monday designed to lower monthly mortgage payments for more troubled homeowners.

But a key new condition in the plan would shift the financial liability for refinanced loans from Wall Street banks to the American taxpayer. And by focusing on lower payments, the program does not confront what housing experts view as the core problem in the foreclosure crisis -- borrower debt that exceeds the value of one's home.

Faced with the weak response to the Home Affordable Refinance Program, the Obama administration is planning to open up the program to all borrowers who owe more on their mortgage than their homes' worth, commonly dubbed being underwater, and have not missed a mortgage payment. HARP had been limited to borrowers who owed up to 25 percent more than their home is worth. More than 22 percent of all home mortgages -- or 10.9 million homes -- are currently underwater, according to CoreLogic data. Fewer than 900,000 borrowers have elected to go through HARP to date.

The revised program also eliminates several fees associated with refinancing that can make the decision to refinance uneconomical for borrowers. But the potential benefit of the eliminated fees could be relatively small: If a few thousand dollars worth of fees made refinancing a bad deal for underwater borrowers, the ultimate benefits that refinancing can pose would remain limited.

On a conference call with reporters, White House National Economic Council Director Gene Sperling referred to the HARP expansion as "a win-win policy" that will result in "less defaults" and "fewer foreclosures." But one of the program's new terms will benefit private-sector Wall Street banks, potentially at the expense of taxpayers.
http://www.huffingtonpost.com/2011/10/24/foreclosure-plan-obama-harp-refinancing_n_1028554.html

[Tatiana]

1. That is a stunning statistic... 22% of all home mortgages are underwater!

WOW... no wonder why we are in this crisis. Unbelievable. Judges should be allowed to cramdown the mortgages to what the home is worth and force the banks to eat the loss.

[trumad]

2. Yeah---

and they expect these underwater mortgage owners to have never missed a payment.

It's bullshit.

[Robb]

9. Well, there's some number there

...between 22% underwater and the 14% delinquency rate. But It's not huge.

[jpljr77]

10. It's not bullshit. Being underwater does not imply financial hardship.

This is an assistance program for people like my wife and I. We bought our first (and only) home in Summer 2006. We bought a house we could afford, but since it was so popular at the time, we didn't put anything down. Since our home has declined in value so much, we are technically underwater (our total outstanding mortgage is more than what the home is worth). But we can make our payments, and haven't missed one yet.

That scenario is a lot more common than you probably think.

[banned from Kos]

18. Amen - its a bailout for YOU - and I support you getting this bailout

100%.

[trumad]

27. what part of bailout for the banks did you miss?

I'm glad it will help you and your wife... but don't miss a payment or you're fucked.

[TheWraith]

33. How about the part where it ISN'T a bailout for the banks?

It only applies to GSE loans, ones NOT handled by for profit banks. In other words, the claim that it is in any way a "bailout" is bullshit.

[TheOther95Percent]

40. I hope you can refinance now under this plan.

I bought in 2004 and I got a deal since it was a very motivated seller. Anybody who bought in my building after me is at least $50K underwater. I really hope this helps my neighbors.

[OnionPatch]

48. Yep, same here.

We purchased in 2003, just before the big bubble. We put a good chunk of money down and took a fixed rate loan. But the market has affected our home value so much that we are now underwater even though we've made every payment on time. We are literally prisoners in our home now. If we wanted to move, even if we were lucky enough to find a buyer in this sea of homes for sale, we'd owe the bank 20k. Refinancing is out of the question since we owe more than the home is worth.

I know many, many people in the same boat. We are not broke but we are not spending, hiring or starting new businesses because of this unexpected debt and our "prisoner-in-our-homes" status. This has to be affecting the economy.

[midnight]

7. I agree... Especially since they were already bailed out for them..

[Tesha]

39. Why? Do you really think that no one in a now-upside-down mortgage knew...

...that they were gambling on the value of their
house? How about the folks who took interest-only
loans and paid no equity at all, even as the market
value of their homes dropped?

Do you really believe that the banks are solely
at fault and should suffer all the harm, even in
these cases?

Tesha

[kentuck]

3. K & R !

People need to know what is going on...

[louis-t]

4. BECAUSE-The banks will never agree to anything that

doesn't benefit THEM!

[EFerrari]

8. It's too bad Obama isn't in a position of power over those damn banks. nt

[Autumn]

24. Did you read this part? Obama has the power over them.

"Even if the original loan was sent to Fannie and Freddie with false or fraudulent guarantees from the bank -- promises that may directly be tied to the borrower's current financial problems -- banks will be immune from liability. Fannie and Freddie plan to charge banks "a modest fee" to extinguish this liability, but the administration has yet to determine what that fee will be."


I think the damn banks are pretty fucking glad of the power he has. Cause he's using it to cover and benefit their sorry asses. We tax payers will once again get fucked.

[EFerrari]

26. I didn't think the sarcasm smiley was needed.

:)

[Robb]

5. It's a bandaid at best, I agree.

Just glancing it over, I expect there might be some folks who would benefit in the short term -- we're underwater but want to stay anyhow, and I'm certainly going to look carefully to see if I can save a few dollars.

But I don't see this as helping in any grand, sweeping way.

[woo me with science]

6. K&R

This is what happens when you allow business to continue as usual...

[Crazy Dave]

11. Does Obama really think this is going to fool anyone and get him more support?

Well....maybe with the banks but personally I think they're all going to piss on him and throw big money at the republican nominee.

[enough]

12. Yes he does think that. (nt)

[banned from Kos]

13. un-rec. Its not a "bank bailout" to reduce interest rates and payments

If Obama kicked a banker's dog it would be misconstrued as a bank bailout around here.

[kentuck]

15. It sure sounds like a bailout...

The banks that hold the mortgages will offer lower payments to underwater homeowners and if they still can't make the payment, the taxpayers will be responsible thru Fannie and Freddie and the banks no longer hold any responsibility for the mortgage. How do you see it differently??

[banned from Kos]

17. Because if you're current on payments today and your mortgage

complies with GSE conforming loan standards then its eligible for resale to Fannie Mae anyway. The house is just being adjusted to new 2011 appraisal guidelines.

Good credit (current) + accurate appraisal = solid loan.

I want the that home at 4% interest rates.

[kentuck]

19. Except the bank no longer holds your mortgage...

the taxpayers (Fannie and Freddie) will hold the mortgage if you decide to dump it.

[banned from Kos]

23. According to CNBC and Shaun Donovan this program does not apply to banks

it must be a GSE loan today.

4 million loans eligible.

[kentuck]

37. Do you mean the banks are no longer holding the mortgages?

How were they able to get rid of them so easily?

[leftyohiolib]

14. hamp isnt working cause the banks arent interested in you saving your home

they make more money by foreclosing on yours and reselling it. D'OH chg harp to hamp.iguess harp is something else

[Crazy Dave]

16. That's why I think the banks are all going to throw big money at Romney in 2012

He wants to expedite and make it easier for the banks to foreclose, kick out the occupants and re-sell the homes.

[leftyohiolib]

22. that and the fact that none of those other losers are goingto be the gop nom.

[EFerrari]

20. HAMP was a honeypot for the banks to lure people into foreclosure.

First, the loan servicer gets paid for diddling you for a year or two promising a modification and then the banks get the property anyway when the modification never gets done.

[girl gone mad]

35. And it was designed to be that way.

When Geithner was quizzed on the failure of HAMP, he was reportedly dumbstruck. In his eyes, the program was a roaring success because it had allowed banks to appear much healthier over the short term. In other words, the goal of this program was always just to prop up the banks, not to actually help people.

[EFerrari]

44. Yep. Which is why I said honeypot. It was clearly by design. nt

[sharp_stick]

25. I really doubt they are making much more

off foreclosures. We've had two houses in our neighborhood go into foreclosure. Both previous owners left and the houses stood abandoned for over a year, one of them more than two years while the bank paid taxes to the city. Granted they did squat with the properties while they sat there reducing their expenses but that also seriously reduced the value of the homes.

They finally sold the longest empty home to a nice family at a discount of $85,000 off the value paid in 2004 according to Zillow. The second house was sold at a discount of $45,000 off the original foreclosure price and more than $72,000 less than what was paid in 2002.

If the banks had of worked with the families that had been living there, they would have been able to continue collecting payments on the original principle at a reduced rate. I only know the one family that was there and they bent over backwards to make a deal with the bank, they tried everything before they were forced out. They were a really nice family and Mom lost her job, even a bit of compassion from the bank would have saved their home and I'm sure a shitload of money for the bank.

I'm convinced the only reason banks continue on this foreclosure idiocy is because they are lazy and have this foreclosure system so embedded in their corporate DNA that they are terrified of the prospect of things changing.

[JuniperLea]

21. Negative equity is the real problem...

Nothing to date has addressed it either. If the owner short-sells, or walks, it damns their credit rating for a long time. But if the owner short-sells, or walks, I'm betting the banks don't suffer a tiny bit.

[trumad]

28. exactly

Our resident wall street toadie up above really has no explantion for the banks skating on liability if the homeowner defaults.

[kentuck]

30. I think it's just a continuation of letting Fannie and Freddie (us) pay for it?

These are the worst mortgages that the banks are now holding. This is the last of the batch. If they can get the taxpayers to pay for them, then they are in the clear. I fail to see it as anything other than a bailout...The banks are washing their hands of these mortgages and the government (us) are going to be the responsible party for them if the mortgage holders decide that the negative equity is still a crappy deal...

[Matariki]

29. Wondering where to get more info on this?

[Frank Jameson]

31. Here is what Obama should make the banks do ...

Let's say a guy has a mortgage for $200,000 for 30 years at 5.5 %. But his house is now only worth $140,000.

Let us spread the suffering around a little. Whether we like it or not, us taxpayers are being harmed by this real estate problem. So we should encourage the government to solve it by helping the mortgage holder.

I suggest the government look at all "underwater montages" and split the loss three ways.

(1) Let the buyer lose 1/3 because he should have had better sense to begin with.

(2) Let the government cover 1/3 of they should not have repealed regulation.

(3) Let the bank lose 1/3 because they were active partners in a crime against consumers by allowing a person to borrow more than they should have.

So here we go. The mortgage holders 30 year 5.5% loan costs him $1,136 a month.

The government steps in and pays the bank 1/3 of the loss of value of the house. So the mortgage is reduced to $180,000.

The banks must accept a loss of 1/3. So another $20,000 is subtracted. The mortgage is now $160,000.

We allow the mortgage holder to suffer 1/3 of his loss. So his mortgage is now $160,000.

The bank refinances for 30 years at 3.75%.

The borrowers monthly payment is now $741 a month. For a reduction of $395 a month. His loss is now only 10% and in a couple of years he should have an equity.

If he cannot/will not make that payment -- it is his fault.

[Xithras]

34. IMO, there's an even simpler way to do it that could save millions of homes.

Refinance the homes at current value, and let the government place a lien against the property for the difference.

Let's say you paid $200,000 for a house in 2008 that's now worth $100,000, and your outstanding mortgage balance is $175,000. The government would refi your house, writing you a new loan for $100,000 (current market value) at the current interest rate. The government would then place a $75k lien against your property for the loss.

If you sell the house in two years for $100,000, the government writes off the difference as a loss. Homeowners shouldn't be pursued for this loss, but they should be banned from getting new government backed mortgages for 10 years or so (to discourage people from profit-taking). If your loan balance is $75,000 in 10 years and you sell the house for $150k after a recovery, the government will take the $75k in profit to settle the lien in full. If you sell it for $200,000 in 30 years after you've paid it off, you get a check for $125,000, and the government takes it's $75,000.

Doing it this way allows the homeowner to stay in a home at current market prices and reduces the odds of default. It also allows the taxpayer to potentially recover that forgiven money later on if the market recovers, so that the individual homeowners aren't profiting at the expense of the taxpayers. The government would ONLY lose money if the home was refinanced to current market levels and then resold or foreclosed on before the market recovered. This, in turn, would encourage the government to pursue economic policies that benefit the average American, so that an economic recovery would lift property values and minimize government losses. The better the economy is doing, the lower the risk level to the government and taxpayers.


If you really want to stick it to the banks, this plan could simply be modified to levy some of those losses onto the banks themselves, instead of onto the U.S. government.

[Frank Jameson]

36. Actually that is an idea worth considering

What bothers me is that all the Fed and other bankers want to do is cause inflation so the house prices will rise above the mortgages. The problem is that will cause the dollar to lose value and all our savings and retirement accounts will be wiped out by inflation.

But they don't worry about that. Let's hope Obama -- or somebody -- will make them worry.

[Xithras]

38. I've been posting it for years and nobody has picked it apart yet...

...but, sadly, neither Congress or the President is interested in taking economic recovery ideas from a part-time computer science instructor posting on an Internet messageboard. I actually did send this idea to Feinstein and Boxer's offices years ago, but just got back the standard "Thank you for contacting your Senator..." form reply.

Ah well.

[slipslidingaway]

41. Wonder how much money the government would have at risk under your plan ...

I like the idea, but do think the banks should be on the hook for some of the potential loss and should be required to establish a reserve fund for some of that amount.

[Xithras]

45. Since you asked. $3.8 trillion max.

$3.8 trillion, the last time I checked anyway. Of course, that assumes that every underwater homeowner in America uses the program, and that loss would only be realized if every one of them immediately lost their homes anyway.

I would guess that the overwhelming majority of American homeowners would be fine in their homes if their underwater mortages were reset to current market levels, their negative equity was wiped out, and they were refinanced at current interest rates using a conventional mortgage.

In essence, what we're talking about is a government-issued secured non-recourse loan that isn't due until the property is sold. Once the homeowners are reset to zero-equity, any price inflation or mortgage payments that increase the homeowners equity simply improves the rate of return to the government.

The actual incurred losses would be very dependent on the governments ability to fix the economy and restore home values to their pre-crash levels. If they could get us back there in a decade or so, I suspect that the actual losses would only be a few hundred billion or so...a fraction of what the government has already spent on its "bailouts".

[slipslidingaway]

46. Wow, that is an enormous sum! Hard to get the economy moving when the next ...

generation carries so much debt for education, hundreds of thousands go into debt for medical bills and so many jobs are now overseas.

:(

[Xithras]

32. This will help a lot of people out who are still stuck in crappy bubble mortgages.

I have a friend, right now, who bought using a 30 year I/O loan and has been keeping up with the payments just fine. He's been considering walking away from it anyway. He's fine with it being upside down (he's in his 30's and wants to retire in the home, so he's OK with sitting on it for a few decades), but he originally only planned on keeping the I/O loan for a few years and wanted to refi. With his current loan, he will be paying a mortgage for 30 years, only to finish owing just as much as he started with. Even though he has plenty of credit and a good job, the banks won't touch him because his house is so far underwater (he owes around $250k on a home that's worth a bit over half of that nowadays).

I've already forwarded articles on the new plan to him this morning. Hopefully this will help owners like him who are still trapped in crappy bubble-era loans and can't get out of them because their houses are under water.

I tend to criticize Obama a LOT when I think it's justified, but I'm not criticizing this plan at all. It's a good program that has the potential to help out millions of stuck borrowers. My only grumble is that he didn't do this two years ago, but I'd rather see it now than not at all (which is what the Republicans would have offered).

[bigtree]

42. critics here always tend to ignore the struggling folks who do take advantage of these modest plans

. . . that the President implements or advances into law.

I took advantage of the mortgage adjustment initiative and now am saving over $300 a month, paying only the principle until I get it down near the original amount owed.

It's amazing the lengths folks will go to criticize this president. Sure, it's a modest program, but it's not as if he hasn't been working since 2009 to get Congress to move on the broader planks of his economic plan.

20 recs for the notion this is JUST a bank bailout? Amazing.

[farmbo]

43. Stop already. This guy's full of it. Krugman cites a study suggesting 4 million jobs!

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x805365

[mfcorey1]

47. Damn! Whatever he tries to do, which will never be perfect, there is always dissecting and Monday

night quarterbacking of how to do it better. I suggest the President throw his hands in the air and say, "to hell with it", get his family and let the ones with a better idea have it. Never will please the masses.