News President's Homeowner Affordability and Stability Plan

[TheStatutoryApe]

You are making my point: Many people have no idea how to do a calculation like that. You don't think that having a masters in nuclear engineering puts you at a bit of an advantage compared to the average Joe? There are plenty of people who can barely do fractions, but they still have jobs that pay well and allow them to buy a home. What's more, they don't know enough to know that they need help, or where to get it.

I think that these people are the product of our culture. Its common place for people to live beyond their means. It seems only logcal to me that anyone should be very careful when getting themselves into any sort of major financial obligation. Unfortunately for most it is considered merely a fact of life that you will have to go into major debt at some point and so they don't really think about it much. People piling on the bandwagon only perpetuate this as the standard.
I agree that something needs to be done. Unfortunately I have no idea what since I am not very economicaly savvy. At the very least though I would like to see the message sent that the current standard in financial responsibility is entirely unacceptable. I don't see that painting these people as victims is going to do that.

 

[Astronuc]

Feds unveil plan to help 9 million stay in homes
http://news.yahoo.com/s/ap/20090304/ap_on_go_pr_wh/obama_housing

WASHINGTON – The Obama administration kicked off a new program Wednesday that's designed to help up to 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments. Borrowers, however, are being advised to be patient in their efforts to get help because mortgage companies are likely to be flooded with calls.

Government officials, launching the "Making Home Affordable" program also acknowledge that the initiatives are only a partial fix for a sweeping problem that has helped plunge the U.S. economy into the worst recession in decades. In fact, tens of thousands of homeowners in some of the most battered real estate markets — concentrated in California, Florida, Nevada and Arizona — won't be eligible for the two programs.

"It's not intended to prevent every foreclosure or to help every homeowner," a senior Treasury Department official told reporters. "It's really targeted at responsible homeowners."

There was also skepticism that banks would be willing to participate.
. . . .

Apparently a large number of people (responsible homeowners) feel this is unfair.

http://politicalticker.blogs.cnn.com/2009/03/04/poll-majority-say-obama-mortgage-plan-is-unfair/

Time will tell.

 

[Ms Music]

Well I sure don't know anyone that thinks it is fair... The only person I have ever known to have to go through a foreclosure, it is all ready done. So doesn't even help them. So I am paying for a lot of *supposed* responsible mortgage holders for the rest of my life that I don't even know. *sigh*

 

[Astronuc]

It's not clear to me that mortgage rescue package will stimulate the economy, unless the intent is to ensure a flow of money to the lenders, who then have to turn around and 'lend' or invest in the economy.

Perhaps it will keep the mortgage foreclosure crisis from getting worse, i.e. it will by like treading water, but treading water is not the same as being rescued. If those who can't make payment on their mortgage are given assistance that makes it possible to pay their mortgage, it would seem they still do not have much left to make other purchases. So the economic demand is still down.

Who gets help from the mortgage plan?
http://marketplace.publicradio.org/display/web/2009/03/04/pm_mortgage_guidelines/

Let's see what happens with Friday's unemployment report.

Who's hit the worst by the recession?
http://marketplace.publicradio.org/display/web/2009/03/04/pm_whos_hit_q/

Job Losses Show Breadth of Recession
http://www.nytimes.com/2009/03/04/business/04leonhardt.html

 

[Phrak]

Are we rewarding ignorance then?

Did you know that the resale value of housing would drop below perchase value, before the market knew it?

 

[mheslep]

Did you know that the resale value of housing would drop below perchase value, before the market knew it?

Why is that relevant? Should everyone be insured by the government against depreciating housing prices?

 

[Proton Soup]

Why is that relevant? Should everyone be insured by the government against depreciating housing prices?

no, but they should have been protected from predation.

 

[mheslep]

no, but they should have been protected from predation.

If that's the concern then at least let us see a plan addressing just the predator loans. For fraudulent loans seize lender assets, or otherwise seek redress from those lenders. Then use the proceeds to help those that had mortgages w/ those lenders, directly. The present plan is closer to blank check.

 

[Proton Soup]

If that's the concern then at least let us see a plan addressing just the predator loans. For fraudulent loans seize lender assets, or otherwise seek redress from those lenders. Then use the proceeds to help those that had mortgages w/ those lenders, directly. The present plan is closer to blank check.

i don't think that is the concern here, it is simply a concern that i have. personally, i am for law (but most importantly, enforcement) that would limit the kinds of shenanigans lenders pulled, especially the bait-and-switch ARMs, lying about homebuyer income, and loading people up with enough debt that they have no wiggle room at all and can't survive unexpected expenses. i would go further than seizing assets, though. i think these sorts of "white collar" crimes are indistinguishable from physical violence and merit prison time.

 

[Astronuc]

This summary of the HASP was published in the local news paper.

Speculators and house flippers are excluded from the Homeowner Affordability and Stability Plan

Part 1: Loan refinancing

Up to 5 million homeowners with a solid payment history on mortgages held or owned by Fannie Mae or Freddie Mac will be eligible to refinance into more affordable terms.

Homeowners may be able to refinance if they have less than 20% equity in their homes. An appraisal may be necessary.

The program will end in 2010.

Part 2: Load modifications

Lenders and other loan servicers can begin making modifications that could help up to 4 million at-risk homeowners in their homes.

Homeowners with a first loan can have an unpaid principal balance of up to $729,750. Higher limits will be allowed for owner-occupied properties with two or four units.

Borrowers must document income, which includes providing two most recent pay stubs and an affidavit of financial hardship.

Program will run until Dec 31, 2012.

Forclosure (lis pendens) filings in our county:
2004 500
2005 599
2006 878
2007 1184
2008 1322

The rate of foreclosures in 2009 is down from the same time in 2008.

 

[mheslep]

As McCain might have called it, one 'fundamental' in the economy of this country is that ~90% of the mortgage holders continue to pay their mortgage on time. A hard question to be put to the HASP is what will it do to the mindset of those 90%?

 

[mheslep]

... modern western governments today are actually quite socialistic and generally moving even further to the left. The US is actually one of the furthest to the right. ...

That's true about the large EU states, but as I've pointed out before it is somewhat of a misconception in this country that all of the other modern Western governments are far left or even to the left of the US. All of the Baltic states have flat taxes rates. Ireland has a ~15% business tax (compared to our 35%). Several EU countries have moved away from their once government only health care systems for increasingly private alternatives such as in the Netherlands and Canada. Chile has a mostly private social security system.

 

[TheStatutoryApe]

If that's the concern then at least let us see a plan addressing just the predator loans. For fraudulent loans seize lender assets, or otherwise seek redress from those lenders. Then use the proceeds to help those that had mortgages w/ those lenders, directly. The present plan is closer to blank check.

the problem here is that the loan companies were not preying upon the home owners. no mortgage company is going to be able to make money by signing off on loans to people who are unlikely to be able to pay them off. they were preying upon other financial institutions. they signed up anyone they could(and lied so they could sign up more) and then sold the bad loans to other banks. they make money and the other banks suffer when the defaults occur. now you might want to still go after them anyway but when what they were doing became common knowledge in the industry no one wanted to buy their loans anymore and the vast majority of the companies went belly up. they don't exist any more so you can't get anything from them. and even if you could they would be bankrupt and cleaned out long before enough money could be found to fix the problem.

 

[Phrak]

Where were youall when Nick Guarino, Wall Street Underground, was telling this story as past history in 2001? Any talk of a 1930's style recession--or whatever the talking heads in the ABC's are calling it, was met with blank looks as late as 2007. I got zero traction in these forums in 2008.

The federal funds rate stands at .25%. Twentyfive more points and there's no where left to go. This is the corporate bailout that has been ongoing for nearly a full decade, has debased the dollar bigtime, induced millions to invest in cheap, Chinese imitation consumer goods, and has evolved to include propping up the housing market, and no one is complaining about this trillion dollar giveaway.

And, by the way, this also induced the housing bubble, the current topic of discussion.

On the plus side of this equation we are graced with the internet, cell phones, and Chinese knockoffs that are falling apart.

 

[WhoWee]

It's not clear to me that mortgage rescue package will stimulate the economy, unless the intent is to ensure a flow of money to the lenders, who then have to turn around and 'lend' or invest in the economy.

Perhaps it will keep the mortgage foreclosure crisis from getting worse, i.e. it will by like treading water, but treading water is not the same as being rescued. If those who can't make payment on their mortgage are given assistance that makes it possible to pay their mortgage, it would seem they still do not have much left to make other purchases. So the economic demand is still down.

All of the plans put forward should have clear goals...this one is as vague as save or create (insert latest # of) jobs...otherwise it looks/feels like they are shooting from the hip...and risking the largest sums in history.

 

[Phrak]

An economy is stimulated by labor that increases the value of infrastructure.

An economy is hampered by:

-Depletion of resources to pay misdirected labor to build worthless infrastructure. (The original cause of all this grief.)

-Redirection of resources that deplete infrastucture or create lesser valued infrastructure.

-Disassembly of an infrastructure to components that add lesser value. (The justification for the last 8 years of corporate welfare to prevent it.)

-Just about everything else.

Only sweat and blood rebuilds an economy. Everything else, such as a fradulent stimulus package, is about making someone else sweat and bleed for it.

 

[WhoWee]

The primary "RESOURCE" being depleted is the US credit line...there IS a limit.

 

[Phrak]

Liquidation.

Without finding an online definition of liquidation, or liquidationism, this is my own definition: "Let failing investments fail, let failing institutions go bankrupt, and let those who can't pay mortgages undergo foreclosure."


Who do you want to prop-up and who would you let liquidate?

In addition, who is going to pay for propping up whom?


And more, does liquidation of category X--in this case recent home per purchasers--harm the overall economies of We-The-People or help us?

Those who say it helps will say it helps in the long term, where short term patches are more costly, and delay economic recovery.

Those who disfavour a particular liquidation would argue that liquidation causes more liquidation in other economic sectors, a domino effect--and delay of economic recovery.

But most arguments are motivated by self interest. If those who didn't know they were accountable for this mess found out, most would conveniently discover a new god.


Keynes was against liquidation. On a web sight in his honor,

http://econ161.berkeley.edu/Economists/keynes.html" ,

Keynes criticizes Treasury Secretary (Harding through Hoover) Andrew Mellon, who stood in favor of liquidation.

Mellon: "[T]he government must keep its hands off and let the slump liquidate itself."

Keynes: "Mr. Mellon had only one formula: "Liquidate labor, liquidate stocks, liquidate the farms, liquidate real estate." He insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people"...

I quote this to round-out the meaning of liquidation.

--------------------------

mheslep, In case you were wondering why I hadn't responded... I can argue that recent home purchasers are getting unfairly screwed, but I can't argue that renters who pay taxes are getting unfairly screwed by paying for them. That's not right either.

 

[WhoWee]

Are you suggesting a very large expansion of Section 8...or is that too radical?

 

[Astronuc]

Some insight into Home Affordability and Stability.

Elizabeth Warren: Foreclosures Threaten Economy
http://www.npr.org/templates/story/story.php?storyId=101611260

Fresh Air from WHYY, March 9, 2009 · According to a report issued Mar. 6, 2009 by the Congressional Oversight Panel charged with monitoring the use of bailout funds, the rate of home foreclosure is now three times its historic rate — "so large that it threatens the entire economy."

Panel chairwoman Elizabeth Warren joins Fresh Air to discuss the foreclosure problem — and what can be done about it.

. . . .

Warren discusses what the plan covers and what it doesn't.

It looks like bankruptcy is the solution to negative equity, but that doesn't apply to primary resisdence. This will require a change in bankruptcy laws (one is pending in Congress). But there are limitations/restrictions. This however could mean banks take more losses, i.e. some banks would be forced 'underwater'.

Bottom line - we can't pretend anymore that the banks' assets are more than they actually are.

http://cop.senate.gov/documents/cop-030609-report.pdf