What do people think of Obama's mortgage bailout plan?

 

What few details are out I don't like. Basically the bailout will help people who currently can afford their mortgage and are not defaulting but who are upside down but would likely not be upside down had they given a good down payment. If you and your neighbor bought the same house for the same price a couple of years ago and you gave 25% down and he gave 3% and both of you are making your payments he gets a bailout and you don't. How fair is that?

that's not what I read on it

 

i thought you had to be at least 80% upside down

 

i also heard that it's only open to people who had their loans with fannie/freddie - which if true seems more like a hedge against further default risk for those gov't important companies, as opposed to real lending relief/reform

What do you mean by the 80% upside down?

 

From what I read the new loans would be backed by Fannie and Freddie (not sure what they mean by "backed") and the borrower would have to meet the Fannie / Freddie income requirements and the home would need to be owner occupied. If the borrower needs to document his income it means people who got laid-off would not qualify for the bailout. The bailout will help upside down people who are currently employed and are currently paying their mortgage. Obama's goal seems to be to prevent people who can afford their mortgage to walk away from them.

this whitehouse blog is pretty good - i guess full details don't come out until march

 

http://www.whitehouse.gov/blog/09/02/18/Help-for-homeowners/

 

seems to be two pronged

 

If you are not "at risk", but are just having a hard time refinincing to better rates due to value drops you can be eligible under the following - the loan must be secured by fannie/freddie, you're existing loan cannot be over 1.05 LTV ......... me thinks this is going to be a hard one for most to qualify for, although it will be really nice for those that do

 

To qualify for the at risk portion you would need the following:

 

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and © your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

 

Doesn't seem to me that this does a whole lot of good. Even if you put the at risk people in new homes there is nothing to ensure that they will not default in a year (the $5k in 5 year incentive is a joke)

 

If someone is struggling - enters the program and then loses their job & home next year the net result is actually worse ...... still a foreclosed property with an additional layer of tax payer expense

 

the gov't really needs to look at the disease instead of trying to quick treat the symptoms with expensive medicine

Things are so bad that the question ought not be "is it fair" but, rather, "will it help stop housing/real estate prices from further plummeting". We will not bounce back until prices stabalize... it's as simple as that. Fairness is not a virtue when you're on the verge of another great depression. So the question is, will it work? That's a better one to ask.

Things are so bad that the question ought not be "is it fair" but, rather, "will it help stop housing/real estate prices from further plummeting". We will not bounce back until prices stabalize... it's as simple as that. Fairness is not a virtue when you're on the verge of another great depression. So the question is, will it work? That's a better one to ask.

He's trying to reduce the number of foreclosures but his solution is to help out people who don't need help and to do nothing for those who do. To reduce the number of people walkign away from mortgages he should increase the penalties of doing so. For example, if you walk away from a mortgage becasue you're upside down but can still afford to pay it then you can never deduct mortgage interest on any future mortgages and you can never get a Fannie / Freddie mortgage either.

who's to determine who can pay? - what about change in circumstance - say my parents contracted cancer back in NY and I wanted to move back home to be a caretaker - no way I could sell this house as I'm upside down (due to a large crash in home values - my home is worth less now than when it was built in 2001) ...... i'd be pretty much forced to walk away

 

even if I qualified for the plan - it doesn't really help protect from that scenario, which would lead to another foreclosure

 

i don't see how this really helps as even a modified loan is still out of the market - you're getting more favorable terms on a house you cannot sell

 

for the people who are struggling to make payments - it will definitely help keep some of them in their homes, but i question how significant this impact is ........... they obviously have financial constraints, be it student loans, CC debt, car payments, etc ......... once again the loan value remains the same, the terms are just modified ....... so what happens when they lose their jobs, have an unexpected maintenance expense or need to add on debt to get through a life event - it's not like they have savings in the bank to ride out any bad times ...... that house is going back to foreclosure

 

i personally think we need to look at loan reform in both the mortgage & CC markets - make it easier for people to pay down their debts, keeping them out of the never ending cycle

What do people think of Obama's mortgage bailout plan?

 

 

It is a pure boondoggle. If there was to be any kind of bailout, it should have been in the form of a toxic-debt bank.

If Obama fails at this, it would look REALLY bad for all the people who have believed in him. :whistle

If Obama fails at this, it would look REALLY bad for all the people who have believed in him. :whistle

 

You hate the guy so much that's how you look at it. To me, if Obama fails at this, it means we're in even more serious trouble. At that point I stop worrying about "people who believed in him" and more about the state of our country and the world. Grow up, get a life, and realize this actually impacts people on a day to day basis.

who's to determine who can pay? - what about change in circumstance - say my parents contracted cancer back in NY and I wanted to move back home to be a caretaker - no way I could sell this house as I'm upside down (due to a large crash in home values - my home is worth less now than when it was built in 2001) ...... i'd be pretty much forced to walk away

 

even if I qualified for the plan - it doesn't really help protect from that scenario, which would lead to another foreclosure

 

i don't see how this really helps as even a modified loan is still out of the market - you're getting more favorable terms on a house you cannot sell

 

for the people who are struggling to make payments - it will definitely help keep some of them in their homes, but i question how significant this impact is ........... they obviously have financial constraints, be it student loans, CC debt, car payments, etc ......... once again the loan value remains the same, the terms are just modified ....... so what happens when they lose their jobs, have an unexpected maintenance expense or need to add on debt to get through a life event - it's not like they have savings in the bank to ride out any bad times ...... that house is going back to foreclosure

 

i personally think we need to look at loan reform in both the mortgage & CC markets - make it easier for people to pay down their debts, keeping them out of the never ending cycle

 

 

The scenerio you describe in your first paragraph could happen to anybody, even in the best of economies. My husband was laid off of a really good job ($12 per hour in 1985) 1 month after our daughter was born. Back then, when you told Dade County Public Schools you'd be out 6 months on maternity leave, you couldn't decide to cut it short and come back earlier. What happened? I wasn't bringing in any money and he found a job 2 weeks later at $5 per hour. We almost lost our house. We lived off of our parents, credit cards and it took us years and years to pay off those balances.

 

What I think needs to happen is, anyone who is going to take advantage of the refi must agree to have either credit counseling, debt consolidation or some other means of really forcing those people to meet their primary financial obligations before they fund the frivilous ones. I will be furious if someone cuts a deal to refi their home and then blows the 'extra' money on a trip to Jamaica. Remember what happened to those unscrupulous people who got insurance settlements from Katrina and bought designer handbags, etc. I'm hoping that doesn't happen here but if I know human nature, it probably will. That doesn't mean we throw the baby out with the bathwater but a debt consolidation program along with the refi might put a lid on how families spend their money.

 

Just my $ .02 worth...

El Penguino,

 

Credit, in one form or another, has been around for centuries. When used with discretion, credit is a good thing. It allows the middle/lower income families a chance of being able to build up equity and personal worth. The rich don't need credit. If I had enough money to go out and buy whatever car I wanted, believe me-credit wouldn't be an issue.

 

I can understand what you mean when you said you wouldn't own a house or a car if you don't have the cash behind it. But not many of us can say that. Trust me, when my refrigerator fails, I won't be waiting around until I save up enough money to get another one. While my husband and I have a mortgage and 3 cars, we bought our second home well within our means. As far as the three cars, we own 2 of them and will soon pay off the third.

 

Historically, homes and other valuable possessions were passed from generation to generation. That is also when people pretty much stayed in the town they were born in. Times are different. Maybe I'm old fashioned, but I hope to give my current home to my children when I pass on.

 

 

I don't agree with the idea that leasing is more fiscally wise. When the lease is up, what do you own? What equity have you built? That's almost like justifying that taking a taxi everywhere is more fiscally sound than having a car.

 

Oh well- we're all entitled to our own opinions. All I know, is the financial decisions I've made for my family have worked out pretty good so far.

owning a car is only fiscally sound if you are going to keep it for several years after you pay it off. I paid off my car in early 2006 and I am still driving it with no plans to replace it. If you are going to change cars every 2 years, then leasing is for you.

who's to determine who can pay? - what about change in circumstance - say my parents contracted cancer back in NY and I wanted to move back home to be a caretaker - no way I could sell this house as I'm upside down (due to a large crash in home values - my home is worth less now than when it was built in 2001) ...... i'd be pretty much forced to walk away

When the guy who was foreclosed applies for his next Fannie home loan a few years down the road the circumstances of his previous foreclosure could be reviewed as part of the application process. In your example you would be penalized but cases such as yours I think would be the exception. Most cases would be Mr. Deadbeat leaving a home he could still afford solely because he was upside down.

Are student loans bad, Penguino?

El Penguino,

 

I don't agree with the idea that leasing is more fiscally wise. When the lease is up, what do you own? What equity have you built? That's almost like justifying that taking a taxi everywhere is more fiscally sound than having a car.

Think about it the other way and you will see the point. Hypothetically after paying off a 30 year mortgage you essentially end up with a commodity that has radically depreciated from when you purchased it. Where is the reward in that? Sure, you can make alterations but that will take a fiscal input in your part and you are subjected to the housing market business cycle. It's enslavement. Not to mention all of the hidden fees and taxes.

 

I would much prefer to avoid these fees, avoid the heavy down-payment and actually invest that money into something that will actually accumulate. And then I could always move into a new house or apartment!

 

Penguino,

 

I generally agree with your economic views. In this case, though, I think there are several roads you can take, depending on your goal.

 

I see your point that an individual who takes a 30 year mortgage may very well have an asset that has depreciated in value after they have paid of the mortgage (this of course depends on many factors, it's perfectly possible for a home to appreciate in value). So it's possible for someone to get no direct fiscal benefit from taking on a 30 year mortgage and paying it off over the 30 years.

 

However, if the goal of the person is to leave behind something for their children or family, then owning a home is not a bad way to go. While the individual him or herself won't be able to reap the fruits, that individuals son or daughter will have a home which they have paid $0 for. They will have a very valuable asset.

 

So, as an individual, if I make a down payment on my home, say $20,000, then continue to pay mortgage payments that are about equal of what it would cost me to rent a living space, then I'm essentially making a $20,000 investment for my kids. At the end of 30 years, that $20,000 turns into a $500,000, $600,000 (what have you) asset for your family.

 

You can argue that you can put that $20,000 into some other investment that could yield the same or more value after the end of 30 years, but putting that money into a home is a perfectly vialbe option if you are considering not your financial situation but that of your kids or whoever you leave the home behind for. At the very least, the home would provide a place for your children to live after you have passed, saving them thousands upon thousands of dollars a year on rental (or their own mortgage) payments