How long will it take for this to take effect? And what properties are local governments going to buy? Seems to me its just one more way to keep costs high. Its all just a joke on us. Free market my ass. Work more, earn more, and spend more so that you have to work more. Are we all really that stupid.
Sorry it just makes me sick.
According to the article: "The outlines of the bill suggested that the two sides had succeeded, at least for the moment, in maintaining a spirit of bipartisan collaboration. Republicans had sought a larger tax credit, of $15,000 to be credited over three years, for buyers of foreclosed properties but were apparently willing to settle for a $5000, single-year credit."
I would imagine that this tax credit would only cover SFR and not investment type rentals or vacation homes. As for the millions for counseling, what is the point? Another case of the government wasting tax payer money!
I might be confused but didn't Ron Paul say 19% of our taxes goes to paying interest. And Bernanke replied that they had already done the math for 100% of governement spending going toward repayment of interest. Why would they be trying to figure out just how much they can bleed the people? Why can't we all just live within our means? The people of this country are being brainwashed into thinking material possesion equals happiness.
Am I missing something here? This seems like a drop in the bucket - $4 billion in grants against against many hundreds of $billions in write downs so far (and more to come!).
And a $7K tax credit for buyers of foreclosed properties - hell that will hardly pay for new carpet and landscaping. This is just a little grease for the people who are sitting on the sidelines waiting to buy. It is a $7K gift to every Piggington waiting to buy.
Sounds to me like the senate is going to let the market take its course. Might as well be giving lenders the finger and basically telling them to F.O.
Submitted by SD Realtor on April 2, 2008 - 10:27pm.
johnny the feds are preparing 300 billion and that is just the first pass at the program. That is a little bit more then a drop in the bucket to me. That is 300 billion that the FHA will have to federally insure reworked mortgages. Taxpayer money my friend. Don't think for a minute that they won't throw more money at the problem.
My friend predicted what would happen, albeit three years off. He was always talking about stats and figures though. I don't believe he was looking at the psychology.
In terms of momentum where is the avg Joe's psychology at? Has the media doom and gloom blitz yet blossomed into a media blitzkrieg? My casual observation is that as of 06 the mentality was "buy now because this thing is gonna go sky high forever and don't get priced out". Have we hit the opposite side of that mentality yet?
I guess what I am asking is can these measures offset psychology...and everything else for that matter? Or are we just applying brakes to just one car on the freight train going down hill?
SD Realtor, yes, I have heard the $300BB number. However, I do not see it mentioned in the NYTs coverage of the bipartisan bill coming together in the Senate.
Is the $300BB a real / approved plan? Any insight on how it will be executed? Any links to articles explaining it would be much appreciated.
Submitted by SD Realtor on April 3, 2008 - 12:33am.
johnny
The main problem here is that you are not seeing the forest through the trees. In the month of March alone we have witnessed events that could be construed as somewhat cataclyzmic by historical standards. We have witnessed our government literally bailout a huge financial institution that was basically run by incompetents. We have seen a flurry (and I posted about this over and over again in the past 2 years) of polical tomfoolery that will result in 100s of billions, AT THE VERY LEAST, in taxpayer monies that will be used to back loans, bailout loans, and the FED has basically opened a window for financial institutions that are NOT BANKS. We have seen the GSE have the capital requirements loosened. We are now seeing mortgage reworks with reduced principal.
Most scary of all and not even discussed on this site, we have seen a proposal of what will be the most intrusive policy yet of empowering the FED with respect to regulation of the financial industry EVER.
Think about it, all of this has recently gone down in the past month man.
Seriously, yes all of us responsible renters who didn't give into the housing rush, who pay our bills, who all have great credit scores can all pat ourselves on the back. Where has that gotten us? While we have been prudent, we are going to witness our government basically surrender our currency and virtually nationalize housing in an effort to keep our consumption based economy afloat.
Will housing continue to go down? Of course it will. Will we ALL be hurt by it, by the responsibility of foolish buyers compounded by the actions of our government. Yes we will...
Sorry about the rant...It just gets to me that people are not more enraged by this stuff. To sit back and keep saying, well this measure doesn't matter, this move by the Feds will not stop things, this proposal by Schumer or Reid will not matter... jeez it is just as bad as listening to NAR spout crap as well. These things do matter. They are costly, they are bad, it is just taking a free market and manipulating it beyond belief.
SD Realtor: Not that it will do any good......but, I'm really pissed and outraged about all of this foolishness and have written letters and emails..........and called my Congressional representative and Senators to register my protest. If enough people will get pissed enough to do this, it might just make the bastards think twice before throwing more good money at a problem that they can't solve with money.
The government, like the proverbial camel, has been inserting its nose under the tent for years. It has been throwing money at social problems, criminal problems and education with little to no improvement. I think we all know what will happen when housing and banking become nationalized with stupid legislation such as this. First no child left behind and now no irresponsible home owner left behind. God save us from the government.
What's ironic is that in this time of economic hardship, our government is doing everything in its powers to keep home prices unaffordable. Heaven forbid Americans find a new piggy bank, and save money the old fashioned way, instead of relying on phony home values to boost their egos and net worth.
Submitted by SD Realtor on April 3, 2008 - 8:57am.
Ex-SD I know I did the same thing. I guess it just intrigues me that a post about a realtor handing out flyers in a bank, or a realtor who is lame can garnish full pages of responses but the fact that our own government is acting is such a hopeless manner doesn't seem to stir the juices so to speak.
Submitted by 5yearwaiter on April 3, 2008 - 11:31am.
That is the reason I titled this as with "The Heck...". This is another big mistake FED or GOV is going to entertain. On what grounds they find facts to help these many people?. They are once again trying to ruin the mortgage rules and systematic process of mortgage into it's own directions. Well bubble bursted and people are slwowly adjusting or realising (let them settle whatever wrek!!) and Financial Banking adjusting with write offs(help here bit ok). Don't know much, now I can say with gurantee whoever invest now or near future has "No luck with that investment" keeping innview of how that spins -sure there wouldn't be an luck!!
Submitted by LV Renter on April 3, 2008 - 12:46pm.
So for the record the congress has fast tracked legislation that will create more foreclosures. People are going to steer to the properties with the credit, meaning non distressed properties will need to have lower prices. Which of course creates more foreclosures. BRILLIANT!!!
Damnit, I dont know if ANYONE on here supports ANY of this junk. I know I sure as hell dont. I really want to go to one of these rallies and ask some question to the point of:
"How can you justify keeping housing prices so outawack with incomes and such that people just starting out have no hope of ever buying without severly restricting our future standard of living so some nimrod who took out a bunch of HELOC's for Plasma TV's and corvetts can not loose money? Please dont address your answer to me, please address it to this young families 5 year old daughter with the brown deer eyes."
Maybe then A counterpoint can be seen in the press in any other section other than "Opinion". Unfornatually Bilbray and Davis dont really read a site like piggington, no matter how good for them to learn it may be.
In all reality the reason why people dont express more anger and frustration is because they dont know what to do. Call or email either of our Senators and you will get blown off with some LAME form letter. Same with our local congressman, cept you may actually get some bored college intern to talk to you and explain with his D- econ understanding how this will really help people.
You want to do something about it? Lets get together some time with all our friends, go to Congressman Bilbray or Congresswoman Davis's office and send a message. Only problem is we will have to wait beind the Hope Now!, minority/civil/bleeding heart activits, and the Banking/finance lobbiests to see them. I am positive they are regular fixtures in this offices, if for no other reason than maybe the press will show up for a 30 second sound bite to show congress at work. I am still game. You name a time and place and ill be there.
Submitted by 5yearwaiter on April 3, 2008 - 3:58pm.
Any way this bill is going to be passed soon and all side people voted for this and full details (more wonders) yet to come when this became public. A strange question always tick in my mind is, why do we punish criminal those who loot for money(and don't hurt any one). We should also bailout them if this law this way senates converting. May be major people commit this kind of looties for money in future, may be senate can rewrite some new laws - how funny !!
the reason all that will go through is because piggies are the minority, the gov doesn't care about us. They have a million+1 people that shouldn't have bought houses in line squaking about how they are out of luck and need a hand. Worse case to us, we save and save and still have nothing, but at least these people have their homes and politicians have votes! YAAAY!!!
The National Debt has continued to increase an average of
$1.71 billion per day since September 29, 2006
That seems like a lot. If you divide it by the number of people in this country it amounts to $5.62 per day per person, or roughly 1.4 servings of Starbuck's Grande Latte per day.
SD Realtor, I think we are talking past eachother here. IMHO I see the forest quite well - what I am looking for are details on some of the larger government interventions. There are no large actions described as part of the Senate bill that is the topic of this post.
I am sorry if you feel you should not have been renting. I believe that prudent people will all come out ahead. Having a catastrophic revaluation leading to depression and simulataneous dollar devaluation would not help anyone, and would really hurt renter/savers who depend on current year income or dollar denominated savings to buy groceries.
Free markets that operate well are regulated in many ways - look at US Equities - there are extensive trading rules, suspensions of trading when price movements are excessive, and substantial financial disclosure and reporting rules. A free market with market based pricing does not mean a free for all with no rules. Thankfully the Federal government is shoring up some of the wild west that characterized the housing/mortgage markets of the last 10 years.
Six months ago I wrote on this site that the correction would not all come in the form of a correction in real values alone (which would be a catastrophe for every American), but would also be facilitated by higher than normal inflation and targeted interventions by the government.
It is not clear to me that targeted interventions by the government are bad for the prudent per se. An orderly revaluation is in everyones best interest and allows renters becoming buyers to be secure in thier own financial situation.
So the challenge is that the government needs to intervene but in a reasonable way that doesn't put too much burden on savers and tax payers.
Which is what I am asking for - any links to articles that detail the larger interventions involving financial transfers (like the $300BB one that people talk aobut a lot but seems to be without specifics or detail). I am seeing a forest and LOOKING FOR the trees.
Mortgage foreclosures haven't yet hit their peak, it's an election year, and Congress is back in session. Hold onto your wallets because a housing bailout is moving forward unless the White House says no.
Senators from both parties agreed late yesterday to throw about $11 billion more at the housing market, and we'll have more to say about that later. But think of Uncle Sam as the subprime lender of last resort and you are getting close to what the Beltway is contemplating. In the name of preventing foreclosures, House Financial Services Chairman Barney Frank wants to transfer the risk of further declines in home prices to taxpayers from lenders and borrowers.
[Barney Frank]
Mr. Frank's idea is that, for mortgages originated between the start of 2005 and mid-2007, a lender and borrower would be able to agree on a federal refinancing plan. Lenders would have to write down their loan to no more than 85% of the current appraised value of the property – which means the banks will use this opportunity to unload the biggest stinkers in their loan portfolios.
For the borrower, the deal is even sweeter: a low fixed monthly payment and a reduction in the principal to market value. The Federal Housing Administration would then guarantee the loan, up to a total of $300 billion in total Frank Refis. The deal is so sweet that even Mr. Frank is concerned that otherwise reliable borrowers may "purposely default" to be eligible for assistance. His solution is to require borrowers to "certify" that they really, truly aren't doing this simply to get on the taxpayer gravy train.
The pols also understand, but won't admit, that you can't bail out borrowers without bailing out lenders. And on both counts, we're not talking about the most deserving recipients in the history of welfare: Those receiving bailouts will be lenders who chased high returns despite the risks, and borrowers challenging historic rates of delinquency even before rate resets. Many will also be fraudsters, given that mortgage fraud has increased more than 1,200% since 2000.
A new study from the Boston Federal Reserve destroys the myth of the victimized subprime borrower. Boston Fed economists examined 1.5 million homeownerships over nearly 20 years and found that the overwhelming reason for subprime foreclosures is not unsustainable debt foisted on ignorant borrowers or even financial setbacks. People walk out on subprime mortgages when the value of their home declines.
Homeowners who've suffered a 20% decline in home prices are 14 times as likely to default as those who have enjoyed a 20% gain. "Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages," says the Boston Fed study. In other words, even if the government moves these borrowers into FHA-guaranteed mortgages with fixed rates, but home prices keep falling, lots of borrowers will stiff the taxpayers like they've been stiffing private lenders.
Traditionally, lenders making a commitment to finance your home have demanded that you make a commitment as well: a down payment. But during the credit boom, the shrinking market share of FHA-insured loans demonstrated how much the world was changing. FHA was intended to help moderate-income borrowers afford homes by requiring merely a 3% down payment. When subprime lenders started offering loans with zero down, FHA asked Congress to let their lenders do the same. Fortunately for taxpayers, Congress resisted. In the fourth quarter of 2007, FHA loans were one mortgage category that actually enjoyed a decline in foreclosures.
That trend may not last, because Mr. Frank's bill waters down FHA underwriting standards. Today, the FHA tells lenders that a borrower should not have debt payments amounting to more than 43% of monthly income, but Mr. Frank's bill allows this figure to rise as high as 55%.
Under current FHA guidelines, lenders must also closely examine a borrower's credit history. Yet under the "flexible underwriting standards" in Mr. Frank's draft, borrowers can't be denied FHA insurance due to a low credit score. Delinquency on existing mortgages also can't be the sole reason to deny FHA insurance. Mr. Frank's bill authorizes the Secretary of Housing and Urban Development to contract out for a new underwriting system, and it should be entertaining to see what HUD's political minds can devise to appease pressure groups.
In sum, Mr. Frank is volunteering U.S. taxpayers to insure $300 billion in mortgages with underwriting standards to be named later. Connecticut Senator Chris Dodd thinks $400 billion is more like it. Quavering Republicans should do the political math. The Mortgage Bankers Association tracks 46 million mortgage borrowers, and 42 million are paying on time. More than 20 million households own their homes outright and, having worked for years to pay for them, probably don't want to pay for someone else's. Neither do 35 million renters who didn't take a flyer on nicer digs.
The good news is that a taxpayer champion is emerging from, of all places, Florida. His state is ground zero in the housing downturn, but House Republican Tom Feeney says, "My constituents are not terribly sympathetic with borrowers who made bad decisions." We're told the White House will oppose the Frank-Dodd bailout, but if there's any doubt, Mr. Bush should have Mr. Feeney in for a chat.
Submitted by SD Realtor on April 3, 2008 - 10:55pm.
Johnny I understand your question better with your more recent post. Unfortunately I am not aware of any of the details of any of the plans other then what is posted on line. I simply don't have the time to delve into them.
I guess all I can say is that I do not feel that the government is providing what you termed an orderly revaluation of housing stock. To me the programs that have been put forth seem to fall in one of two categories, either politically motivated or totally reactionary and made to try to cushion Wall Street. As far as not putting to much of a burden on taxpayers...Well I guess that is a squishy statement right? Is that defined as less then 500B or a trillion B? Not that it matters anymore.
I think that there could have been more rational thought as to how to help find that orderly valuation then the way it has gone so far.
I don't think I ever said I am sorry I have been renting. I don't like renting, but I am not sorry. It just sucks that more of my tax money will be used to finance a beauracracy that will help to insure a loan that will need to rewritten and backed by the FHA.
How long will it take for this to take effect? And what properties are local governments going to buy? Seems to me its just one more way to keep costs high. Its all just a joke on us. Free market my ass. Work more, earn more, and spend more so that you have to work more. Are we all really that stupid.
Sorry it just makes me sick.
According to the article: "The outlines of the bill suggested that the two sides had succeeded, at least for the moment, in maintaining a spirit of bipartisan collaboration. Republicans had sought a larger tax credit, of $15,000 to be credited over three years, for buyers of foreclosed properties but were apparently willing to settle for a $5000, single-year credit."
I would imagine that this tax credit would only cover SFR and not investment type rentals or vacation homes. As for the millions for counseling, what is the point? Another case of the government wasting tax payer money!
I might be confused but didn't Ron Paul say 19% of our taxes goes to paying interest. And Bernanke replied that they had already done the math for 100% of governement spending going toward repayment of interest. Why would they be trying to figure out just how much they can bleed the people? Why can't we all just live within our means? The people of this country are being brainwashed into thinking material possesion equals happiness.
Am I missing something here? This seems like a drop in the bucket - $4 billion in grants against against many hundreds of $billions in write downs so far (and more to come!).
And a $7K tax credit for buyers of foreclosed properties - hell that will hardly pay for new carpet and landscaping. This is just a little grease for the people who are sitting on the sidelines waiting to buy. It is a $7K gift to every Piggington waiting to buy.
Sounds to me like the senate is going to let the market take its course. Might as well be giving lenders the finger and basically telling them to F.O.
What am I missing?
With the forum topic title I thought for sure it was posted by Borat. Where is you?
johnny the feds are preparing 300 billion and that is just the first pass at the program. That is a little bit more then a drop in the bucket to me. That is 300 billion that the FHA will have to federally insure reworked mortgages. Taxpayer money my friend. Don't think for a minute that they won't throw more money at the problem.
SD Realtor
My friend predicted what would happen, albeit three years off. He was always talking about stats and figures though. I don't believe he was looking at the psychology.
In terms of momentum where is the avg Joe's psychology at? Has the media doom and gloom blitz yet blossomed into a media blitzkrieg? My casual observation is that as of 06 the mentality was "buy now because this thing is gonna go sky high forever and don't get priced out". Have we hit the opposite side of that mentality yet?
I guess what I am asking is can these measures offset psychology...and everything else for that matter? Or are we just applying brakes to just one car on the freight train going down hill?
SD Realtor, yes, I have heard the $300BB number. However, I do not see it mentioned in the NYTs coverage of the bipartisan bill coming together in the Senate.
Is the $300BB a real / approved plan? Any insight on how it will be executed? Any links to articles explaining it would be much appreciated.
johnny
The main problem here is that you are not seeing the forest through the trees. In the month of March alone we have witnessed events that could be construed as somewhat cataclyzmic by historical standards. We have witnessed our government literally bailout a huge financial institution that was basically run by incompetents. We have seen a flurry (and I posted about this over and over again in the past 2 years) of polical tomfoolery that will result in 100s of billions, AT THE VERY LEAST, in taxpayer monies that will be used to back loans, bailout loans, and the FED has basically opened a window for financial institutions that are NOT BANKS. We have seen the GSE have the capital requirements loosened. We are now seeing mortgage reworks with reduced principal.
Most scary of all and not even discussed on this site, we have seen a proposal of what will be the most intrusive policy yet of empowering the FED with respect to regulation of the financial industry EVER.
Think about it, all of this has recently gone down in the past month man.
Seriously, yes all of us responsible renters who didn't give into the housing rush, who pay our bills, who all have great credit scores can all pat ourselves on the back. Where has that gotten us? While we have been prudent, we are going to witness our government basically surrender our currency and virtually nationalize housing in an effort to keep our consumption based economy afloat.
Will housing continue to go down? Of course it will. Will we ALL be hurt by it, by the responsibility of foolish buyers compounded by the actions of our government. Yes we will...
Sorry about the rant...It just gets to me that people are not more enraged by this stuff. To sit back and keep saying, well this measure doesn't matter, this move by the Feds will not stop things, this proposal by Schumer or Reid will not matter... jeez it is just as bad as listening to NAR spout crap as well. These things do matter. They are costly, they are bad, it is just taking a free market and manipulating it beyond belief.
SD Realtor
SD Realtor: Not that it will do any good......but, I'm really pissed and outraged about all of this foolishness and have written letters and emails..........and called my Congressional representative and Senators to register my protest. If enough people will get pissed enough to do this, it might just make the bastards think twice before throwing more good money at a problem that they can't solve with money.
The government, like the proverbial camel, has been inserting its nose under the tent for years. It has been throwing money at social problems, criminal problems and education with little to no improvement. I think we all know what will happen when housing and banking become nationalized with stupid legislation such as this. First no child left behind and now no irresponsible home owner left behind. God save us from the government.
What's ironic is that in this time of economic hardship, our government is doing everything in its powers to keep home prices unaffordable. Heaven forbid Americans find a new piggy bank, and save money the old fashioned way, instead of relying on phony home values to boost their egos and net worth.
Ex-SD I know I did the same thing. I guess it just intrigues me that a post about a realtor handing out flyers in a bank, or a realtor who is lame can garnish full pages of responses but the fact that our own government is acting is such a hopeless manner doesn't seem to stir the juices so to speak.
SD Realtor
I would think the government has a vested interest in keeping prices high, so it can collect more tax.
That is the reason I titled this as with "The Heck...". This is another big mistake FED or GOV is going to entertain. On what grounds they find facts to help these many people?. They are once again trying to ruin the mortgage rules and systematic process of mortgage into it's own directions. Well bubble bursted and people are slwowly adjusting or realising (let them settle whatever wrek!!) and Financial Banking adjusting with write offs(help here bit ok). Don't know much, now I can say with gurantee whoever invest now or near future has "No luck with that investment" keeping innview of how that spins -sure there wouldn't be an luck!!
5yearswaiter
The Outstanding Public Debt as of 03 Apr 2008 at 07:16:37 PM GMT is:
$ 9,450,584,342,118
Estimated population of the United States is 303,742,313
so each citizen's share of this debt is $31,111.14.
The National Debt has continued to increase an average of
$1.71 billion per day since September 29, 2006
So for the record the congress has fast tracked legislation that will create more foreclosures. People are going to steer to the properties with the credit, meaning non distressed properties will need to have lower prices. Which of course creates more foreclosures. BRILLIANT!!!
Damnit, I dont know if ANYONE on here supports ANY of this junk. I know I sure as hell dont. I really want to go to one of these rallies and ask some question to the point of:
"How can you justify keeping housing prices so outawack with incomes and such that people just starting out have no hope of ever buying without severly restricting our future standard of living so some nimrod who took out a bunch of HELOC's for Plasma TV's and corvetts can not loose money? Please dont address your answer to me, please address it to this young families 5 year old daughter with the brown deer eyes."
Maybe then A counterpoint can be seen in the press in any other section other than "Opinion". Unfornatually Bilbray and Davis dont really read a site like piggington, no matter how good for them to learn it may be.
In all reality the reason why people dont express more anger and frustration is because they dont know what to do. Call or email either of our Senators and you will get blown off with some LAME form letter. Same with our local congressman, cept you may actually get some bored college intern to talk to you and explain with his D- econ understanding how this will really help people.
You want to do something about it? Lets get together some time with all our friends, go to Congressman Bilbray or Congresswoman Davis's office and send a message. Only problem is we will have to wait beind the Hope Now!, minority/civil/bleeding heart activits, and the Banking/finance lobbiests to see them. I am positive they are regular fixtures in this offices, if for no other reason than maybe the press will show up for a 30 second sound bite to show congress at work. I am still game. You name a time and place and ill be there.
Any way this bill is going to be passed soon and all side people voted for this and full details (more wonders) yet to come when this became public. A strange question always tick in my mind is, why do we punish criminal those who loot for money(and don't hurt any one). We should also bailout them if this law this way senates converting. May be major people commit this kind of looties for money in future, may be senate can rewrite some new laws - how funny !!
5yearswaiter
the reason all that will go through is because piggies are the minority, the gov doesn't care about us. They have a million+1 people that shouldn't have bought houses in line squaking about how they are out of luck and need a hand. Worse case to us, we save and save and still have nothing, but at least these people have their homes and politicians have votes! YAAAY!!!
The National Debt has continued to increase an average of
$1.71 billion per day since September 29, 2006
That seems like a lot. If you divide it by the number of people in this country it amounts to $5.62 per day per person, or roughly 1.4 servings of Starbuck's Grande Latte per day.
SD Realtor, I think we are talking past eachother here. IMHO I see the forest quite well - what I am looking for are details on some of the larger government interventions. There are no large actions described as part of the Senate bill that is the topic of this post.
I am sorry if you feel you should not have been renting. I believe that prudent people will all come out ahead. Having a catastrophic revaluation leading to depression and simulataneous dollar devaluation would not help anyone, and would really hurt renter/savers who depend on current year income or dollar denominated savings to buy groceries.
Free markets that operate well are regulated in many ways - look at US Equities - there are extensive trading rules, suspensions of trading when price movements are excessive, and substantial financial disclosure and reporting rules. A free market with market based pricing does not mean a free for all with no rules. Thankfully the Federal government is shoring up some of the wild west that characterized the housing/mortgage markets of the last 10 years.
Six months ago I wrote on this site that the correction would not all come in the form of a correction in real values alone (which would be a catastrophe for every American), but would also be facilitated by higher than normal inflation and targeted interventions by the government.
It is not clear to me that targeted interventions by the government are bad for the prudent per se. An orderly revaluation is in everyones best interest and allows renters becoming buyers to be secure in thier own financial situation.
So the challenge is that the government needs to intervene but in a reasonable way that doesn't put too much burden on savers and tax payers.
Which is what I am asking for - any links to articles that detail the larger interventions involving financial transfers (like the $300BB one that people talk aobut a lot but seems to be without specifics or detail). I am seeing a forest and LOOKING FOR the trees.
Thanks in advance.
This bill is small potatoes. The biggest thing mentioned is a $15BB to allow some builders to carry forward historical losses to future tax returns.
Johnnycsd, here is a summary of the $300B package:
http://online.wsj.com/article/SB12071821...
Mortgage foreclosures haven't yet hit their peak, it's an election year, and Congress is back in session. Hold onto your wallets because a housing bailout is moving forward unless the White House says no.
Senators from both parties agreed late yesterday to throw about $11 billion more at the housing market, and we'll have more to say about that later. But think of Uncle Sam as the subprime lender of last resort and you are getting close to what the Beltway is contemplating. In the name of preventing foreclosures, House Financial Services Chairman Barney Frank wants to transfer the risk of further declines in home prices to taxpayers from lenders and borrowers.
[Barney Frank]
Mr. Frank's idea is that, for mortgages originated between the start of 2005 and mid-2007, a lender and borrower would be able to agree on a federal refinancing plan. Lenders would have to write down their loan to no more than 85% of the current appraised value of the property – which means the banks will use this opportunity to unload the biggest stinkers in their loan portfolios.
For the borrower, the deal is even sweeter: a low fixed monthly payment and a reduction in the principal to market value. The Federal Housing Administration would then guarantee the loan, up to a total of $300 billion in total Frank Refis. The deal is so sweet that even Mr. Frank is concerned that otherwise reliable borrowers may "purposely default" to be eligible for assistance. His solution is to require borrowers to "certify" that they really, truly aren't doing this simply to get on the taxpayer gravy train.
The pols also understand, but won't admit, that you can't bail out borrowers without bailing out lenders. And on both counts, we're not talking about the most deserving recipients in the history of welfare: Those receiving bailouts will be lenders who chased high returns despite the risks, and borrowers challenging historic rates of delinquency even before rate resets. Many will also be fraudsters, given that mortgage fraud has increased more than 1,200% since 2000.
A new study from the Boston Federal Reserve destroys the myth of the victimized subprime borrower. Boston Fed economists examined 1.5 million homeownerships over nearly 20 years and found that the overwhelming reason for subprime foreclosures is not unsustainable debt foisted on ignorant borrowers or even financial setbacks. People walk out on subprime mortgages when the value of their home declines.
Homeowners who've suffered a 20% decline in home prices are 14 times as likely to default as those who have enjoyed a 20% gain. "Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages," says the Boston Fed study. In other words, even if the government moves these borrowers into FHA-guaranteed mortgages with fixed rates, but home prices keep falling, lots of borrowers will stiff the taxpayers like they've been stiffing private lenders.
Traditionally, lenders making a commitment to finance your home have demanded that you make a commitment as well: a down payment. But during the credit boom, the shrinking market share of FHA-insured loans demonstrated how much the world was changing. FHA was intended to help moderate-income borrowers afford homes by requiring merely a 3% down payment. When subprime lenders started offering loans with zero down, FHA asked Congress to let their lenders do the same. Fortunately for taxpayers, Congress resisted. In the fourth quarter of 2007, FHA loans were one mortgage category that actually enjoyed a decline in foreclosures.
That trend may not last, because Mr. Frank's bill waters down FHA underwriting standards. Today, the FHA tells lenders that a borrower should not have debt payments amounting to more than 43% of monthly income, but Mr. Frank's bill allows this figure to rise as high as 55%.
Under current FHA guidelines, lenders must also closely examine a borrower's credit history. Yet under the "flexible underwriting standards" in Mr. Frank's draft, borrowers can't be denied FHA insurance due to a low credit score. Delinquency on existing mortgages also can't be the sole reason to deny FHA insurance. Mr. Frank's bill authorizes the Secretary of Housing and Urban Development to contract out for a new underwriting system, and it should be entertaining to see what HUD's political minds can devise to appease pressure groups.
In sum, Mr. Frank is volunteering U.S. taxpayers to insure $300 billion in mortgages with underwriting standards to be named later. Connecticut Senator Chris Dodd thinks $400 billion is more like it. Quavering Republicans should do the political math. The Mortgage Bankers Association tracks 46 million mortgage borrowers, and 42 million are paying on time. More than 20 million households own their homes outright and, having worked for years to pay for them, probably don't want to pay for someone else's. Neither do 35 million renters who didn't take a flyer on nicer digs.
The good news is that a taxpayer champion is emerging from, of all places, Florida. His state is ground zero in the housing downturn, but House Republican Tom Feeney says, "My constituents are not terribly sympathetic with borrowers who made bad decisions." We're told the White House will oppose the Frank-Dodd bailout, but if there's any doubt, Mr. Bush should have Mr. Feeney in for a chat.
Johnny I understand your question better with your more recent post. Unfortunately I am not aware of any of the details of any of the plans other then what is posted on line. I simply don't have the time to delve into them.
I guess all I can say is that I do not feel that the government is providing what you termed an orderly revaluation of housing stock. To me the programs that have been put forth seem to fall in one of two categories, either politically motivated or totally reactionary and made to try to cushion Wall Street. As far as not putting to much of a burden on taxpayers...Well I guess that is a squishy statement right? Is that defined as less then 500B or a trillion B? Not that it matters anymore.
I think that there could have been more rational thought as to how to help find that orderly valuation then the way it has gone so far.
I don't think I ever said I am sorry I have been renting. I don't like renting, but I am not sorry. It just sucks that more of my tax money will be used to finance a beauracracy that will help to insure a loan that will need to rewritten and backed by the FHA.
SD Realtor