As I understand it or hope how this will eventually work, there is no re-appraising your home as SDR posted about. If your overpriced LV home WAS worth 300k and now, 150k, it’s still appraised at 300k (or whatever the tax rolls say it is), you just get to lower your interest rate (assuming you want to, to begin with) say from 5.75 to 4.25 thereby lowering your payments. If I was in the situation where my property is down 50%, I think I’d just walk if I could. I have family that’s actually doing that now. It makes little business/financial sense to stay in a house if all you get is a lower interest rate. THERE IS NO REMOVING of principal or lowering what is actually owed, only your rate drops.
As for it being “wrong”, the problem is the GSE ALREADY OWNS every loan that this program would qualify for because they already own the loan to begin with.
I really don’t think this program is for folks who are 50% down or some of what people are posting about and folks that are like that should probably walk and not pay for an overpriced asset.
This is for folks who “want” to stay in their homes, HAVE been paying a higher rate on the value of their house/mortgage, and is OK that their home is down 10% or whatever, but want to be able to refi when previously, they couldn’t due to a list of reasons because the mortgage market is messed up. This could be like the article says, someone had a loss on a part-time biz which isn’t even their primary job, self-employed folks, folks with massive assets, but lower income due to time off for family, folks who put 20 or 30% down or whatever, but now, with valuation drops, only have 15% equity and can’t get the best rates…you name it.
The hope is that with a lower monthly payment, these folks who have been responsible with their payments/mortgage will use the money to help the economy a little by shopping, traveling, spending, etc…
A lot of economist like this proposal because it doesn’t add to the deficit and can stimulate the economy by putting more cash in the hands of people who might use it.
Also, if FNM And Freddie already OWN these loans to begin with, I am guessing, but assume they can call the bond investor’s note and re-issue them a new note if they want (the bond investors are the ones getting screwed here and who I see as the “l00sers”). However, the upside is that if the home owner has a lower rate/payment, they are less likely to default so the payments are more secure…Then again, if the GSE own the loans, then maybe that’s their right.
We’ll see what happens, but I don’t think this proposal “hurts” folks without mortgages as much as people make it out to be.
I hate big banks too, but you sorta need them unfortunately and more bank jobs for this, more people who will spend to eat out, etc…
