If you watch some of the Congressional hearings with banks & various players in the financial industry (not the bailout hearings, but other ones that occurred before those) you’ll see that the banks/lenders place the H4H (Hope for Homeowners) plan at the very bottom of their preferred list. They have also admitted to holding off on foreclosures as they await more action from the government. Yes, they actually admitted that…saw them with my very own eyes.
The H4H program forces them to reduce principal amounts on the loans. They said they’d rather monkey around with rates and terms than write-down the principal amounts. They were VERY opposed to this plan, which makes me think it’s the best plan out there.
BTW, it’s not the borrower that would have to come in with the 10%, it’s the lenders. The lending industry already had this reduced from the original proposal which required 15% below current market price.
In my cynical view, the bailout was enacted because nobody was willing to do this. Best for the govt to buy the loans from the lenders, then the GOVERNMENT will be writing-down the principal amounts (and the taxpayers are stuck with the losses, not the banks). IMHO, this was one of the main components of this plan, and it’s written-in the bailout that the govt will do this.
