[quote=SD Realtor]Yes CAR origination charges will be lower because the hefty increases that were put in place by the GSEs are now going to be removed.
At least that is my understanding.
Like I said I am on the fence about the program. I understand the goal. Put more money in the pockets of people who have had a 6 month good payment history, (which is not much by the way) and hope that this money stimulates the economy.
Honestly I am not sure if that happens. I think an economy is stimulated with jobs. I think that people are trying to save money, not spend money that they save.
Again, I am trying to wrap my arms around a better solution that will actually help SOLVE the problem, not just push the problem down the road. In order to do that the asset HAS TO BE LIQUIDATED. So perhaps you actually liquidate the asset and let it go for sale. The current owners actually get first right of refusal of some sorts. That is, under an open bid, whatever that highest bid is, the owners get to match or top it. This would be a short sale of course. The only hitch is the equity problem. For this issue the owners may be granted some sort of leniency, perhaps due to their good payment history they only need to come up with 3% down or something like that. So what is the end result? Well the end result is that the bad loan comes off the books and is the new loan now reflects the current market value of the home. The owners who stayed got to keep the home and now have a lower payment. Alternately if they chose not to stay they then moved into a home and rented and now most likely have a lower payment and can live within their means.
In this manner the liquidation that needs to happen has happened. The “reward” for the original owners is that they got to stay in the home. Also they did not have to go through a default process so they are not affected credit wise. One may argue that they “lost” the equity but the equity was lost due to market depreciation anyways. The loser would be the investors because the loan did not get fully paid off however they did not wash out completely, they at least got back 50%, 60% or more on the loan.
To me a program like this is much more of a solution to the problem.[/quote]
IMHO, default is the only solution. I see no reason to reward foolish, risky behavior, either. The borrowers who were outbidding more prudent folks (who were then forced to rent on the sidelines) deserve absolutely no sympathy.
If we reward those who take on debt they have no intenions of paying off, then we can expect more of this behavior in the future. What we need to do is let those who caused the problems take the brunt of the consequences. Lenders have to lose, and borrowers have to be foreclosed on and take a credit hit. That’s they only way we can prevent this from happening in the future.
OTOH, if people want to give these mortgage slaves a lower rate, that’s fine. We just shouldn’t expect the government to have to pay for it. The lenders are free to modify the loans in whatever way they choose. Nobody should interfere with their right to foreclose, if that’s what they want to do when a borrower has stopped making payments. That’s the entire point of having a collateralized loan.
