Bailout Update.. Bush scores some points here.

[hipmatt]

House Democrats squared off against the Bush administration yesterday over measures to help homeowners trapped in a vise of unaffordable subprime mortgages and falling home prices.

The Democratic-controlled House passed a bill that would require the nation’s two government-sponsored mortgage finance companies and the Federal Housing Administration’s insurance program to channel up to $900 million a year into a new fund for affordable housing.

The White House quickly threatened to veto the bill, saying that it would “increase spending and disrupt the appropriations process.” The showdown is still hypothetical, because Senate Democrats have not drafted a comparable bill.

The Bush administration, meanwhile, announced a new alliance of mortgage companies and nonprofit counseling groups that would try to help homeowners switch out of expensive subprime loans before they fall behind on payments and lose their houses.

The Treasury secretary, Henry M. Paulson Jr., said that the group, which includes 11 of the nation’s biggest mortgage servicing companies, had developed “an aggressive plan” to help borrowers find cheaper fixed-rate mortgages.

Administration officials and many housing experts contend that a large number of people who took out expensive subprime mortgages, which can carry interest rates above 10 percent, may have credit good enough to qualify for more traditional loans.

About two million people bought homes with subprime loans that offered low introductory monthly payments; those payments are set to jump sharply over the next 18 months as the initial teaser rates expire.

Administration officials offered no details on what new terms mortgage lenders might be willing to offer borrowers who cannot qualify for conventional loans.

And some industry experts said the initiative would not untangle the biggest obstacle to renegotiating mortgages — the fact that most subprime loans have been packaged into complex securities and sold to investors around the world.

“I think this is a good program to the extent that it works,” said Christopher J. Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School. “However, there is a certain political/P.R. element to this program and this announcement, in that lenders and borrowers should always be doing this, with or without government involvement.”

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said he supported Mr. Paulson’s effort. But Mr. Frank would go much further than the White House. He was the primary author of the bill to provide a new affordable housing fund, which the White House opposes.

He has also proposed other measures, which the administration opposes even more fiercely, that would change bankruptcy laws to give mortgage borrowers more bargaining power with lenders.

A survey by Moody’s Investors Service last month indicated that mortgage service companies modified only 1 percent of all mortgages with expiring teaser rates last year.

Delinquency and foreclosure rates on subprime loans have doubled in the last year, and industry analysts say most of those borrowers ran into trouble before the initial teaser rates expired.

The problems are expected to get much more severe in the months ahead, because housing prices and home sales are falling in most parts of the country.

Falling home prices mean a growing number of people have mortgages that are bigger than the value of their homes. And plunging home sales mean that homeowners face much greater difficulty selling their homes for enough money to repay their debt.

Many subprime borrowers had avoided problems in recent years by getting new loans with new teaser rates. But that option all but disappeared this summer after investors began to panic about soaring default rates.

Alphonso Jackson, the secretary of housing and urban development, predicted last month that 500,000 homes could end up in foreclosure in the next year or so. But some analysts on Wall Street warned that the number could be much higher.

[SD Realtor]

Wow I can used one of the most rarely heard phrases of our time…

Good for Bush…

BSR –

from the quote above “nation’s two government-sponsored mortgage finance companies and the Federal Housing Administration’s insurance program to channel up to $900 million a year into a new fund for affordable housing.”

government sponsored translates to taxpayer dollars…stuff like this just kills me!!! (as you know)

[SD Realtor]

Wow I can used one of the most rarely heard phrases of our time…

Good for Bush…

BSR –

from the quote above “nation’s two government-sponsored mortgage finance companies and the Federal Housing Administration’s insurance program to channel up to $900 million a year into a new fund for affordable housing.”

government sponsored translates to taxpayer dollars…stuff like this just kills me!!! (as you know)

[bsrsharma]

I don’t think that spending bill will get 60 votes in Senate. Bush’s threat is good but won’t be needed.

But in the scheme of things, $900M is really small potatos. Even @ $100K a pop, they can help a maximum of 9000 homeowners. There are that many troubled borrowers in a Town. This is a Trillion $ mess; A Billion $ is only sufficient for wallpaper to cover the real cracks.

[bsrsharma]

I don’t think that spending bill will get 60 votes in Senate. Bush’s threat is good but won’t be needed.

But in the scheme of things, $900M is really small potatos. Even @ $100K a pop, they can help a maximum of 9000 homeowners. There are that many troubled borrowers in a Town. This is a Trillion $ mess; A Billion $ is only sufficient for wallpaper to cover the real cracks.

[SD Realtor]

BSR… any money is to much money in my book. It is not okay to say well a little bit here will not make a dent, and a little bit there will not make a dent. When you let someone be irresponsible (if only by a little bit at a time) then they will continue to do so…

I hope Bushes veto will not be needed. However it is only a matter of time before Hillary is president. I would be more then happy to wager that Hillary will not only not veto something like this, but she will most likely sponser many more bills like this.

SD Realtor

[SD Realtor]

BSR… any money is to much money in my book. It is not okay to say well a little bit here will not make a dent, and a little bit there will not make a dent. When you let someone be irresponsible (if only by a little bit at a time) then they will continue to do so…

I hope Bushes veto will not be needed. However it is only a matter of time before Hillary is president. I would be more then happy to wager that Hillary will not only not veto something like this, but she will most likely sponser many more bills like this.

SD Realtor

[cr]

I saw an interview today and I think Bush really wants to help people, but he may actually be smart enough to know only a infinitessimal percentage actually deserve help, although I don’t know how you qualify them.

The problem is he can’t shut the door on the idea of government assistance because it’s become a political issue. As if his approval rating could go down anymore. Despite the foreclosure problem being worse than ever, it’s still less than 5% of the population, so his approval rating might actually go up if he does nothing.

[cr]

I saw an interview today and I think Bush really wants to help people, but he may actually be smart enough to know only a infinitessimal percentage actually deserve help, although I don’t know how you qualify them.

The problem is he can’t shut the door on the idea of government assistance because it’s become a political issue. As if his approval rating could go down anymore. Despite the foreclosure problem being worse than ever, it’s still less than 5% of the population, so his approval rating might actually go up if he does nothing.

[donaldduckmoore]

“Administration officials and many housing experts contend that a large number of people who took out expensive subprime mortgages, which can carry interest rates above 10 percent, may have credit good enough to qualify for more traditional loans.”

The only way to help them is to keep their teaser rates and switch that to a 30 years fix. Will this happen? Everything above the teaser rates will kill them anyway because they bought houses that were already overpriced and unaffordable to them.

[donaldduckmoore]

“Administration officials and many housing experts contend that a large number of people who took out expensive subprime mortgages, which can carry interest rates above 10 percent, may have credit good enough to qualify for more traditional loans.”

The only way to help them is to keep their teaser rates and switch that to a 30 years fix. Will this happen? Everything above the teaser rates will kill them anyway because they bought houses that were already overpriced and unaffordable to them.

[Anonymous]

“because they bought houses that were already overpriced and unaffordable to them” are two different issues.

Overpriced is a matter of opinion and irrelevant to this discussion. Based on my experience as a Realtor, at least 50% of the people who I see in trouble refinanced and pulled equity out of their homes. If they hadn’t done that, they would be able to afford their payments. The other half simply shouldn’t have gotten tied up in that size of mortgage and the banks allowed them to do so instead of saying no, you can’t afford it. Then there is a small percentage of people who lost a job, lost a spouse, had a medical problem, etc. that caused their income to change and they can’t afford their home.

Is it the government’s job to help any of these people? In my opinion, it would probably be better for the banks to step in on a case by case basis, but even though problem loans represent a small percentage of all loans it’s a huge volume for banks to deal with.

[Anonymous]

“because they bought houses that were already overpriced and unaffordable to them” are two different issues.

Overpriced is a matter of opinion and irrelevant to this discussion. Based on my experience as a Realtor, at least 50% of the people who I see in trouble refinanced and pulled equity out of their homes. If they hadn’t done that, they would be able to afford their payments. The other half simply shouldn’t have gotten tied up in that size of mortgage and the banks allowed them to do so instead of saying no, you can’t afford it. Then there is a small percentage of people who lost a job, lost a spouse, had a medical problem, etc. that caused their income to change and they can’t afford their home.

Is it the government’s job to help any of these people? In my opinion, it would probably be better for the banks to step in on a case by case basis, but even though problem loans represent a small percentage of all loans it’s a huge volume for banks to deal with.

[Author]

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