Bailout – What does it mean for real estate for us waiting?

[Huckleberry]

Here is my take on this.

Based on this article:
http://money.cnn.com/2008/10/01/real_estate/hope_for_homeowners/index.htm

The new $300 billion Hope for Homeownership program will more than likely be a template for subsequent programs.

It states these criteria for eligibility:

– have taken out their mortgages on or before Jan. 1, 2008 and have made at least six payments.

– be unable to afford their current loan, but did not intentionally miss payments.

– have a debt-to-income ratio of at least 31%.

– live in the house and not own other homes.

– have provided accurate information on their loan documents and not been convicted of fraud in the past decade.

Under the program, borrowers will get:

– a 30-year, fixed rate mortgage of up to $550,440.

– a new appraisal and loan for no more than 90% of the home’s value.

– released from second mortgages and prepayment penalties.

– But homeowners must pay a premium of 3% of the loan’s value upfront, and 1.5% of the outstanding mortgage amount annually. Also, they must share any appreciation in the home’s value with the FHA when they sell.

But, based on MR. Mortgages analysis of the banks and modeling of RE values:
http://mrmortgage.ml-implode.com/2008/09/30/banks-bad-math-home-price-indexing-responsible/

I can’t see how this convinces SoCal owners to use the program(s), considering how upside down most are. I would personally rather walk away than pay 10% down (based on the new loan only being 90% of appraised value), 3% premium, a 1.5% annual fee plus appreciation sharing w/ FHA.

I would much rather walk away, take the credit hit, save money while renting, let values decline more, then try again in five years.

Additionally, without the exotic loan programs there still aren’t enough buyers on the fence to soak up all of the coming inventory. This is backed up by MM analysis of how the bailout doesn’t even scratch the surface of the defaults in the pipeline:
http://mrmortgage.ml-implode.com/2008/09/23/mortgage-defaults-already-at-50bb-per-month700bb-wont-go-too-far/

And again, I can guarantee many won’t even qualify for this program, as they will be proven to have fraudulently acquired their original loans.

So Piggs, what are your thoughts on this? I would also like to hear some opinions…

peterb and temeculaguy, what are your thoughts? You guys usually have good insight to these topics…

[jpinpb]

Is the 700 Billion based on the 300 billion Hope project. I thought it was going to instantly reduce loans 20%.

[jpinpb]

Is the 700 Billion based on the 300 billion Hope project. I thought it was going to instantly reduce loans 20%.

[jpinpb]

Is the 700 Billion based on the 300 billion Hope project. I thought it was going to instantly reduce loans 20%.

[jpinpb]

Is the 700 Billion based on the 300 billion Hope project. I thought it was going to instantly reduce loans 20%.

[jpinpb]

Is the 700 Billion based on the 300 billion Hope project. I thought it was going to instantly reduce loans 20%.

[kewp]

Actually, I think the bailout is going to accelerate a decline in home prices.

My thinking is that the point of all this is to ‘unstick’ the credit markets and get banks lending again. Remember its sales that set the comps and push the prices down. Given tightening lending requirements and the fact that the ‘bloom is off the rose’ regarding RE as an investment, I can’t see anywhere to go but down.

The scary thing is that the bailout is probably going to force bigger future bailouts, as tumbling house prices will cause more folks to toss the keys.

[kewp]

Actually, I think the bailout is going to accelerate a decline in home prices.

My thinking is that the point of all this is to ‘unstick’ the credit markets and get banks lending again. Remember its sales that set the comps and push the prices down. Given tightening lending requirements and the fact that the ‘bloom is off the rose’ regarding RE as an investment, I can’t see anywhere to go but down.

The scary thing is that the bailout is probably going to force bigger future bailouts, as tumbling house prices will cause more folks to toss the keys.

[kewp]

Actually, I think the bailout is going to accelerate a decline in home prices.

My thinking is that the point of all this is to ‘unstick’ the credit markets and get banks lending again. Remember its sales that set the comps and push the prices down. Given tightening lending requirements and the fact that the ‘bloom is off the rose’ regarding RE as an investment, I can’t see anywhere to go but down.

The scary thing is that the bailout is probably going to force bigger future bailouts, as tumbling house prices will cause more folks to toss the keys.

[kewp]

Actually, I think the bailout is going to accelerate a decline in home prices.

My thinking is that the point of all this is to ‘unstick’ the credit markets and get banks lending again. Remember its sales that set the comps and push the prices down. Given tightening lending requirements and the fact that the ‘bloom is off the rose’ regarding RE as an investment, I can’t see anywhere to go but down.

The scary thing is that the bailout is probably going to force bigger future bailouts, as tumbling house prices will cause more folks to toss the keys.

[kewp]

Actually, I think the bailout is going to accelerate a decline in home prices.

My thinking is that the point of all this is to ‘unstick’ the credit markets and get banks lending again. Remember its sales that set the comps and push the prices down. Given tightening lending requirements and the fact that the ‘bloom is off the rose’ regarding RE as an investment, I can’t see anywhere to go but down.

The scary thing is that the bailout is probably going to force bigger future bailouts, as tumbling house prices will cause more folks to toss the keys.

[patientrenter]

There are only a few key people really driving the bailout bus. They include Barney Frank, Chris Dodd, Chuck Schumer, Paulson, and Bernanke. Each of them has made very clear that they will not be satisfied with the bailouts until they make home prices stop falling.

Will the particular programs put in place so far achieve that goal? I don’t know and it’s irrelevant. What matters is whether the govt has the ability, using all its powers now and in the future, to prevent a quick return to historical norms for house prices.

I know which way I’d bet on that.

[patientrenter]

There are only a few key people really driving the bailout bus. They include Barney Frank, Chris Dodd, Chuck Schumer, Paulson, and Bernanke. Each of them has made very clear that they will not be satisfied with the bailouts until they make home prices stop falling.

Will the particular programs put in place so far achieve that goal? I don’t know and it’s irrelevant. What matters is whether the govt has the ability, using all its powers now and in the future, to prevent a quick return to historical norms for house prices.

I know which way I’d bet on that.

[patientrenter]

There are only a few key people really driving the bailout bus. They include Barney Frank, Chris Dodd, Chuck Schumer, Paulson, and Bernanke. Each of them has made very clear that they will not be satisfied with the bailouts until they make home prices stop falling.

Will the particular programs put in place so far achieve that goal? I don’t know and it’s irrelevant. What matters is whether the govt has the ability, using all its powers now and in the future, to prevent a quick return to historical norms for house prices.

I know which way I’d bet on that.

[patientrenter]

There are only a few key people really driving the bailout bus. They include Barney Frank, Chris Dodd, Chuck Schumer, Paulson, and Bernanke. Each of them has made very clear that they will not be satisfied with the bailouts until they make home prices stop falling.

Will the particular programs put in place so far achieve that goal? I don’t know and it’s irrelevant. What matters is whether the govt has the ability, using all its powers now and in the future, to prevent a quick return to historical norms for house prices.

I know which way I’d bet on that.

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