House Approves Plan to Help Struggling Homeowners Avoid Foreclosure

[Coronita]

Doesn't look good. When you have a democrat controlled congress, and possibly a democrat controlled Prez in the future, we're going to see more of this. Nothing wrong with democrats. But, when the government lacks party balance, as we've seen in the past with a Republican controlled gov, things actually can get done, for better or worse.

http://biz.yahoo.com/ap/070918/congress_mortgages.html?.v=12

 

You folks better pray this bill makes it to the the pres before election, and it gets vetoed.

 

 

 

 

House Approves Plan to Help Struggling Homeowners Avoid Foreclosure

WASHINGTON (AP) — The House on Tuesday approved a plan to expand federal backing of mortgages in hopes of helping struggling homeowners avoid foreclosure. Despite some White House objections, the Bush administration and House Democrats took conciliatory stances pointing toward resolving their differences.

The bill passed the House 348-72. It would allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to back refinanced loans for tens of thousands of borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial "teaser" levels.

Brian Montgomery, the Housing and Urban Development assistant secretary who heads the FHA, said the legislation could enable more than 200,000 homeowners whose loans are excluded from federal backing to come under the agency's umbrella.

"This is a historic day for FHA," Montgomery told reporters after the vote. He said the administration remains concerned about specific provisions — notably much higher limits in the bill for mortgages that could be insured by the agency, as much as $729,750 in high-cost areas compared with the current $362,000. However, Montgomery added, "I feel optimistic we'll work out these differences" as the legislation moves through Congress.

In the Senate, the Banking Committee is expected to vote Wednesday on a version of the legislation proposed by panel chairman Sen. Christopher Dodd, D-Conn., and its senior Republican, Sen. Richard Shelby of Alabama.

The House measure is Congress' first stand-alone bill passed in response to the mortgage-market tumult of the summer, which came amid a rising tide of defaults and foreclosures. The Senate last week approved spending legislation that includes $200 million in aid to nonprofits and other groups that offer counseling and information to help homeowners avoid foreclosure.

"The American dream is in peril for many families in this country as foreclosures rise and dreams shatter," Rep. Betty Sutton, a Democrat from Ohio, a state particularly hard-hit by the default wave, declared in House debate before the vote.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said he wanted to whisk the new House measure to the Senate along with a bill to tighten government oversight of mortgage finance giants Fannie Mae and Freddie Mac. The administration has insisted such legislation was needed before restraints on the amounts of mortgage securities the two government-sponsored companies are allowed to buy and hold could be eased.

Frank said he was ready to be flexible in negotiations with the White House on the legislative proposals and that he believed their enactment was possible before Thanksgiving.

In debate, House Republicans sharply objected to a $300 million-a-year fund for grants for affordable rental housing and homeownership assistance for low-income families, which would be financed from FHA revenues — a plan also opposed by the administration. Rep. Ed Royce, R-Calif., called it "an experiment in socialism."

But Republicans mostly were swept along in the vote for the bill, whose overall thrust they endorsed in the face of the mortgage crisis.

The bad news deepened again on Tuesday. Research firm RealtyTrac Inc. said the number of foreclosure filings reported in the United States last month more than doubled compared with August 2006 and jumped 36 percent from July — a trend signaling that many homeowners are increasingly unable to make timely payments on their mortgages or sell their homes amid the housing slump.

An estimated 2 million to 2.5 million adjustable-rate mortgages are scheduled to "reset" this year and next, jumping from low "teaser" rates for the first two or three years to much steeper rates that could cost borrowers their homes. The wave of resets could crest during the presidential and congressional election campaigns next year, and the issue has brought politically charged debate in recent weeks over possible responses by the government.

At the same time, turbulence in financial and credit markets resulting from the mortgage upheaval has cast a shadow over the economy and raised the specter of a possible recession.

Government officials and real-estate industry interests maintain that the FHA, which now backs some 3.7 million loans in the event of default, is hamstrung by existing law. The size of mortgages the agency can insure is often too small to attract borrowers in expensive areas such as California and the Northeast — reducing the FHA'S share of the home-loan market to around 4 percent from 19 percent a decade ago.

The House bill is H.R. 1852.

 

[luxuryglow]

On my way home, i overheard on the radio something about foreclosure amnesty… can someone explain this issue?
Thanks

[LookoutBelow]

Its a great big NADA….re-election smoke being blown here…..watch what they DO…..not what they SAY…..maybe 3% of screwed homeowners would actually benefit from this silliness …..This means nothing

[HLS]

I dunno lookout….
There is a HUGE attempt to confuse the general population about what is happening, on the pretext of saving the little guy. If they do raise limits, it’s a #@(&^$! BAILOUT that will be at taxpayer’s expense….

Haven’t heard it called “amnesty” but in many cases the foreclosure decision was helped by the fact that the borrower owes more on the house than it is worth, can’t sell it for what they owe, better to walk away anyway.

What is the lender going to do with it ?, other than sell it for a loss and spend a pile of money in the process.
Real etstate agents get commissions for selling foreclosures too.

The govt AND lender would rather keep people buried in an overpriced home on the guise of “we want to help you” so keep paying your lender… (If the home was worth more, they wouldn’t be so willing to help) Call it amnesty, whatever, it sounds better than BAILOUT.

SO, raise the limits so they can keep a Californian buried and saddled with $600K worth of debt and interest payments, in a house with no equity. What exactly are you saving if you have Zero or negative equity ??

THE ANSWER is to allow foreclosures as necessary. We need a free market without intervention. Let the people who bought and couldn’t afford it know that it WASN’T an OK thing to do, and you aren’t going to get bailed out.

Let the prices fall until supply and demand kicks in, so those that KNEW they couldn’t afford to buy in the past and waited are rewarded with lower prices.

And if they REALLY wanted to help the buried homeowners , they would let the foreclosures happen, and the guy that owes $600K today can go rent for a few years, save up some money, and buy a house in the same neighborhood he has today (that he cannot afford today) for $300K and owe less at that time and still own a house. (probably wont save any money, that was humor)

Please tell me which is better for the govt protecting the system from collapsing… and which scenario is REALLY better for the borrower ?

The govt is (or should be) embarrassed, ashamed and scared, among other things.
The time for them to intervene isn’t in 2007, it was in 2002 when the 100% financing started.
THAT was the time for them to butt in and require a down payment.

Even with cheap interest rates, I can assure you that market would have never exploded like it did.

There would be happy homeowners today and there would be lots of tenants for landlords just like it supposed to be.

[carlover]

The original poster was hoping for a quick veto of this bill by the president. But, like it or not, with a vote of 348-72 that is impossible. Congress needs to have a 2/3 YES vote to override a presidential veto or 0.66%, but the bill passed the house with an 83% YES vote.

That being said this still has to go through the Senate and get consolidated into a single bill which could take some time.

[patientlywaiting]

Good post, HLS. Exactly right. What’s there to save if you have zero equity?

[Ex-SD]

HLS: BINGO!!!!
With an election year approaching, these stupid politicians are simply pandering for votes and as usual………..they’re going to sell out the American public. They don’t care how much damage they do because they’ll get theirs back with kick-backs and their usual big increase in salary & benefits that they always vote for themselves. You are 100% correct that the housing market simply needs to correct itself to get things in proper alignment. The politicians are only going to do more damage to the overall economy with this foolishness.

[HLS]

Ex-SD…
You wouldn’t be saying this JUST so YOU can buy back in at 50% of what you sold at would you 😉

“You are 100% correct that the housing market simply needs to correct itself”

Take 100 upside homeowners at random and ask them:

A) How about we foreclose on your house, drop your credit score a bit, let you walk away with no 1099 debt relief consequence, you go rent for a few years while the PIGG’s folks straighten this mess out FOR YOU, You save up a few bucks, and you can buy a similar house back and owe half as much money as you do today, after saving a whole bunch by renting….Then you will owe $300K instead of $600K
OR
B) How about we figure out a way that you can continue to pay interest on a $600K house that’s really worth about $300K,
that you don’t have any equity in today anyway, and we don’t really know what the heck we are talking about, (cuz if we did you wouldn’t be in this mess) but hopefully in a few years this mess will sort itself out. C'[mon, it’s an election year and WE WANT TO HELP. You will continue to be strapped, and will still owe about $600K in a few years, but the good part is, YA don’t have to move. Your credit score is probably crappy right about now anyway. So we are going to help you, just like we are helping those poor folks in New Orleans who live in a punchbowl……

Ummmmm, which one is REALLY better for the homeowner…
A or B ??? ???

[Ex-SD]

HLS: LOL!
It’s going to take a 50% hit in the SD housing market to entice me to move back. I’m liking it here more & more with each passing month.

It’s fascinating to watch this huge firestorm and look at the politicians scurrying to the money well with their buckets in an attempt to put it out. In a few months, they will figure out that there’s really nothing they can do but let it burn itself out…………………..then the Fed will start raising rates because we’ll be in a horrible recession (or depression). It’s not going to be pretty.

[HLS]

EX-SD, I know what you are thinking! I’d love to have you as a neighbor when you load up the wagon train and venture back west.

I’d love to be a fly on the wall when these big boys are together.
I firmly believe that what they say in public and and what they really think is 180 degrees difference.

I still remember when Greenspan uttered “irrational exuberance” why he didn’t say… You folks are insane idiots for paying the prices for these worthless stocks.
Ya gotta know that’s what he was thinking, and wanted to say.

SO… Just suppose, Bernanke calls Greenspan before his first speech and says, “UM,, Al,, How ya doin,, It’s Ben.
Ummm,, Do I tell those whackjobs in CA that they are being stupid paying that kind of money for stucco boxes ?”

AL says, “Ben, are you kidding me? I shouldn’t be telling you this, but my blind trust is long all the home builders, it’s not too late to get in on the action” So Ben says,. “OH OH,, OK,, AL. thanks, got it. UMM can I utter ‘irrational exuberance’ ?”

Al says ” Ben, you’re a big boy, just keep talking and tell them that you will be monitoring the situation and will watch it closely,, and ALWAYS add ‘We are doing EVERYTHING that we can’ It’s a great line to use, people think that ya mean it. The longer you talk, the fewer people listen, and even less understand. Kudlow and Cramer will argue over each word later, DON’T WORRY”

Ben says “OK OK,, Thanks AL..”

Al says “Ben,, two more things, get in on those homebuilder stocks, I’m telling you, It’s not too late”
Ben “OK AL. what’s the 2nd thing”

Al says “Oh ya..if that Maria from CNBC asks for an interview, do it Ben, she’s a cutie”

[Author]

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