Morgage bailout bill explained

[studenteconomist]

I read a great article on CNN Money about the morgage bailout bills winding their way through congress currently.

http://money.cnn.com/2008/05/13/news/economy/fha_expansion_101/index.htm?postversion=2008051312

It finally spells out what the lender and payer give up to avoid a foreclosure. My first reaction was, ok, so the lender loses 15% of the loan beyond the current market value (which could add another 30% loss), and the home owner has to pay back at least 50% of the future appreciation back to the go FHA as well as pay a 1.5% premium per year. So the home owner is not getting off scott free (I have simplified it, please read the whole article). BUt then I realized that the best plan for the home owner is to sell the home after one year at 7% below the market value of the and not have to pay a cent extra. They are thus avoiding any foreclosure or credit hits, and could sell their home for easily 30% less then their loan.

For example,
A 500k house financed 100% in 2005 is now appraised 25% less (375k). Under the loan bailout bill, the lender would reduce the loan to 90% of the appraised value, or 337.5k. If the home owner now sells the home after just 1 year for 348.75k, they will be able to pay back the 3% FHA fee as well as the 337.5k loan. Thus the price from for the home is from 500k to 348.75k, a 30.3% discount!! What a bailout indeed. The “free” money the home owner got would equal over 150k off their original loan.
The one wrinkle, though, is that the bank must approve the re-write of the loan. I wonder how many banks will willingly choose a new loan that all but guarantees a 40-50% loss on the original loan??

[Eugene]

If anyone’s interested, here’s full text of the bill

http://www.house.gov/apps/list/press/financialsvcs_dem/h_r__3221.pdf

parts relevant to the bailout start at page 9

a few more notes:

– Owner occupied only.

– You must have current debt to income ratio above 35% to qualify.

– New payments “shall be in an amount that is substantially reduced from the debt service payments due under the existing mortgage or mortgages”. This could be a problem for many people. If you’re getting rewritten from a 5% IO ARM for 600k into 5.8+1.5% fixed 30-year for 450k, your payments go UP even though your balance is reduced by 25%. Those FHA premiums bite.

– Can’t take out second mortgages or loans on the property for 5 years, unless explicitly permitted by “the Oversight Board” to maintain the property.

[Eugene]

If anyone’s interested, here’s full text of the bill

http://www.house.gov/apps/list/press/financialsvcs_dem/h_r__3221.pdf

parts relevant to the bailout start at page 9

a few more notes:

– Owner occupied only.

– You must have current debt to income ratio above 35% to qualify.

– New payments “shall be in an amount that is substantially reduced from the debt service payments due under the existing mortgage or mortgages”. This could be a problem for many people. If you’re getting rewritten from a 5% IO ARM for 600k into 5.8+1.5% fixed 30-year for 450k, your payments go UP even though your balance is reduced by 25%. Those FHA premiums bite.

– Can’t take out second mortgages or loans on the property for 5 years, unless explicitly permitted by “the Oversight Board” to maintain the property.

[Eugene]

If anyone’s interested, here’s full text of the bill

http://www.house.gov/apps/list/press/financialsvcs_dem/h_r__3221.pdf

parts relevant to the bailout start at page 9

a few more notes:

– Owner occupied only.

– You must have current debt to income ratio above 35% to qualify.

– New payments “shall be in an amount that is substantially reduced from the debt service payments due under the existing mortgage or mortgages”. This could be a problem for many people. If you’re getting rewritten from a 5% IO ARM for 600k into 5.8+1.5% fixed 30-year for 450k, your payments go UP even though your balance is reduced by 25%. Those FHA premiums bite.

– Can’t take out second mortgages or loans on the property for 5 years, unless explicitly permitted by “the Oversight Board” to maintain the property.

[Eugene]

If anyone’s interested, here’s full text of the bill

http://www.house.gov/apps/list/press/financialsvcs_dem/h_r__3221.pdf

parts relevant to the bailout start at page 9

a few more notes:

– Owner occupied only.

– You must have current debt to income ratio above 35% to qualify.

– New payments “shall be in an amount that is substantially reduced from the debt service payments due under the existing mortgage or mortgages”. This could be a problem for many people. If you’re getting rewritten from a 5% IO ARM for 600k into 5.8+1.5% fixed 30-year for 450k, your payments go UP even though your balance is reduced by 25%. Those FHA premiums bite.

– Can’t take out second mortgages or loans on the property for 5 years, unless explicitly permitted by “the Oversight Board” to maintain the property.

[Eugene]

If anyone’s interested, here’s full text of the bill

http://www.house.gov/apps/list/press/financialsvcs_dem/h_r__3221.pdf

parts relevant to the bailout start at page 9

a few more notes:

– Owner occupied only.

– You must have current debt to income ratio above 35% to qualify.

– New payments “shall be in an amount that is substantially reduced from the debt service payments due under the existing mortgage or mortgages”. This could be a problem for many people. If you’re getting rewritten from a 5% IO ARM for 600k into 5.8+1.5% fixed 30-year for 450k, your payments go UP even though your balance is reduced by 25%. Those FHA premiums bite.

– Can’t take out second mortgages or loans on the property for 5 years, unless explicitly permitted by “the Oversight Board” to maintain the property.

[Ex-SD]

Any way you look at this ridiculous bill, it’s a bunch of horse crap. Why in the world should the taxpayer’s of the USA bail out people who bought a home and it didn’t turn out the way they expected? There is no precedent for passing this bill. Other than bleeding-heart idiots like Barney Frank (who couldn’t hit himself in the butt with both hands) and his socialist cohorts who are pushing this legislation, what kind of responsible politician would vote for this foolishness? I don’t personally know one person who is for this bill. At least Bush (whom I have little regard for) has come out against it and says that he will veto the bill. Whether he will follow through with his threat is another matter. I don’t think the bleeding-heart, giveaway artists in Congress can muster enough votes to override a Bush veto…….but who knows? It IS an election year and that can make politicians act dumber than they normally act.

If this passes, many of the people that get rescued will still default because their houses will continue to go down in value for several more years and probably not recover any appreciation for another 12-20 years. And thanks to Barney & Friends, the taxpayer will foot the bill because the Federal Govt is going to guarantee the loans. This is our government at it’s worst and the poster child for irresponsibility.

[Ex-SD]

Any way you look at this ridiculous bill, it’s a bunch of horse crap. Why in the world should the taxpayer’s of the USA bail out people who bought a home and it didn’t turn out the way they expected? There is no precedent for passing this bill. Other than bleeding-heart idiots like Barney Frank (who couldn’t hit himself in the butt with both hands) and his socialist cohorts who are pushing this legislation, what kind of responsible politician would vote for this foolishness? I don’t personally know one person who is for this bill. At least Bush (whom I have little regard for) has come out against it and says that he will veto the bill. Whether he will follow through with his threat is another matter. I don’t think the bleeding-heart, giveaway artists in Congress can muster enough votes to override a Bush veto…….but who knows? It IS an election year and that can make politicians act dumber than they normally act.

If this passes, many of the people that get rescued will still default because their houses will continue to go down in value for several more years and probably not recover any appreciation for another 12-20 years. And thanks to Barney & Friends, the taxpayer will foot the bill because the Federal Govt is going to guarantee the loans. This is our government at it’s worst and the poster child for irresponsibility.

[Ex-SD]

Any way you look at this ridiculous bill, it’s a bunch of horse crap. Why in the world should the taxpayer’s of the USA bail out people who bought a home and it didn’t turn out the way they expected? There is no precedent for passing this bill. Other than bleeding-heart idiots like Barney Frank (who couldn’t hit himself in the butt with both hands) and his socialist cohorts who are pushing this legislation, what kind of responsible politician would vote for this foolishness? I don’t personally know one person who is for this bill. At least Bush (whom I have little regard for) has come out against it and says that he will veto the bill. Whether he will follow through with his threat is another matter. I don’t think the bleeding-heart, giveaway artists in Congress can muster enough votes to override a Bush veto…….but who knows? It IS an election year and that can make politicians act dumber than they normally act.

If this passes, many of the people that get rescued will still default because their houses will continue to go down in value for several more years and probably not recover any appreciation for another 12-20 years. And thanks to Barney & Friends, the taxpayer will foot the bill because the Federal Govt is going to guarantee the loans. This is our government at it’s worst and the poster child for irresponsibility.

[Ex-SD]

Any way you look at this ridiculous bill, it’s a bunch of horse crap. Why in the world should the taxpayer’s of the USA bail out people who bought a home and it didn’t turn out the way they expected? There is no precedent for passing this bill. Other than bleeding-heart idiots like Barney Frank (who couldn’t hit himself in the butt with both hands) and his socialist cohorts who are pushing this legislation, what kind of responsible politician would vote for this foolishness? I don’t personally know one person who is for this bill. At least Bush (whom I have little regard for) has come out against it and says that he will veto the bill. Whether he will follow through with his threat is another matter. I don’t think the bleeding-heart, giveaway artists in Congress can muster enough votes to override a Bush veto…….but who knows? It IS an election year and that can make politicians act dumber than they normally act.

If this passes, many of the people that get rescued will still default because their houses will continue to go down in value for several more years and probably not recover any appreciation for another 12-20 years. And thanks to Barney & Friends, the taxpayer will foot the bill because the Federal Govt is going to guarantee the loans. This is our government at it’s worst and the poster child for irresponsibility.

[Ex-SD]

Any way you look at this ridiculous bill, it’s a bunch of horse crap. Why in the world should the taxpayer’s of the USA bail out people who bought a home and it didn’t turn out the way they expected? There is no precedent for passing this bill. Other than bleeding-heart idiots like Barney Frank (who couldn’t hit himself in the butt with both hands) and his socialist cohorts who are pushing this legislation, what kind of responsible politician would vote for this foolishness? I don’t personally know one person who is for this bill. At least Bush (whom I have little regard for) has come out against it and says that he will veto the bill. Whether he will follow through with his threat is another matter. I don’t think the bleeding-heart, giveaway artists in Congress can muster enough votes to override a Bush veto…….but who knows? It IS an election year and that can make politicians act dumber than they normally act.

If this passes, many of the people that get rescued will still default because their houses will continue to go down in value for several more years and probably not recover any appreciation for another 12-20 years. And thanks to Barney & Friends, the taxpayer will foot the bill because the Federal Govt is going to guarantee the loans. This is our government at it’s worst and the poster child for irresponsibility.

[drunkle]

“You must have current debt to income ratio above 35% to qualify.”

does that mean what i think it means? who is this bailout aimed at?

ex-sd: every idiot in washington is a bleeding heart socialist. it just depends on which social circle they belong to.

[drunkle]

“You must have current debt to income ratio above 35% to qualify.”

does that mean what i think it means? who is this bailout aimed at?

ex-sd: every idiot in washington is a bleeding heart socialist. it just depends on which social circle they belong to.

[drunkle]

“You must have current debt to income ratio above 35% to qualify.”

does that mean what i think it means? who is this bailout aimed at?

ex-sd: every idiot in washington is a bleeding heart socialist. it just depends on which social circle they belong to.

[drunkle]

“You must have current debt to income ratio above 35% to qualify.”

does that mean what i think it means? who is this bailout aimed at?

ex-sd: every idiot in washington is a bleeding heart socialist. it just depends on which social circle they belong to.

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