Morgage bailout bill explained

[SK in CV]

If the FHA is providing insurance on the loan, I assure you they will demand old tax returns, specially if they’re as recent as 2005 (That’s still an open year for IRS audits), if current income couldn’t have supported the original loan that is being refinanced. You’re right on the “I didn’t know” defense. But only if it’s credible. (A handwritten preliminary loan app, in the borrowers handwriting, for instance might mke that defense not credible) The FHA has a long history of demanding stringent underwriting standards. The last 4 years have helped many in the industry to forget the headaches of getting an FHA loan funded. They have never made it easy. I don’t suspect that will change.

[garysears]

I understand the explanation to mean that anyone who currently has an overinflated mortgage in a declining market could in theory get some of the loan forgiven.

It looks like it would all come down to a judgement by the bank as to who is likely to default without such debt forgiveness. It also appears it might encourage people to stop making payments in hopes of getting bailed out.

I’m thinking this incentive could make things more difficult for the banks. If I’ve been making payments on time, but am tired of the debt burden, why shouldn’t I stop paying, get a NOD as leverage, and request my “bail out”? It seems this “cure” might cause more NODs and loan writedowns than would otherwise happen.

[garysears]

I understand the explanation to mean that anyone who currently has an overinflated mortgage in a declining market could in theory get some of the loan forgiven.

It looks like it would all come down to a judgement by the bank as to who is likely to default without such debt forgiveness. It also appears it might encourage people to stop making payments in hopes of getting bailed out.

I’m thinking this incentive could make things more difficult for the banks. If I’ve been making payments on time, but am tired of the debt burden, why shouldn’t I stop paying, get a NOD as leverage, and request my “bail out”? It seems this “cure” might cause more NODs and loan writedowns than would otherwise happen.

[garysears]

I understand the explanation to mean that anyone who currently has an overinflated mortgage in a declining market could in theory get some of the loan forgiven.

It looks like it would all come down to a judgement by the bank as to who is likely to default without such debt forgiveness. It also appears it might encourage people to stop making payments in hopes of getting bailed out.

I’m thinking this incentive could make things more difficult for the banks. If I’ve been making payments on time, but am tired of the debt burden, why shouldn’t I stop paying, get a NOD as leverage, and request my “bail out”? It seems this “cure” might cause more NODs and loan writedowns than would otherwise happen.

[garysears]

I understand the explanation to mean that anyone who currently has an overinflated mortgage in a declining market could in theory get some of the loan forgiven.

It looks like it would all come down to a judgement by the bank as to who is likely to default without such debt forgiveness. It also appears it might encourage people to stop making payments in hopes of getting bailed out.

I’m thinking this incentive could make things more difficult for the banks. If I’ve been making payments on time, but am tired of the debt burden, why shouldn’t I stop paying, get a NOD as leverage, and request my “bail out”? It seems this “cure” might cause more NODs and loan writedowns than would otherwise happen.

[garysears]

I understand the explanation to mean that anyone who currently has an overinflated mortgage in a declining market could in theory get some of the loan forgiven.

It looks like it would all come down to a judgement by the bank as to who is likely to default without such debt forgiveness. It also appears it might encourage people to stop making payments in hopes of getting bailed out.

I’m thinking this incentive could make things more difficult for the banks. If I’ve been making payments on time, but am tired of the debt burden, why shouldn’t I stop paying, get a NOD as leverage, and request my “bail out”? It seems this “cure” might cause more NODs and loan writedowns than would otherwise happen.

[Raybyrnes]

garysears

Isn’t this exactly what people do to credit card companies. Run up a huge bill, threaten to declare BK and settle the tab in credit counseling at 30 cents on the dollar.

[Raybyrnes]

garysears

Isn’t this exactly what people do to credit card companies. Run up a huge bill, threaten to declare BK and settle the tab in credit counseling at 30 cents on the dollar.

[Raybyrnes]

garysears

Isn’t this exactly what people do to credit card companies. Run up a huge bill, threaten to declare BK and settle the tab in credit counseling at 30 cents on the dollar.

[Raybyrnes]

garysears

Isn’t this exactly what people do to credit card companies. Run up a huge bill, threaten to declare BK and settle the tab in credit counseling at 30 cents on the dollar.

[Raybyrnes]

garysears

Isn’t this exactly what people do to credit card companies. Run up a huge bill, threaten to declare BK and settle the tab in credit counseling at 30 cents on the dollar.

[garysears]

Raybyrnes, it seems like the same thing to me. It would be difficult to distinguish the difference between real financial problems and “buyer’s remorse”.

I didn’t read the text of the bill, but where is the bank’s incentive to write down the debt? Why not just foreclose and attempt to get full market value rather than writing down lower so the borrower is no longer underwater?

[garysears]

Raybyrnes, it seems like the same thing to me. It would be difficult to distinguish the difference between real financial problems and “buyer’s remorse”.

I didn’t read the text of the bill, but where is the bank’s incentive to write down the debt? Why not just foreclose and attempt to get full market value rather than writing down lower so the borrower is no longer underwater?

[garysears]

Raybyrnes, it seems like the same thing to me. It would be difficult to distinguish the difference between real financial problems and “buyer’s remorse”.

I didn’t read the text of the bill, but where is the bank’s incentive to write down the debt? Why not just foreclose and attempt to get full market value rather than writing down lower so the borrower is no longer underwater?

[garysears]

Raybyrnes, it seems like the same thing to me. It would be difficult to distinguish the difference between real financial problems and “buyer’s remorse”.

I didn’t read the text of the bill, but where is the bank’s incentive to write down the debt? Why not just foreclose and attempt to get full market value rather than writing down lower so the borrower is no longer underwater?

[Author]

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