Obama mortgage aid targets distressed homeowners
The White House will use $75 billion to subsidize the loan payments of distressed mortgage-holders.
By Ron Scherer | Staff writer of The Christian Science Monitor/ February 18, 2009 edition
Reporter Ron Scherer discusses the potential effect of President Obama's new mortgage-relief plan.
Reporter Ron Scherer
New York
President Obama is approaching America’s burgeoning foreclosure problem with a bag full of new taxpayer-financed incentives to entice lenders to make millions of mortgages more affordable for distressed homeowners.
In a much-awaited announcement, the White House said Wednesday it will use $75 billion already authorized by Congress to essentially subsidize the mortgage payments of millions of Americans whose homes are now worth less than they owe. Much of the money will go to banks to reward them for amending mortgages to make them more affordable, but homeowners will also get a financial bonus for staying current with their mortgage payments.
Money would also be used – beyond the $75 billion – to bulk up Fannie Mae and Freddie Mac, the government-owned buyers of mortgages. This would allow them to acquire more loans.
“This is not a silver bullet, although I don’t think one exists,” says Mark Zandi, chief economist at Moody’s Economy.com. “This should be helpful to stem but not stop the continuing rise in foreclosures.”
Is the plan big enough?
While the White House plan involves billions of dollars, the size of the problem is even larger. Some $500 billion in mortgages, Mr. Zandi estimates, are underwater – meaning the value of the mortgage is higher than the value of the house.
“There is no way to help all $500 billion,” he says.
In 2008, there were 3.2 million foreclosure filings, estimates RealtyTrac, which tracks and sells foreclosure data. That’s an 81 percent increase over 2007.
“Depending on who you listen to, there could be 10 million to 13 million more foreclosures in the next five to six years,” says John Taylor, president of the National Community Reinvestment Coalition, which represents some 600 community groups in Washington. “That is pretty catastrophic.”
Target: responsible homeowners
The White House initiative, called the Homeowner Affordability and Stability Plan, is aimed at homeowners who are still making their monthly payments but cannot refinance because the value of their home has fallen so much. Because many homeowners have been unable to refinance their homes, their mortgage payments, particularly as a percentage of their income, have climbed as their adjustable-rate mortgages have reset.
Such a trend has been particularly challenging as the recession has deepened and layoffs have mounted.
“In the past, if you found yourself in a situation like this, you could have sold your home and bought a smaller one with more affordable payments. Or you could have refinanced your home at a lower rate,” said Mr. Obama Wednesday in Mesa, Ariz. “But today, home values have fallen so sharply that even if you make a large down payment, the current value of your mortgage may still be higher than the current value of your house. So no bank will return your calls, and no sale will return your investment. You can’t afford to leave and you can’t afford to stay.”
Bank, government share losses
Under one part of the White House plan, banks will take the first step, reducing a homeowner’s monthly payment to 38 percent of the homeowner’s income. Then, the government will step in, providing a subsidy to get the monthly payment down to 31 percent of the homeowner’s income. This part of the plan is for subprime mortgages – those made to people with less-than-stellar credit.
In a fact sheet, the White House estimates that the savings for a family with $200,000 remaining on a 30-year, fixed-rate 6.5 percent mortgage would come to $2,300 annually, or about $191 a month.
As an added incentive for borrowers to keep current, the plan also will give such borrowers $1,000 a year for five years that goes toward reducing the principal balance of a loan.
The carrot for the mortgage owner or servicer is an upfront payment of $1,000 for each mortgage that is modified downward. And, if the modification is successful, the bank will get another $1,000 a year for up to three years.
Additional Treasury plan
The new housing plan follows the US Treasury’s announcement that it was working on a plan to buy underperforming loans from US financial institutions. Treasury Secretary Timothy Geithner is still hammering out the details of the plan. But the plan announced Wednesday could help that effort if it reduces the number of foreclosed properties, says Alan White, an expert on loan modifications and a professor at Valparaiso University School of Law in Valparaiso, Ind.
“These two plans are closely related,” he says.
Mr. White is generally positive about the new approach. “These are all fairly thoughtful carrots,” he says. “But it would not hurt to use the power of the US Treasury or the FDIC [Federal Deposit Insurance Corp.] to strongly encourage the servicers to participate.”
However, Mr. Taylor says his organization is disappointed. “It will provide some help for homeowners on the fringe if interest rates dropped,” he says. “But I think their estimate of the amount of folks who will be helped is optimistic.”
Will banks go along?
For example, Taylor is not certain the banks will volunteer for the program. “Are those incentives enough to lop off tens of thousands of dollars that a homeowner will owe the bank?” he asks. And, he adds, the program is only slated to run for five years, after which the loans may revert back to their original status. “It just pushes off the problem for five years,” he says.
Some other housing experts were hoping the Obama administration would require modifications of the
principal amount owed. “Say someone bought a house for $400,000, and it’s now worth $200,000. They are just walking away from the mortgage,” says Jack McCabe of McCabe Research & Consulting in Deerfield Beach, Fla. “There is no incentive to keep making payments on houses that are continuing to decline.”
The Obama plan hopes to address this problem by stabilizing home prices.
( More stories )
Comments
2. island | 02.18.09
A “responsible homeowner” isn’t a “distressed mortgage-holder”… so the O-man is lying to us…. deceiving us, misleading us… whatever… something is not on the up and up.
And this is simply and honest observation… I did NOT vote for McCain.
3. red_gti2000 | 02.18.09
Ok, so I’m the responsible one who bought a small house 9 years ago on a 30-yr fixed that had less rooms than what I really need for my family because I didn’t want to overborrow. But then I thought it would be a starter home and I could trade up later. This economic crisis comes and shoots that plan all to hell… but I still have a job so I’m paying the mortgage on time.
Using an aggressive ARM, my neighbor bought a large house that he clearly couldn’t afford, with extra rooms for his kids and the nice basement playroom, large lawn, etc. Soon won’t be able to make the payments because of the ARM reset — and he knew this would happen from the start.
The government will now — with my taxes — subsidize him so he continues living in his nice, comfortable house. I, on the other hand, will continue to have my teenage kids sleep in bunk beds in a shared room, all of us sharing a single bathroom, etc. And watch him every day take out his nice BMW to work (probably purchased using a home-equity loan), while I ride the bus.
Nice one, Obama. You are so good-hearted.
4. RABO | 02.18.09
I am very happy to see that help is being offered to responsible homeowners who have been struggling to meet their obligations. This is the demographic that will lead the rise out of this recession. Relief for these people will quickly translate into additional spending, and help stimulate the larger economy.
The component aimed at assisting homeowners on the edge of default and those “underwater” will help stem the foreclosure rate.
Good ideas, all around.
5. bryan | 02.18.09
I was forced to refi at the very peak of the market and give the equity to my ex-wife as a court ordered property setlement.
I feel as though the courts, the judge, and thereby the government has cost me a lifetime of trouble. I can either walk away, or get assistance to offset some of the over 300 thousand more that the house appraised for in 2006, than it is actually worth now. Even if I stay, I got screwed hard by the exwife, courts, and the R.E. bubble.
6. Bill N. | 02.18.09
It concerns me that we keep covering natural losses that occur in up and down markets. It’s sending a bad message and starting a bad precedent: the government will be expected to make up for anything that goes wrong now and in the future. That’s unsustainable. It’s noble to try one on one, but to use taxpayer money and take from the rich and give to the poor, and to make poor the next generation, well, all that lacks nobility. We’re saving our skins without really having a plan to pay it back and then some.
7. j wilkerson | 02.18.09
My mortgage broker suggested allowing all mortgagees the opportunity to extend their 30 year mortgages to 40 year mortgages. I understand that probably will not help those losing their jobs in all mortgage debt ranges,not just sub prime debt, but it certainly would help some.
8. Larry Murner | 02.18.09
None of the plans presented so far do nothing to reward those financially responsible individuals or families. They only reward those that took “RISK” and knowingly over extended their credit. I would hope that by rewarding those responsible that they would find a way to help those neighbors or communities where they reside. I think that all the stimulating efforts are aimed at the same people or groups that created this situation and are not going to be the one’s that will make changes that they cannot accept or visualize. We should reward those Taxpayers that will continue to pay taxes and use the Stimulas dollars responsibly. Financially responsible people have worked hard to not rely on credit but saving and planning on the future.
If Stimulas dollars were directly given to responsible taxpayers with targets such as mortage payments or auto payments (if they are deliquent), this would directly affect each geographic economy. Why is our government addressing the TOP DOWN approach as government has always done. Obama should be considering the paradym shift that will get us away for the way we have always done things.
9. Bob Starrett | 02.18.09
Good effort but it does not address the primary issue, i.e “What is the value of the house in todays’s market?” Everyone is waiting to see where the bottom of the market is but the downward spiral is generated or at lease supported by the uncertainity about values. It’s catch 22.
Why don’t we use the study on equilibrium, see NAR study,and arbitraily assign value by regional analysis. If a marekt needs to adjust downward by 27.5% to meet equilibrium then the value is 72.5% of the origanl value. We would then have a floor or fixed point of value. Mortgage financing could then rely on a LTV at 80% of the equilibrium price. Equity position would be understood. we could then allow the market place through supply and demand get the inventory into balance.
This is probably not as simple as it sounds but at least it is a methodlogy tht everyone could work from.
10. Susan Ellen | 02.18.09
I beleive the idea of incentives to the homeowner to stay current is critical. Too many folks are walking away because they seemingly have no choice. With all that your putting into play with this stimulus plan, it seems that there should be also a penalty advanced on the homeowner if they simply walk away as well. For example, you will receive $1000 towards prinicpal for the next (5) years, you will have an adjustment on your mnthly that is comfortable to your income, but if you do not stay current, you owe back to the government the dollars invested.
11. Corporate Death | 02.18.09
“We do not publish all comments, and we do not publish comments immediately.”
This whole system is a sham. And, you are part of the problem.
12. Oma | 02.18.09
Great. I saved for 12 years, bought and small house that needed some work, but was what I could afford, and put down 20% ; and my house payment with property tax is 30 percent of my annual income. If only I had bought a large home I could not afford and not spent my savings on my downpayment I would have money for furniture, and maybe a vacation too, and still have the government bailing me out. I have learned a valuable life lesson here. Rules are just guidelines and suckers like myself end up paying for the rich and poor and middle class alike.
13. Theresa | 02.18.09
I believe a great incentive for both the banks and the government in helping out homeowners is; if the government steps in and asks the banks to lower the principal balance to what the house is actually worth today, then the government pays the bank that principal write-off to the bank. So the bank doesn’t lose money, but then the government gets it’s money back from the homeowner if the homeowner sells his or her house in the next 7 years. See if the homeowner stands to gain equity and sells his/her house in the next 7 years, then the government should get a portion of that equity as repayment back for lowering the principal balance. I believe this way, the banks would actually agree to help the homeowners and everyone, homeowner,bank,and government, all take part in lowering the payment.
15. capitalist | 02.18.09
If we “can’t help them all” then we should not help any of them. For every foreclosed home there is a buyer out there lurking, waiting for the oportunity, using responsible consumer habits. Just because people are loosing thier house does not make them homeless, ever heard of renting? What a joke, lets bail out all the junk loans and the junk borrowers all on the backs of those who can actually make thier bills.
16. Ted Ban | 02.18.09
Could someone please tell Obama that “responsible homeowners” don’t need his help?
17. j | 02.18.09
Cool. Maybe I can afford to flush my toilet soon. Couldn’t pay my sewer bill last month since I got laid off, so eh…
18. HappyTaxpayer | 02.18.09
I think this is great. There’s nothing I enjoy more than working 4 months out of every year to fulfill my tax obligation so that the government can help these poor individuals that took on more debt than they could afford plus all of the poor bankers that would have gone without their multi-million dollar performance bonuses. That’s what America is all about - helping out your fellow American con-artist and failed house flipper.
Good job Obama!!
19. Joe Baud | 02.18.09
Does this mean that I should stop making payments (even though I can still manage), let may mortgage fall into arrears so that I can get the $200+/- in savings? This might be a good way to offset the additional $200/monthin takes that I will have to pay to support the obama madness. Is this something akin to mad cow disease?
20. patrick | 02.18.09
Why not get rid of all sub-prime mortgages and lock them in at a fixed fair rate? Why is this not law? Pass a bill make it happen.
22. fred j | 02.18.09
what about the people who make ther payments —do we get any benefit for not buying to much house and makeing payments— buy a house for 300,ooo and now how to pay 150,000—– not a bad deal?
23. RspnsblAngryAznMan | 02.18.09
I’m just waiting for the Obama supporters to see how much they’ve fallen for the hype that was pushed onto them by the liberal media. You bought a house well away from what you can afford, believed in the hype of “Change we can belive in”, and voted for him. I hope you remember the decisions and choices you made in 2012.
24. jabber_wolf | 02.18.09
I can understand loaning money to banks, so they can start making loans and free up some liquidity in the system, as banks cant loan land they repossessed.
A loan is something we can get back and get all of it or maybe interest back on it but renegotiating loand terms so the rest of us have to pay for it?!?!
Share the losses?!!
What’s with stating the “Government” shares losses???
Why not speak the truth and admit the “rest of us” share the losses of idiots that bet(gambled) and lost on 5 year arms. Now “WE” must share their loss?
Hell no!
25. kia303 | 02.18.09
One simple question, since this is my taxpayer money do I get a share of ownership in every house that my tax dollars go too help them out???
26. LonghornMama | 02.18.09
At least President Obama is doing something. He needs to come to California where a small group of bandits is holding the entire state hostage.
27. joe | 02.18.09
When I first saw the article title, “Obama mortgage aid targets responsible homeowners”, I thought it meant that it would harm them and help out the irresponsible ones. There is probably a better title that could have shown that the bill was trying to help responsible owners, like “Obama mortgage aid focuses aid towards responsible homeowners” or something like that.
28. John Q Public | 02.18.09
I am sure I have the same question a lot of working Americans (and Democrats) have about Obama’s plan: What about his value structure leads him to define people who paid more for a house than they could afford going in “as responsible”. A lot of us who exercised true responsibility by either remaining renters or by buying a lesser house at an admittedly corruptly inflated price but within our means, have had our values and moral judgement slapped in the face by this.
I have no doubt that the privileged class of people Obama needs for re-election, despite their selfishness and poor judgement, will welcome this. It is ultimately an admission that we have a corrupt economic system that always rewards irresponsibility and just simply re-labels it “responsible”.
29. Patriot | 02.18.09
Is this new administration another puppet of the Banks? It is a time to understand, that the monetary system as it is now, doesn’t work. Think something new. If you can’t, than bring new people to the government that can. We still see the same faces, years after years, after years.
The governmental business - It’s look like a family business now. We need people that can control the Banks and Big Corporations and their GREED. Say hi to Bernanke, he is like a Salamander, never burns, never drowns.
30. Martin Turow | 02.18.09
This plan makes no sense. What is the logic behind “stabilizing” prices when they are still hyperinflated? Also, anywhere from a third to half of these modifications will fail, so what’s the point? Housing prices need to come down to affordable levels, not sustained at artificially high ones. This is a knee-jerk reaction and I’m extremely disappointed in Obama for supporting this. I know Obama wants to do something, but if he can’t get it right, he really would do better, at least in the case of housing, to not do anything.
31. Chuck Powell | 02.18.09
I am a responsilbe home owner and i have made my payments. I don’t have a big screen tv or a $50,000 dollar car in the garage. My wife and I both work. Where is the help we could use so we could have a retirement or take a vacation. We need to help the people who are paying their taxes and hard working legalized members of this society.
32. Gordon Gekko | 02.18.09
This plan is a joke! The banks get billions but down and out Americans save $191 a month while still having to pay their property and federal taxes, while being unemployed?
33. Ron M. | 02.18.09
A major weakness of the current plan is that it assumes that anyone whose house payment is less than 38% of their monthly is doing fine and doesn’t need any help. It’s painfully obvious that nothing could be further from the truth.
A lot of financial and mortgage experts have told me that what they REALLY need to do is support lowering interest rates across the board to a flat 3 or 4 percent, for everybody. Then tens of millions of homeowners could refinance through an accelerated process. If they lowered it to 3%, the average homeowner would gain about $300 a month. Homeowners in higher-market areas (e.g. California) could over $1,000. Remember, this would be cold cash in homeowners’ pockets. They could use it to pay off debt and buy goods and get both the state and national economies working again.
35. japrof | 02.18.09
What about those people that have been smart? What do we get out of this “stimulus plan?”
36. Dave | 02.18.09
How dare you say that this is responcible. I have never missed a payment, but no one will lower my rates or help me with my payments. I have to pay taxes to help all these idiots with their payments. This sucks “OBAMA”
37. Leric Goodman | 02.18.09
This dog won’t hunt. The proposal is tiny in comparison to a huge problem which is growing exponentially.
The only way to get the semblance of a normal market is to STOP FORECLOSURES — ALL OF THEM — for a period of 10 years. Then, if the debtors and creditors have not made new arrangements by then, hold a lottery that allows 1% of the properties each year to complete the foreclosure process. That will keep the tsunami of foreclosures from overwhelming the market, putting more and more people deeper and deeper underwater. Anything less is just adjusting the arrangement of deck chairs on the Titanic.
38. Hemraj Chauhan | 02.18.09
Government do not have enough money to help all the troubled home owners. If I bought the house for $400,000 and now it is worth only $200,000. Then I have lost $200,000 + my closing cost etc. Bank is not going to forgive my loss and Government can not give me my loss. The only way Government can help is give a fixed rate (very low) loan (not the mortgage company) so that people can have the ability to pay their mortgage and remain in the house. If you rely on the banks/mortgage company, they will not help.
At present banks got billions of dollars at zero interest and in return they are charging 15-20%. This will not work.
39. oldlaurs | 02.18.09
I have paid all my bills for 60 plus years and now my savings are 1/2 of what they were a year ago. Where is my help? The help is only for those who made stupid decisions and got over their head in debt.
40. Responsible in WA | 02.18.09
I have no problems with my mortgage and have been paying on time for eight years. What do I get for that? Nothing? I should have bought a huge house that I couldn’t afford last year so I can get the government help me keep it.
41. Randy Kronebusch | 02.18.09
who do you contact for this so you can find out more about it and where to apply.
Thanks Randy
42. DGDanforth | 02.18.09
Excuse my ignorance but why not force the banks to maintain a fixed mortgage rate and NOT increase, even though the initial agreement was for variable rate?
If the bank loaned P (principle) then they are out P but foreclosing on someone because they can’t pay the M=(1+i)P monthly rate is nuts. The banks should simply be forced to decrease i (interest). Yes they need to make a profit BUT in these time break even should be an option.
43. Prince | 02.18.09
Why can’t they just waive the property tax for 5 years, since the government is giving money to the states? A $6000.00 property tax comes down to $500.00/month on top of the principal + interest + insurance.
44. Jim Gay | 02.18.09
Am I the only one who has a problem with the phrase, “Target: responsible homeowners”. People signed a binding, legal contract that their intereste rates would be adjustable meaning they may go up or may go down. When I sign a contract I make sure I am able to meet the requirements of the current contract and don’t count on finding some way out (AKA refinancing) at a later point in time. People need to recognize that when you buy something you need to be prepared to pay for it, including having some extra in reserves in case you lose your job. And if you can’t pay for it, you will lose it. That is life. If I bought a car at $40,000 on a contract that the interest rate would go up or down and suddenly lost my job and I couldn’t even sell the car for what I still owe, that is life…both for me and the bank.
45. jonathan | 02.18.09
Hmmm…Take money from the producing portion of America (ie tax payers) and spend that money on bad investments (ie something worth less than you’re paying). In the real world, where politics aren’t involved, that’s called a bad investment.
46. genek1953 | 02.18.09
There is nothing that anyone can do to reinflate that $200,000 house back to twice its true value. People who made the unfortunate mistake of paying double what a house is worth (and that is exactly what they did if they bought into the nonsensical price increases of this bubble) will probably never be able to catch up no matter what aid is provided, short of just handing them a house as a gift.
The best thing people in this situation can do, for themselves as well as for the country, is to recognize that they overreached their potential, turn in their keys and work on living within their means and rebuilding their lives. Maybe someday they’ll be in a better place, but for now, encouraging them to continue to chase what for them was really the unreachable dream of home ownership will only destroy them.
47. Carl de cesare | 02.18.09
How can we reslove this problem, if the bank says no to a modification? Do we have any kind of law on the consumer side? And what is the 5 year deal? Are you saying thr original loan will be back in place, after the 5th year? Thank You!
Carl De Cesare
Palm Beach, Fl.
954 778-8288
48. zooage | 02.18.09
How is this fair to those of us that lost our homes already? I developed a severe nerve disorder that caused me to miss a year of work while it was brought under control. I refused to take money from the government because of personal morals. I was raised to take care of myself, without begging others to support me. Now we are being forced to keep people in homes they never should have been allowed to buy to start with. Anyone who couldn’t afford a down payment should never have qualified for a mortgage! It is too close to communism for my taste when everyone is entitled to own a home, as if it were a right. Most will only end up in the same situation in 6 months anyway. This plan is a waste of tax dollars, and we don’t need any more of that this year.
49. Rather Notdan | 02.18.09
Sounds to me like, the tax payer is going to pay to the thieving banks, the false highly inflated price created by the bubble.
You gotta be kidding me!
The plan bails out the fox and leaves the chickens prisoners in their coops.
50. James | 02.18.09
Doesn’t “responsible” mean taking responsibility? Banks and borrowers both took risks (a.k.a. “greed”) and both should shoulder the responsibility. This plan is irresponsible. Let them fail.
The thing that makes me mad is that it’s not “their” house. If I bought a million dollar house, should the government do anything to try to keep me in it? Of course not.
Foreclosure is not the problem–it’s the solution to the problem. Always has been and always will be. The only thing government should do is get out of the way.
51. thomson@wjltd.com | 02.18.09
Just how is ‘responsible’ being defined here? If someone was responsible they would have taken a fixed rate loan that they could afford. It would seem this aid assists people that purchased property with an ARM with discounted period. These people were not ‘responsible’ they ’speculated’ that house prices would continue to rise thus they would be able to refinance to continue to live in a house that really they cannot ‘responsibly’ afford.
There are many ways this plan could have been achieved without such cost to taxpayers. 1. The banks could have been asked or forced to extend the term of the mortagage, thus reducing the monthly payment. 2. The government could structure a housing assistance loan which would have the same covenants as a student loan namely, it survives bankrupcy and you can’t walk away from it.
3. The one plan that should be implemented and this should be for responsible buyers is assistance if they can prove that they have a job offer that requires them to move, but they can’t move due to being underwater.
$75 Billion Dollars for this one, or $700 for every household. Hardly ‘Responsible’
52. John Ayers | 02.18.09
And what happens for people that have also lost the value of their homes, but still manage to have their jobs. They are the had working A players companies can’t afford to lose, ones scrambling to make money, do their jobs, and because of it are penalized?
54. Zeppelin | 02.18.09
So, what about the renters who knew the prices were Artificially Inflated and were Responsible by not following the herd that took out loans and ‘hoping’ they would be able to make the mortgage payments in a couple of years, once the Mortgage Rates Increased. The problem that nobody in Government wants to address, is that the average annual income is near $50,000 per year. The old rule of thumb was to Multiply that number by 3 and that was the Maximum a borrower could afford for a Mortgage. So, the average price for a House should be in the $150,000 range, NOT $220,000 That is the root of the problem that will drag on the US economy for years, unless the average price returns to the 3x the average annual salary. It should be written into Law that a borrower must show that they borrow no more than 3x their verifiable salary.
55. Brian D. | 02.18.09
This is pretty incredible! The banks got themselves into this mess and they have the audacity to oppose some of the recovery packages? Congress should simply pass a law requiring all these grubby financial institutions to do whatever they are told to do to get everyone out of this mess. When all this is over, I’d like to see these banks and other institutions liquidated themselves.
56. foreclosure relief | 02.18.09
Foreclosure is the major cause of our financial crisis. Government should really prioritize this issue.We should really keep ourselves updated.Thanks for sharing your thoughts.Good Day!
57. Erik | 02.19.09
“The Obama plan hopes to address this problem by stabilizing home prices.”
He will fail. Law of supply and demand with millions of consumers are against him. And what’s wrong with falling prices? It allows people to get into the housing market that were wise enough to wait for the bubble to collapse! Or, people that were too poor before might finally get a chance to buy!
Where will the $75 billion come from? Nobody seems to address this. I’d rather be stuck in the game of monopoly. The prices are fixed, but at least the game doesn’t come with a federal reserve and high speed printing press.
58. maureen miller | 02.19.09
I concerned about the proposed renegotiation of mortgages by bankruptcy judges. This proposal will not just hurt banks and mortgage lenders. It will hurt many average citizens in the following ways:
1) It will virtually nationalize all lending in the US.
2) It will damage both private lenders and borrowers that may have no other method of selling or buying their homes.For Example:
a. Some seniors sell their homes owner financed and then depend on this income for their future living expenses.
b. Often young couples or seasonal workers must look for owner financing to qualify for home ownership.
Who will want to underwrite(owner finance)loans when they can lose principal?
3) It will open the flood gates to unscrupulous buyers who wish to reduce their principal and may then later cash in on any increase in property value produced by reducing the principal.
59. Darrick Lewis | 02.19.09
I am a ARMY Vet. Now a Postal Worker. My wife is a school teacher. For the past 2 years we have been paying 1100 dollars a month for a home that we are renting to own. We are R.T.O because our credit is not high enough to actualy finance a loan. But there are people who are getting the loans to buy these homes and loosing them. All we ask for is just a chance. The home we live in is 116,000 dollars. With 75 billion dollars to go to the banks and make more loans we would greatly appreciate a loan to purchase our own home instead of paying some one else loan and not get the credit for it.
Thank you:
Darrick Lewis
60. Darrick Lewis | 02.19.09
I am a ARMY Vet. Now a Postal Worker. My wife is a school teacher. For the past 2 years we have been paying 1100 dollars a month for a home that we are renting to own. We are R.T.O because our credit is not high enough to actualy finance a loan. But there are people who are getting the loans to buy these homes and loosing them. All we ask for is just a chance. The home we live in is 116,000 dollars. With 75 billion dollars to go to the banks and make more loans we would greatly appreciate a loan to purchase our own home instead of paying some one else loan and not get the credit for it.
Thank you:
Darrick Lewis
61. M. DeCicco | 02.19.09
I think that President Obama’s plan is kind. One must realize that they should never live beyond their means. I’ve been a real estate broker for 22 years and have been through the real estate economic cycle. I’ve advised clients when and not to buy. The ones who listened are doing just fine; the other few are on their way to foreclosure. My buyers are always well-educated when it comes to purchasing a property, as during times such as what we are coping with now, I know I can sleep at night.
I see loan officers driving expensive cars during these times that they cannot pay for. It’s sad.
M. DeCicco
62. Bill | 02.19.09
What ever happened to integrity? These people took out a loan and now just because they lost some money I the taxpayer am supposed to pay for it? To follow the same logic, I the taxpayer should have received a tax rebate when homes were going up in value even though I didn’t own the home.
Why punish the people who saw the hysteria and chose not to participate?
63. Katie B | 02.19.09
How are we defining “responsible homeowner”? Can a person who is not now a responsible homeowner become one, and then qualify for help? What about debt to asset ratio? How is this program being put into action? How will non-profit organizations be involved?
Many local non-profits throughout the country have been operating foreclosure prevention and homebuyer education programs for years. They may be the right organizations to administer some aspects of the program.
64. Kate S | 02.19.09
When will it be acceptable for a foreclosure counselor to give a concrete opinion on how someone should change their spending habits? Right now, counselors are NOT permitted to say; “You are making payments on two brand new cars, I would suggest that you sell one or both and replace them with used cars thereby reducing your car payments from 800 a month to 400 a month. You also have a $250 cell phone bill and you have digital cable and high-speed internet — and you opt to pay these bills and NOT your mortgage”
I am not saying that this is always the case, but if it is, someone needs to be able to be straight forward and make concrete recommendations on how these families facing foreclosure can help themselves. In all honesty, sometimes it just doesn’t occur to people that there is another way to live and that these items are not necessities but rather luxuries.
66. MILTON H. VIVIAN | 02.19.09
…SOUNDS REASONABLE; AND, DOABLE. A SOUND HOME AND JOB—MAKES FOR A STRONG AMERICA; AND, A STRONG—GLOBAL ECONOMY. THE UN EDIFIED AND UN EDUCATED, WILL GRIPE; BUT, THEY MUST BE IGNORED; FOR NOW; THEN. EDUCATED—A TALL ORDER!!! MILTON & MARGARET.
67. riverwatcher | 02.19.09
I work in the mortgage refinance dept of a major US bank, and am glad to see this. Whatever root causes got us into this debacle, at least the Obama admin is reaching out to investors, banks, Wall Street to work through the problem. To not act would be negligent financial homicide. Those who have responsibly been paying their mortgages & managing their debt - congrats; it is the sick who need help; those in good shape have their reward already. To those screaming “socialism”, I say, do you want to see your brother, mother or kids homeless because their property value dropped - thru no fault of their own - or they lost their job by layoff/merger/outsourcing?
68. MK | 02.20.09
I think we all need to turn off the TV, which has been telling millions of us that we need to live in MCMansions or recent flips, know what not to wear, travel often ot exotic locations, and eat expensive processed food. If we lived the way our parents lived, and our expectations were a product of parental involvement, instead of incessant marketing, our country would not be in this mess. I just wonder if it is too late for a cultural overhaul.
69. jon | 02.20.09
I saved for years to buy a home in an inner city neighborhood. 1200 square feet $97,000. I made a large downpayment and took out a conventional loan. I was unwilling to gamble with an ARM. I have always lived frugally. I am 44 years old and got my first cell phone this year. (I am on my sister’s plan.) I do not own a plasma TV. I get basic cable. I drive a Scion. This year, I lost 1/3 of my retirement savings in the stock market. But I am not asking for a government bailout.
I am angry, though, that I am now expected to bail out my high-living neighbors and friends. They have nice houses, big, new cars, and homes full of the latest electronics. I am angry that the government has redefined “responsible.” I am what used to be called “responsible.” Now, I’m just a “sucker.”
70. Jeanne from Ohio | 02.21.09
I am a responsible homeowner. My husband and I purchased our home 7 years ago. We have always paid our mortgage on time. Over the last 2 years, my husband has been laid off several times. We have emptied our savings and cashed in all of our CD’s. We have nothing left. To make matters worse, I lost my job in December. We can no longer make our payments due to the extreme amount of unemployment we have encountered. How will Obama’s plan help us or do you all feel that we are irresponsible homeowners? I am not interested in a band aid fix. We need to sell our home which is worth much less than we paid for it 7 years ago. A short sale and deed in lieu of forclosure may be the only way for us to survive. Any suggestions?
71. SBooth | 02.21.09
I voted for Obama and although I don’t agree 100% with this plan. I don’t think it’s fair to place all the blame on his shoulders. He’s been in office for 2 months. I am a RESPONSIBLE home owner who has paid my mortgage on time for the past 10 years and understand the frustration. But, we need to stop worrying about what our neighbor has and doesn’t have. What they did or did’t do. Like it or not. We are all in this crisis together. I don’t want 100’s of empty homes in my neighborhood. I want to keep families in them so that I can eventually see a return on my investment. I have quite a few foreclosures on my block and they continue to stay empty because the banks aren’t loaning and jobs are still being loss.
72. B.Rubble | 02.23.09
MK - You hit the nail on the head. Our culture is disintegrating faster than it takes a Hollywood phony to accept his lastest award. Simple greed caused this current economic disaster. Greed by the political elite, greed on Wall Street and greed in the corporate executive suites. Let’s just kick the can down the road a little further and let the next generation pay the price.
73. Mark Bradley | 02.23.09
Let the market correct. I’ve been in the RE business for 20 years in California. We have a market bubble-self imposed sadly. We changed bank rules and gave loans to people who should not have qualified. Now they want the people who live within their means to bail out the irresponsible or unlucky ones-no thanks. They can go back to renting in an affordable area or go to another state with lower rents/values. Home ownership is not an entitlement. Their are some I truly feel sorry for but not the ones who speculated and lost or those who used their equity in their home like an atm card. It was a market correction long overdue and now the kids will have a chance to purchase real estate at these values. The government will just mess things up and prolong the pain.
74. Karina Sanchez | 02.23.09
I am very happy that Obama thought about the “responsible homeowners” even knowing that there will be help for a lot of people that were speculating getting houses they couldn’t afford, took money out for investments or to enjoy the money for vacations we all dream to have. Others sold a house, kept the equity at their checking account and bought one they couldn’t afford planning to use that money and then see what happened in the next years. I believe the plan has a lot of restrictions to avoid benefit these people, but massive procedures are never fair for everybody.
At least somebody thought about rewarding the ones that didn’t provoke this crisis and struggled to make their payments on time. The ones that buy smaller houses to be sure they will be able to pay it even in the worst conditions. The ones that don’t have a 25,000 kitchen because they didn’t want to get their house debt bigger that they could afford. The ones that didn’t make this crisis bigger and that will keep acting responsible to protect their economy and our country’s economy.
75. Angela | 02.24.09
ok, i am pretty sick and tired of being lumped into a group of people who bought more than they could afford therefore getting sub-prime loans. try this scenario for a change. my agent conspired with her broker to push through a loan with a phony appraisal. i know this because after years of burning through my savings, cashing out my retirement and going into credit card debt just to keep up with my payments, i finally started digging around trying to figure out why someone who had a FICO score of 700 got a 10.8% 5/1 ARM with IndyMac. eventually i tracked down the first appraiser who refused to give the agent the inflated appraisal accusing her of committing fraud, therefore putting me at risk of getting a bad loan. he was summarily dismissed and replaced by the appraiser who valued the building at 35% more than what it was worth. remember when LENDERS used to hire their own appraisers to make sure they were lending the proper amount? well, those days ended when some very smart mathematicians at MIT came up with all sorts or securitized “products” which essentially eliminated risk to everyone BUT the homeowner. If you need to blame some one start at the top….the SEC, the lender, who repackaged the loans and got them rated AAA by Standard & Poor’s, bought by investors who bought “insurance” (credit default swaps) that were undercapitalized by AIG, because they didn’t fall under the regulated insurance guidelines….(a pig is still a pig, regardless of whether it’s wearing lipstick). and all these sales were being driven by greedy real estate agents, brokers, appraisers and lenders (now servicing agencies) who got their cut and moved on. So 9 years and $600k in interest payments later, my property has just now caught up in value to the original price I paid. Yes, I would like to see a reduction in my principal, interest rate or both. But if I don’t get, I will tough it out hoping it all comes out in the wash. but more than that, i would like to see some tar & feathering on all of the aforementioned players.
76. Sara | 02.24.09
Hey SBooth..I absolutely agree with you. At this time American people should be more concern about our country as a whole, not just what individuals do, did, or have done. Obama, or any other presidential candidates as the president of the country, would have done what’s best to revive the turmoil.
77. Samantha | 03.06.09
For your information, not all people in foreclosure are irresponsible. I am in foreclosure because I am now disabled and we cannot afford our house payment we got 5 years ago in today’s economy on one income. We have tried to refinance our mortgage when things got tough and couldn’t due to medical bills that we just could not pay and dinged our credit, if we had better health care it might be a different story for us. Our mortgage company (Saxon), refuses to change our interest rate or our monthly payment until we can get back on our feet, (either by me getting SSI to help with the income or by being able to get a better mortgage company.) We can clearly afford the house, we just can’t afford this payment after the gas prices that sucked us dry, food, my medical bills and prescriptions. So do I just lay in bed all day in excruciating pain or go to the doctor and care for myself? Obviously you must think I should just lie in bed in horrendous pain all day and keep on paying my mortgage on time. As long as my mortgage holders, investors, etc are all in great health and eating well, not missing work because they have gas money is the way America should be huh???
Do you consider me irresponsible because now I am disabled and cannot work? I didn’t plan this you know but now I am in this loan and nothing I can do. There are days I can’t even take care of my kids, I am just grateful I became disabled when my kids were old enough to start being able to care for themselves.
My husband is a tax payer and also pays part of what you all are calling “irresponsible”, so lets see, he is paying for us to bail ourselves out through Obama, what is wrong with that?? Should he not be able to?? So stop complaining if you don’t know everyones story. Times have been hard on even the best of us.
Stuggling family in Indiana
78. FRANK | 03.21.09
Ok Folks Im lost. If you only pay 31% of youyr income how will you only get 191.00 off your mortgage? Ok this is based on a 200,000 dollar balance which I have. If my income is only 1900-2000 a month will I not be paying only about 600 bucks a month? Somebody email me at islandbreezearts@netscape.com Also folkjs I dealo with Wells fargo and they claim that they dso not have guidelines yet. They are spinning people wheeels!!1 They are saying that they will participate in program but they have yet to start on anyones loans yet and are very rude! One guy GET THIS from collections stated that thgey did not ask for the 26 billion. He said it was pushed on them?? Another gal said We never had a bailout!!??We are doing fine she said. This is what I am dealing with with Wells fargo. They are stringing people along Is anyone else having this problem and is there anyone out there that actually has their bank working on their stability plan as we speak? Let me know folks.
79. max | 03.26.09
This IS a joke. Obama is, unfortunately, still operating on the idea that HAS RUINED THE USA — i.e. “trickle down” — bail out the “high rollers” and “big guys,” let them play, and a little will “trickle down” to the unwashed masses of people. We have Ronnie Reagan to thank for the destruction of the American economy. ONLY government that HELPS ALL NEEDY PEOPLE will be of any use. People who have no money canNOT bring “success” to a so-called “capitalistic” society. Things worked till that “trickle-down”/”get the gov’t off their backs” bullshit came along. Now it’s so ingrained in people that they take it for granted. BUT WE CAN’T — IT DOESN’T WORK.
80. Lorelei | 04.07.09
I hear what people are saying about those who bought more than they could afford. And in some cases I think those arguments are valid. But like with anything…this judgement has to be done on a case by case basis taking into consideration all the variables of each person’s story.
In my case, I bought a home with $150,000 in equity from the sale of my first home as a down payment. That is far more money down than most people make as a down payment and I could have opted to take some of that to use towards a vacation…since I haven’t had one in 10-15 years….but I didn’t. I was responsible and put it towards the purchase of my new home. I had a 3 year adjustable ARM to keep my monthly payments low. With my EXCELLENT credit rating and huge down payment….I never would have thought the value of my home would plummet so low that my home is now worth less than I owe on it and I am, therefore, unable to refinance as I’d always planned to do before the ARM adjusted. Now my mortgage has gone up by $1000.00 per month. Mind you, I am a young, single woman who is not a mortgage expert. I relied on my mortgage lender to properly advise me and he assured me I’d be okay and I believed it because I felt I’d done all the RESPONSIBLE things. Now I’m looking for help as a responsible homeowner and people think I don’t deserve the help because I should have been able to predict that an unprecidented mortgage crisis like this would ever happen!?!? I am working 2 full time and 2 part time jobs to keep up with my adjusted mortgage. I’m getting by but I have no life and I am physically, mentally and emotionally drained. I welcome help from someone…anyone. And I say to those of you who are judging those of us struggling that you shouldn’t judge unless you’ve walked a mile in our shoes or understand each person’s individual circumstances.
81. Elizabeth | 04.21.09
I’m astonished my all the people talking about others that took a RISK and lumping everyone into one catagory. Not everyone took risks, all we wanted was home for our family and a place for our children to call home. Sure we could have continued to rent, however we were already paying that money to the landlord so why not buy our own home and use the money to pay for a home we wouldn’t have to move out of when our lease was up. That is what we did, who could have imagined they would outsource my husbands job to another country and the $95,000.00 dollar a year job would turn into a $400. a week unemployment check. We sure didn’t, so by saying people are taking a risk no that’s not always the case, we refinanced to try and lower our interest rate and lower the mortgage payment, however we refinanced with CitiMortgage and the refuse to refinance or even help out. They refused to accept our payment and now our house went into foreclosure and we cannot get any help. This was not all our doing, it was because they have outsourced jobs to India and other countries, without thinking about the effect on the people and communities in which we live. This effects everyone, and until they bring the jobs back and start giving the jobs back to the Americans that held these jobs and worked to pay their bills, our economy isn’t going to get better. The Mortgage Companies need to be more understanding and work with us instead of foreclosing on our homes, reduce the payment and make the mortgages longer so we can afford them. We took a $25,000. a year pay cut once my husband took a new job, and now they are outsourcing this job, and its only a matter of time that we are back on unemployment.
82. Stephanie Sullivan | 05.18.09
The ones who should pay for the programs are the snake in the grass builders who were teamed up with the lender and the appraisers… I.E. KB homes, KB countrywide and LandSafe. My husband lost his job 6 mo after we purchased our home and it had lost over 100,000. in value. We were unable to sell or refi and fell behind on payments. They would not do a deed in lieu and we also tried a short sale to no avail. We now have been in a foreclosure status for 2 years and have ruined credit and a bankruptcy but are still listed as the owners of a house we thought we lost. This was our 4th home purchase and we have NEVER been late on any payments before. I believe KB homes should return the money to the banks that it stole due to inflated appraisals. This happened in Orlando Fl, but it looks as if they are doing it all over the country
See this story— http://www.lasvegassun.com/news/2009/may/09/customers-sue-kb-home-allege-rigged-appraisals-inf/
83. Mrs. M. Howell | 07.09.09
7/9/09
I have Paid DSO $2995 to process a loan modification for us and have waited three months for something to happen. Now, I’m worried that I might have been scammed. I’ve had a couple emails and two calls telling me it could take up to 4 months to get this accomplished, but now the costs from DSO is added to out overall debt and quite frankly, I’m more worried than ever. I looked into DSO law group before sending supporting paperwork to them in April 2009, and thought the firm was trustworthy. Who can anyone believe in or trust any more except the Lord?
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1. Daryl Ford | 02.18.09
How & when Can I get started , I need to do this Thanks!