Bush to Outline Aid to Mortgage Holders

What promises?

If I told you I had a "great" opportunity for you if you'll just invest $150,000.00 in my business...would you run out and get the loan without doing some research to make sure of what you were getting into?

Why should investing in a house be any different?

 

Watch that. It's important to remember these little rules about buying foreclosure homes:

• They are typically sold for total debt. This includes attorney fees incurred in order to foreclose, as well as attorney fees needed if the borrower filed bankruptcy and the lender had to file a proof of claim. Also you'll be paying securitization fees.
• You usually don't get to see the inside of the house or have an inspection done, before buying the house.
• The shorter the life of the loan, the less of a bargain it will be.
• Often you won't get the property in good conveyance condition. IOW, if the borrower was ****ed about being foreclosed on and tore out all the fixtures, that's what you'll get. But you won't always know that's what has happened when you buy it.

North Carolina is a power of sale state, meaning the lender doesn't have to go to court before holding the sale. Mostly filing fees and ad fees need to be paid unless the borrower tried to stall the sale with a bankruptcy. Judicial states can have outrageous attorney fees. States like NJ and PA are the worst. These foreclosures can take up to 4 years or more in a depressed market.

(I spent about 5 years foreclosing on houses for a very large bank)

 

Exactly what "bailout" are borrowers getting from Mr. Bush?

And Katrina people have gotten their money. They just chose to spend it on Guicci handbags and strip joints. I would think that anyone living in a bowl that is below sea level would have enough sense to:

A. Buy adequate insurance.
B. Evacuate when told to evacuate.

Their poor planning and irresponsible spending doesn't constitute a constitutional crisis on any one else's part.

Two years is plenty of time to get a fresh start - especially with the money these people have had handed to them with no strings attached.

 

You have got to be kidding me. Do the words adult responsibility mean anything to you?

How about EDUCATE YOURSELF.

If I told you I wanted you to give me $150,000.00 for an "investment", would you just hand it over and dream of your rewards? Or would you research to find out about this investment and it's risks?

Buying a house is no different.

 

In order to refinance these loans you have to give these people fixed interest rates that match the sub prime rate they had?? The majority of these mortgage holders were squeaking buy the income requirements when they got these loans. What other kind of "program" could the government develop that defies mathematics and gives them their home back at a current rate of interest?

The only program they can develop is a sub prime rate backed by the government. And if they do this, the government picks up the lose and the mortgage lenders get the money they should have lost in bad investing.

Unless you can show me another method of resolution, Bush is in fact bailing out the financial idiots who thought they could make a profit on this lunacy gamble. While making it look as though it's a compassionate move towards people who are about to loose their homes.

The only answer to the problem is let the lenders develop the program.

 

Some of these folks who got the ARMs, could have qualified for a fixed with a higher rate, but went with the ARM because it was a lower rate. Now that rates have gone up, they have messed up their credit rating because they couldn't pay the increased payments on time. So now, with the newly messed up credit, they can't refinance to a fixed and lower their payments to something they can afford.

The programs Bush is calling for would call for the banks to loosen up on their credit requirements enough to allow these same folks to refinance to a fixed. Due to the indexes used in ARMS, the fixed rates can indeed be lower than the increased ARM payments, thus allowing a more affordable payment.

Not true. You don't know much about mortgages and how mortgage investors work, do you?

The lenders aren't the ones owed the money. Lenders borrow from commercial lenders and investors. When you pay your mortgage payment, the interest and principal go to the investors and commercial lenders. The lender who has your loan, just gets servicing fees. Lenders make their money on servicing revenues.

If a house forecloses, the lender loses in costs to foreclose. The private insurance companies loses costs via foreclosure claims. The Commercial lender loses the interest income and the borrower loses the house.

With these programs, the borrower gets to keep the house, the lender retains the servicing income, the private ins company doesn't have to pay a claim, and the commercial lender retains interest income.

The borrowers get to keep the house. They get their payment lowered. They wouldn't be able to do that without Bush's proposal....so how on earth can you say that it's not benefitting the borrowers?

Or is it that you just don't like the idea of a bank not losing money?

 

Interesting article here.

There's much more at the link above, I just pasted the beginning of the article here. Gotta love that last paragraph above. (Emphasis added.)

 

I'll agree that "some" may be in that instance and if so it was their stupitidy for not refinancing after a couple of years into the loan. They were riding the gravy train thinking it would never stop and got caught. Not our job to bail out stupid people who could have afforded the fixed rates.

The proposal goes way deeper than simply loosening requirements. The FHA is pouring money on the problem right now.

I've been paying 8.75% for 15 years now because I ran into some problems and could not refinance. Where's the bail out for people in my situation? There is none and justly so because it's a personal finance problem and that's the way it should be. I would love a "more affordable" payment, but untill then I'll keep working 2 jobs and make the payments on the debt "I" created.

Now your just going to syntax simantics. I know how the system works and it's still a system problem, not ours.

Because what they are proposing is an "after the fact" reduced interst rate program for people who don't have the finances to be in a home owner position to start with. The majority of the people with these loans were not ready financially to purchase a home. And many of them are in homes worth less than they owe. As for the people who were financially able, well, bad news you loose. You should have been saving all that interest money you weren't paying for this rainy day. You made a bad financial choice and now it's time to pay up.

I shouldn't quantify a stupid question ... but ... I don't like my tax dollars subsidizing bad financial choices by the home owners or the investors who took a chance on them.

 

Part of the problem, as I see it, is that we have created this myth if you will that home ownership is part of the "American Dream" and is another one of those elusive "rights"

 

This article is based on a false face. Its written as though there were no borrowers in foreclosure before the "meltdown". That is patently untrue. At any given time, there are borrowers that are in foreclosure. Plenty of them. No, Bush's proposals won't help everyone...if they did, it would be a bailout, which this is not.

The proposals are not to help speculators and those who made a decision to buy a home they couldn't afford. These programs are to help those who got the "toxic" ARMs. Those with inflated ceilings and caps. Those based on unusual indexes. Those who got loans from unscrupulous brokers.

He is proposing to change the tax liability when a lender forgives part of the loan. And yes...it will help low-income people too. If they have a $200K loan, and the lender forgives $50K....then his proposal would remove the tax liability that would have made that not feasible for low-income folks.

And yes, there are predatory lending laws in some states, however not in all. A Federal program would cover all states.

The proposal allows borrowers who are delinquent to now refinance with the FHA. This is significant because before, those who were delinquent could not refinance with FHA. Borrowers have to prove the loan was being paid as per terms before the rate increase, and have 3% equity.

FHA loan maximums are also to be raised from $202K to about $362K in high cost states such as CA and NY.

Nice try Grandma...but no go.

 

In what way are they "pouring money" on the problem? They aren't paying for anything. No one is getting anything for free. No one is getting their house paid for in any way by any tax money.

This is not for people who have "run into problems". This is for people who got the "toxic" loans. These folks will end up with loans around what you have now, with the program. Why should you be bailed out? Did you get a loan that was unscrupulous?

You misunderstand. This is not going to convert an unaffordable loan they shouldn't have gotten into one they can really afford. This will take a loan that no one should have been given, with traps.... into one that is in line with the house and their qualifications. It will remove the unreasonable terms of the loan.

People who got a loan they simple couldn't afford, will not be getting anything. They will still have to pay or be foreclosed on. Reasonable ARMs won't qualify. Fixed rates won't qualify except for those that have PP penalties or DSI payments, and only those terms will be adjusted via modification. Only loans on primary residences will qualify...speculator loans that "flippers" got on non-primary residence properties will not qualify.

No one is getting a bailout. You need to get that out of your head.

No what they are proposing are essentially modifications. Changing the terms of the loan or refinancing to a loan that is typical for the property value and qualifications of the borrower, but that doesn't have hidden traps such as pre-payment fees, daily simple interest, outrageously high ceilings on ARMS, etc.

They aren't. Your tax dollars aren't going to pay for anything. It costs you nothing when these folks refinance the same principal to a reasonable rate based on market rates. It costs you nothing when the pre-payment penalty is removed from their loans. It costs you nothing when the ARMs are dissolved and changed to fixed rate loans. The borrowers are paying the same principal...but the unreasonable revenue for the above will not be going to the brokers and predatory lenders.

The people who are going to be hurt by this are the ones that should be. Unscrupulous brokers and predatory lenders.

 

Nowhere do I see where the article states or even implies that there were no borrowers in foreclosure prior to the "meltdown" and no one in their right mind would claim that was the case. Anyone who has not been in a coma for the last 50 years knows there are always homes in foreclosure.

Debbie Stabenow, a Democratic Senator from Michigan made that proposal. He does support it. Let's give credit for some bi-partisan action.

I have no idea what you mean by that. I simply posted a factual article from a source that I believe to be reasonably unbiased. Actually, I have heard liberals say McClatchy has a conservative bias, and I've heard conservatives say they have a liberal bias, so I'd guess that puts them somewhere in the middle.

 

The lenders are getting paid on the forclosures thru the FHA. And now they're staffing up to combat the problems these "toxic" loans have created. That's just the start. The costs are going to increase over the next 2 years.

Quoted from the National Low Income Housing Coalitions website:

"Rising Delinquencies and Foreclosures. Since 2002, the FHA single-family rates of foreclosures started rose to a peak of 1.06% in the fourth quarter of 2004 and receded to .79% as of the third quarter of 2006. This compares with a .19% rate for prime loans and a 1.89% rate for subprime loans. Private single-family mortgage insurance covers a smaller portion of the loan balance, typically 25% to 35% of the home value, compared to FHA, which pays claims on up to 100% of the loan balance. Critics say this high level of coverage reduces lender accountability for poor underwriting decisions, resulting in elevated defaults. Lenders, on the other hand, point to a dramatic increase in indemnification requests over the past several years by FHA, which requires the lender to accept the full risk of loss on a loan for five years. FHA has instituted new quality control methods to screen lenders (Appraiser Watch and Credit Watch), as well as loss mitigation programs designed to better serve troubled borrowers."

Make up your mind. Your prior post said, "Now that rates have gone up, they have messed up their credit rating because they couldn't pay the increased payments on time. So now, with the newly messed up credit, they can't refinance to a fixed and lower their payments to something they can afford." Now your saying something different??

Bail out or not, these people that entered into these contracts can not pay now. Sorry, but read what you sign. They saw a loop hole in purchasing a home they really couldn't afford, the lenders saw easy insurance money even if forclosed, and it's that simple.

 

Drdan,

I don't know how to explain MIP and PMI any clearer to you than I already have. You seem so hardheaded on this, that it almost seems as though you WANT something to whine about.

A few facts for you to digest. I would recommend that you research a reliable site, not a liberal organization that wants people to have housing for nothing. I would recommend the Mortgage Bankers Association (MBA).

• Mortgage Insurance Premium (MIP) is paid by the borrower monthly with their mortgage payment. Each month, the servicing lender sends these funds in their entireity to the FHA. These funds are insurance premiums. When a loan goes to foreclosure, the lender sells the house. If no one buys the house at foreclosure, the property goes back to the investor, which is the FHA. The FHA reimburses the debt to the lender, minus MIP claims...which are paid from the insurance premiums pool paid by FHA borrowers. The FHA then markets the house.
  
• FHA also gets to keep most surplus premiums, as any insurance company does.
  
• Conventional loans pay less in mortgage insurance claims than FHA, because they have less default due to stricter qualifying criteria. PMI premiums cost less than FHA premiums because FHA loans carry more risk.

 

Actually, I did read that in the article. Why else mention "it won't help everyone in foreclosure"....as the article did?

Whatever, KD. If the President wasn't doing this, you'd be whining about how it's his fault that it isn't going to happen. We see him moving forward with this and with the tables turned, you don't want to give him credit for it. Typical. It wouldn't happen without his sign off. You know it and I know it.

What I meant by "nice try" is that you liberals spend so much time and energy feeding your BDS, that when President Bush does something that you should be agreeing with, you ignore that...and instead try to negate it.

You can't discuss the issue...instead all we hear is how "Bush didn't do this"..."It's really not that good"....yada, yadda, yadda.

 

perfect summary in one easy sentence. bravo!

thanks for the info you posted re: the lenders having full protection under fha. didn't know that. sounds like bull**** to me

magnolia. how were these loans unscrupulous in your view? serious question, not a setup. other than to say that if your answer is that the loan officer "didn't tell them" about certain parts of the deal, i'd have to say that's a big bag of "tough crap". read the paperwork. owing money every month for thenext 30 years is serious business. take it seriously. and if the lenders took the risk to extend loans to people who they shouldn't have, then they should take the loss if the risk doesn't go their way.

and i dare say that people who can't make their new payment when the arm goes up are hardly having problems with pre-payment penalties. if people don't understand what the terms of their loans are and what the possible increases could be over what period of time, then they shouldn't have signed the loan. they take the loss by giving the home back to be sold in foreclosure. capitalism.

 

Why is it bull? Explain how it works and what you don't like about it.

You liked that, eh? I challenge you to explain how it's "easy insurance money" for the lender. I'll be waiting.

 

is this wrong?

if not, it seems obvious that a lender writing an fha loan would be more willing to take a risk on lending to an unqualified applicant if he knew his loan would be repaid even if the borrower defaults. i don't like that. it encourages bad business that ultimately the taxpayer picks up the tab for.

 

Have you ever read a Daily Simple Interest (DSI) note? On some notes, the verbiage is so covoluted and full of legalese that only an expert would be able to tell it's a DSI loan. Unscrupulous brokers and lenders do this on purpose. Even a person well versed in mortgage terms who does their homework can be taken on this one.

Same with ceilings, floors and caps on ARMS. There are some brokers who will flat out misrepresent what a loan is about. And the fact is that only mortgage professionals can possibly know what is available v. what is offered. A person can go to classes and get educated, but then be taken because the note has been worded in a convoluted manner deliberately.

And again...these programs are for PRIMARY residences only. The house people live in. Those who bought investment property will not qualify.

You do realize, don't you, that even the most savvy of business people get taken now and then by unscrupulous documents.

Look...I am the preacher of personal responsibility. Anyone who spends anytime on this board knows that. That's why I was totally against John "Pretty boy" Edwards plan to just give people money to bring down their loans.

But having been in the mortgage servicing industry for 17 years, I also know what happens. I've seen the documents. I've dealt with the foreclosures. And I can tell you that things have changed. No longer do you deal with just a standard fixed note or a standard ARM note. One almost needs an attorney to review the docs because they are so filled with legal BS that the typical, although educated, person can indeed be duped by some of these documents.

 

That comes into play when they refinance. If they are able to find another lender that will give them better terms, then if there is a pre-payment penalty in the contract, it's added onto the balance that they have to refinance.