>33 of Obama's Mortgage Relief Recipients headed back toward foreclosure

[JockoJohnson]

Home buyer credits, teaser interest rates where people can't afford the actual rate, mortgage interest deductions, etc -- don't all of these keep the housing bubble going? You're artificially raising the demand for housing, by putting buyers in the market for homes.

Repeal the mortgage interest tax deduction and no more home buyer tax credits.

Agreed. A home shouldn't be treated as an investment but a place to live.

 

[drebo]

Home buyer credits, teaser interest rates where people can't afford the actual rate, mortgage interest deductions, etc -- don't all of these keep the housing bubble going? You're artificially raising the demand for housing, by putting buyers in the market for homes.

Repeal the mortgage interest tax deduction and no more home buyer tax credits.

Err...not so much. I agree that massive home buyer rebates keep the bubble going, but deducting interest from income tax does not. If you can't afford a house, mortgage interest deductions aren't going to magically make you able to.

Government promising to be a safety net for banks is the root cause of the bubble, because only when there is 0 risk are banks going to make the silly loans that caused the bubble to become so large.

 

[JockoJohnson]

Err...not so much. I agree that massive home buyer rebates keep the bubble going, but deducting interest from income tax does not. If you can't afford a house, mortgage interest deductions aren't going to magically make you able to.

Government promising to be a safety net for banks is the root cause of the bubble, because only when there is 0 risk are banks going to make the silly loans that caused the bubble to become so large.

But there are people that will continually carry a mortgage so that they have something to deduct. One reason for it is that they say it's better than giving the money to the gov't through taxes. Another legitimate reason I heard was that you can make the money work for you by taking out a mortgage and use that money to get a bigger return on investment (rental homes, stocks, etc.). Again, this is making a home an investment and there is always risk in investments.

 

[BlahBlahYouToo]

so 60 % are doing ok?

of course that doesnt count

Saved 2 out of 3, that aint bad, better than I thought it would turn out

Ummm, the article doesn't say these people are headed back to foreclosure. The article doesn't know why these people left the program or that these people will end up in foreclosure.

Uhh wait... Isn't this what Bush did, and then praised the results of in his speeches?

wow, 67% are not, that is better than I expected.

if you look at the usernames, it's pretty self explanatory i think.

 

[Fingolfin269]

Repeal the mortgage interest tax deduction

Ha screw that. 🙂

 

[drebo]

But there are people that will continually carry a mortgage so that they have something to deduct. One reason for it is that they say it's better than giving the money to the gov't through taxes. Another legitimate reason I heard was that you can make the money work for you by taking out a mortgage and use that money to get a bigger return on investment (rental homes, stocks, etc.). Again, this is making a home an investment and there is always risk in investments.

That's mostly a matter of interest rates, really. As long as interest rates are insanely low, people have no incentive to pay off their mortgage. Raise interest rates and you'll see more people more interested in shorter terms and higher payments.

That does, however, fly in the face of the "everyone deserves to own a home" mentality that seems to be popular lately.

 

[MotF Bane]

Meh. The whole program was both practical and political. It was obvious that many of the homeowners who went with the program would ultimately fail, but it stretched out the losses over time, which was better for the banks and the economy in general. Not that it truly stabilized what is is impossible to truly stabilize, overpriced anything, but it helped to prevent a deep trough in real estate prices, at least for the time being.

And it was political, too, because bailing out the banks demanded something for homeowners, as well.

Failing banks really should have been nationalized, their upper management sacked, reorganized and sold back into private hands. That wasn't going to happen under the watch of the Bush Admin, and anybody with a lick of sense knows it. Nor would it have been wise to allow banking to collapse, either, so we got the bailout. Obama had little choice but to follow through once that had begun. What he woulda, coulda, wanted to do instead is meaningless.

We'll be lucky if 50% of the program participants come through w/o foreclosure, but it never really was about them, anyway, but rather about the larger economy... about preventing cascading collapse where sound loans and businesses are swept away with the rest...

Don't like that? Then don't vote for Deregulating free market demagogues who'll let the economy overheat to create the illusion of prosperity...

Summary: Blame Bush, not Obama's fault, blame the "free market". 🙄

 

[Modelworks]

Until people realize that you cannot live beyond your means for anything but short periods of time it will continue. I have no sympathy for anyone that lost their home because they did not read the terms of the loan or were living outside their means. I haven't heard of a single case of a bank holding a gun to someone and making them sign the loan. The way people are caught up in the 'what I have = personal happiness and if I am not happy I just need to buy more' mentality is what got us to where we are now.

Maybe they need to toughen the laws for people that fail to repay loans. If there was more at stake people would think twice before signing . The way it is now you can get $50,000 on a loan and the worst that usually happens in default is you lose points on the credit score. In Saudi Arabia they can imprison you for defaulting on a loan and you are not released until it is paid back. Their airport is filled with abandoned cars where people fled before they were caught knowing they would be jailed if they stayed. Not saying it should go that far but there needs to be more of a consequence than just a credit score.

 

[Exterous]

I have no sympathy for anyone that lost their home because they did not read the terms of the loan or were living outside their means.

I never understood the defense of "I didn't read the mortgage papers'. Seriously? I read every single one when I bought my house. Yes it took a while but thats a lot of money. If they can't bother to be responsible enough to read a paper pertaining to loans $100,000+ I have no sympathy towards them

 

[BoberFett]

Don't like that? Then don't vote for Deregulating free market demagogues who'll let the economy overheat to create the illusion of prosperity...

So much fail...

 

[BoberFett]

Ha screw that. 🙂

I'd agree to eliminating the mortgage interest deduction if everyone else would agree to eliminate the child deduction.

I mean, as much as we don't want poor people buying houses they can't afford, do we really want morons breeding like crazy?

 

[drebo]

I'd agree to eliminating the mortgage interest deduction if everyone else would agree to eliminate the child deduction.

I mean, as much as we don't want poor people buying houses they can't afford, do we really want morons breeding like crazy?

The people in question likely don't actually pay any income taxes anyway, so eliminating the child deduction isn't going to have any impact on those people.

 

[Fingolfin269]

I'd agree to eliminating the mortgage interest deduction if everyone else would agree to eliminate the child deduction.

I mean, as much as we don't want poor people buying houses they can't afford, do we really want morons breeding like crazy?

Actually, I thought about what I wrote and would actually be okay with the elimination of the mortgage interest deduction... if it were guaranteed that the additional tax revenue would only be used to pay down on the deficit and not to pay for even more crap we don't need.

 

[Jhhnn]

So much fail...

Standard zero content denial, I see...

 

[bfdd]

What would of been a more awesome use of the money would of been to split it evenly across the part of the population who pay taxes and weren't stupid enough to screw themselves over like this. I don't understand rewarding failure. I didn't make any retarded mistakes and I still rent because I didn't want to get stuck with some fucked up mortgage. Where's my 220k?

 

[Jhhnn]

Summary: Blame Bush, not Obama's fault, blame the "free market". 🙄

More denial. Recession/ depression occurs as a corrective measure in a capitalistic system, a correction for the excesses of speculation on easy credit. It's been the same for every major downturn since 1873, and probably before.

The sad truth is that speculation in housing will likely affect us more strongly that stock market speculation did in 1929, because it's an even more fundamental part of the economy. Bush economists and bank regulators whistled Dixie while housing prices exploded to levels that were *obviously* unsustainable-

http://www.ritholtz.com/blog/wp-content/uploads/2009/06/case-shiller-updated.png

It's too bad facts don't matter to believers, because we wouldn't be in this mess if they did...

 

[Vic]

The bigger problem is that HUD, Fannie Mae, and Freddie Mac conspired with Congress to make the original home loans without such "outdated metrics" as verification of income and credit history, not to mention independent third party appraisals, in order to fulfill an insane HUD requirement for the percentage of low and moderate income borrowers. Fannie Mae and Freddie Mac have been changed from their mandate as tools to help middle class people who had the income to own homes but couldn't find credit, to become tools to help people without the income or discipline to own homes own them anyway. Once those mortgages have been made the taxpayers are on the hook anyway.

One reason this program is losing popularity is because it isn't really structured to help the borrowers so much as the banks. Right now banks have some protection via insured loans but otherwise have to crash and hope for bailouts; moving a borrower from a standard loan to the Obama bailout program loan provides the bank with full protection and usually lowers the borrower's payment by little. A lot pf people probably signed up thinking Obama was going to make their house payments and then get frustrated when, as usual, it's merely the establishment taking care of its own.

Reducing a borrower's PITIA 1st mortgage payment to 31% of their gross income doesn't help them? How so? If your payment is already below 31%, then you should be able to afford to meet your contractual obligations no matter how much you may have over-borrowed against your house.

You have no idea what you're talking about in any single sentence of this post BTW.

 

[Vic]

Nope, it doesn't.

1,240,000 borrowers
436,000 have dropped out of the program. That's ~35%.
340,000 have received permanent loan modifications and are making payments on time. That's ~27.5%.
That leaves 464,000 who either are in the program and haven't been helped or were "helped" and still can't make the payments.

So, 60% are NOT doing ok, only 27.5% are.

It takes a minimum of 6 months process time to get a permanent HAMP mod, and usually longer. And while the program was announced March of last year, no servicer implemented it until that June.
What this means is that in the 12 months the program has been running, roughly half of the eligible borrowers (the 60%) have finalized the 6+ month mod process while the other half are still in process. Sounds pretty good to me.

Of those who "dropped out" of the program (as you put it), they primarily fall into 3 groups: (1) those already have an affordable payment less than 31% their gross income, (2) those who cannot afford their home even at its present market value, and (3) those who fail to comply with the program.

 

[Vic]

Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

The banks weren't pressured, it was their idea in order to accelerate implementation of the plan. Income verification was always required from the beginning, except that early applicants were allowed to state their income in order get them into process. Those customers who misstated their income were later disqualified during the income verification process, required before their mod finalized, because they either lied about their income or failed to provide the required documents.

And just to prove how ignorant you must be about this, making statements like that, I'd like to point out that those customers who misstated their income to qualify for the initial trial ending up making 3-4 trial payments before they were disqualified at the income verification process... and then their home went back into foreclosure.

 

[Vic]

Reading comprehension fail.

Look at the post two above yours. $75 billion dollars to save 340,000 mortgages. That's $220,000 per house. I'd bet most of those houses could be paid down FULLY with $220,000. More gov't waste and inefficiency.

Ignorance fail.

First, your 340k mortgages figure is willfully dishonest. With more than that number still in the lengthy process, the actual number of mortgages "saved" will be nearly double that.

Second, you seem to not realize the magnitude of the problem. $220k loss severity is practically average. Contrary to this "poor peeples caused the problem" mentality spread by idiots on the internet, it's the upper middle value properties causing the most losses. Brand new 3500 sq ft homes in suburban developments in California, Nevada, and Arizona. Losses on the majority of those easily exceed $220k per asset.

Oh, and to add to the whole "poor peeples caused the problem," 31% of all defaults now are strategic, meaning the customer can afford their mortgage and is intentionally walking away because they borrowed too much against their house in the boom and now they're underwater. Better hope they don't live a recourse state. Either way, they won't be buying another home for at least 7 years, unless it's with cash.

 

[werepossum]

Reducing a borrower's PITIA 1st mortgage payment to 31% of their gross income doesn't help them? How so? If your payment is already below 31%, then you should be able to afford to meet your contractual obligations no matter how much you may have over-borrowed against your house.

You have no idea what you're talking about in any single sentence of this post BTW.

My point was that the program is structured more to help banks - borrowers get a rate cut for up to five years and/or more time to pay on the loan, banks get permanent government risk protection. Odd that those who pushed the program are now saying the same thing I said. From the article:

Consumer advocates had high hopes for Obama's program when it began. But they have since grown disenchanted.

"The foreclosure-prevention program has had minimal impact," said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group. "It's sad that they didn't put the same amount of resources into helping families avoid foreclosure as they did helping banks."

It takes a minimum of 6 months process time to get a permanent HAMP mod, and usually longer. And while the program was announced March of last year, no servicer implemented it until that June.
What this means is that in the 12 months the program has been running, roughly half of the eligible borrowers (the 60%) have finalized the 6+ month mod process while the other half are still in process. Sounds pretty good to me.

SNIP

More are dropping out than have been helped to date, yet you assume a 100% success rate for those remaining? On what grounds (other than a perverse liking for Obama's butt-musk) do you base that? A reasonable assumption would be that the rates of success versus failure would remain roughly the same, with more failures than successes. Also from the article:

But analysts expect the majority will still wind up in foreclosure and that could slow the broader economic recovery.

"The majority of these modifications aren't going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you're still looking at a very high debt burden."

Thus we see that not only is your assumption of future mortgages saved fatally flawed, your assumption that the mortgages of those who have completed the program successfully have been saved is equally flawed. "The majority" of those successfully receiving modifications are expected to lose their homes to foreclosure, so even the 30% "success rate" is likely going to be higher than the actual number of mortgages saved. Thus the final cost per mortgage saved will likely be higher than Drebo's estimate - probably far, far higher.

 

[Vic]

My point was that the program is structured more to help banks - borrowers get a rate cut for up to five years and/or more time to pay on the loan, banks get permanent government risk protection. Odd that those who pushed the program are now saying the same thing I said. From the article:

The rate cut is not "up to" 5 years, it is for a minimum of 5 years, after which their rate goes up by 1% per year until it reaches whatever it would have been according to the original note.
At the same, banks never get permanent risk protection. Quite the opposite, their incentive is based off the borrower actually performing. You're just making shit up, aren't you?

More are dropping out than have been helped to date, yet you assume a 100% success rate for those remaining? On what grounds (other than a perverse liking for Obama's butt-musk) do you base that?

At no point did I assume a 100% success rate. You appear to have just made that up as well. Read again what I actually did post. Now that income documentation is required upfront, the number of borrowers dropping out of the program because they misstated their income will drop considerably. And as that overall figure only included those approved for the trial, and you can't be approved for the trial now unless verify your income first....

A reasonable assumption would be that the rates of success versus failure would remain roughly the same, with more failures than successes. Also from the article:

Thus we see that not only is your assumption of future mortgages saved fatally flawed, your assumption that the mortgages of those who have completed the program successfully have been saved is equally flawed. "The majority" of those successfully receiving modifications are expected to lose their homes to foreclosure, so even the 30% "success rate" is likely going to be higher than the actual number of mortgages saved. Thus the final cost per mortgage saved will likely be higher than Drebo's estimate - probably far, far higher.

These people who lose their homes do so because (1) they can afford it but intentionally walked away, (2) they can't afford it even at its present market value, or (3) they fail to comply with program requirements, and they do not concern me. Well, maybe the 3rd one, but I take that one on an individual basis. But the first 2 lose their homes because they deserve to lose their homes. Hey, they can still try a short sale.

You see, it is a GOOD thing that a large percentage of the applicants fail the program. It's not for just everyone. Nor should it be. What are you, some kind of communist or something? If you can't afford your house, then get out. If you can afford to pay for it but refuse to do so, then get the fuck out. Yet you're here in this thread complaining that HAMP doesn't let those people stay in their homes, and pretending that position is somehow capitalist. While I'm thinking you got dropped on your head as a baby.

 

[bfdd]

Vic, what I want to know is where are the bail outs for people who don't need them? I mean we obviously did or are doing something right and that usually comes along with a reward. Except everywhere we look the people who fucked up are being rewarded. I guess being a "good dog" doesn't work anymore.

 

[Vic]

Vic, what I want to know is where are the bail outs for people who don't need them? I mean we obviously did or are doing something right and that usually comes along with a reward. Except everywhere we look the people who fucked up are being rewarded. I guess being a "good dog" doesn't work anymore.

These programs are propping up your own home values and keeping the economy running. Without them, the entire banking system in this country would have collapsed. Period. Financing would have disappeared and homes all across the country would be worth nothing more than what a cash buyer would be willing to be pay for them. Period. Plus, I don't know any "good dogs," except posters on the internet who complain that everything is always someone else's fault. I'm sure that in less than a 5 minute conversation I could find out your favorite flavor of milk that comes from the govt teat.

 

[werepossum]

The rate cut is not "up to" 5 years, it is for a minimum of 5 years, after which their rate goes up by 1% per year until it reaches whatever it would have been according to the original note.
At the same, banks never get permanent risk protection. Quite the opposite, their incentive is based off the borrower actually performing. You're just making shit up, aren't you?


At no point did I assume a 100% success rate. You appear to have just made that up as well. Read again what I actually did post. Now that income documentation is required upfront, the number of borrowers dropping out of the program because they misstated their income will drop considerably. And as that overall figure only included those approved for the trial, and you can't be approved for the trial now unless verify your income first....


These people who lose their homes do so because (1) they can afford it but intentionally walked away, (2) they can't afford it the property even at its present market value, or (3) fail to comply with program requirements, do not concern me. Well, maybe the 3rd one, but I take that one on an individual basis. But the first 2 lose their homes because they deserve to lose their homes. Hey, they can still try a short sale.

You see, it is a GOOD thing that a large percentage of the applicants fail the program. It's not for just everyone. Nor should it be. What are you, some kind of communist or something? If you can't afford your house, then get out. If you can afford to pay for it but refuse to do so, then get the fuck out. Yet you're here in this thread complaining that HAMP doesn't let those people stay in their homes, and pretending that position is somehow capitalist. While I'm thinking you got dropped on your head as a baby.

Actually I'm going by what a loan officer told me when her sister-in-law was trying to get help (she dropped out and sold her house, $40/month wasn't going to cut it.)

Here are your quotes.

What this means is that in the 12 months the program has been running, roughly half of the eligible borrowers (the 60%) have finalized the 6+ month mod process while the other half are still in process.
SNIP
With more than that number still in the lengthy process, the actual number of mortgages "saved" will be nearly double that.
SNIP

That's where I got 100% from, your estimates of the remaining half nearly doubling the success rate, which is manifestly true only with a success rate at or near 100% for the remaining half. (An intelligent person would assume that just as more have dropped out than have successfully completed the program to date, so will the numbers of failures be quite high in the future.) If that isn't what you meant, learn to say what you mean.

But to be more precise: Roughly 1,240,000 started the program. Roughly 436,000 have dropped out and 340,000 have successfully completed the program, leaving roughly 464,000 still in process. To double the number of those successfully completing the program, you need a success rate of 73.3%. True, that's not 100%, but it's far larger than the 43.8% of those leaving the program successfully to date.

And as the article states, "the majority" of those who "successfully" complete the program are still expected to lose their homes. If this is even partially true then even a magical 100% program success rate will result in far more than $220,000 per mortgage saved. But then I suppose if you find a failure rate of more than a third to be a good thing, then the ultimate failure rate will be a truly great thing.