Obama's plan includes mortgage prinicpal reduction!
- Thread starter halik
- Start date
Thump553
Lifer
- Jun 2, 2000
- 12,837
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That's what a cramdown is-the lender is required to accept the FMV of the property as the new principal balance. After all they are never going to get more than that in foreclosure.
Just my guess but look for sweeteners and incentives from the government to the lenders in the program-like reimbursement for some or all of the cramdowned portion, etc. If nothing else this would be necessary to make the proposal constitutional.
Just my guess but look for sweeteners and incentives from the government to the lenders in the program-like reimbursement for some or all of the cramdowned portion, etc. If nothing else this would be necessary to make the proposal constitutional.
- Oct 10, 2000
- 25,696
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Actually Donny Deutsch had a good point - if the market recovers and the house goes above the water, we'll recapture the principal. That way the tax payer get part of the upside and the money is repaid (if that's the case anyway).
I've been arguing for that for a while now, it's a de facto shared equity mortgage, where the gov't basically 'buys' a part of the house. The reason why you'd want is the negative externality of all the idiots foreclosing after they overextended - it pulls your house value down also.
Aharami
Lifer
- Aug 31, 2001
- 21,205
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not as simple as that. lot of the foreclosures are happening because owners have lost their jobs and cant find another one, and banks are unwilling to work with the homeowners. would you be able to afford paying your mortgage payments if you were unemployed for 1yr+?
blackangst1
Lifer
- Feb 23, 2005
- 22,902
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Here's what infuriates me:
The multipart plan will for the first time commit government money to spur loan modifications. One likely component will be interest-rate subsidies for at-risk borrowers, with the government matching the servicer's rate reduction. Borrowers would have to take an affordability test to see whether they could handle the monthly payment on the reworked loan.
"Our focus will be on using the full resources of the government to help bring down mortgage payments and to reduce mortgage interest rates," Treasury Secretary Tim Geithner said last week as he announced the administration's financial stability plan.
So in other words, we're going to give more perks to those who shouldnt have qualified for a mortgage in the first place by offering you the same bennies as those who DID qualify...at taxpayers expense. Fuck that.
The multipart plan will for the first time commit government money to spur loan modifications. One likely component will be interest-rate subsidies for at-risk borrowers, with the government matching the servicer's rate reduction. Borrowers would have to take an affordability test to see whether they could handle the monthly payment on the reworked loan.
"Our focus will be on using the full resources of the government to help bring down mortgage payments and to reduce mortgage interest rates," Treasury Secretary Tim Geithner said last week as he announced the administration's financial stability plan.
So in other words, we're going to give more perks to those who shouldnt have qualified for a mortgage in the first place by offering you the same bennies as those who DID qualify...at taxpayers expense. Fuck that.
blackangst1
Lifer
- Feb 23, 2005
- 22,902
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Heh this is just classic. So the idiot down the street who cant afford his house because he bought more than he can afford will get a bailout with my tax dollars? While I am in the same situation? But because I can afford my payment at the moment I have to tough it out? Hard to imagine how we as a nation end up in these situations when we enable such behavior.
Why wouldnt they let them short sell? That doesnt make sense. Does the bank want another foreclosed home that is depreciating faster than a car in their inventory?
I hear what you're saying, but sell your house in this market? Have you been paying attention? A great many homeowners are upside down, even ones that were responsible and put 20% down.
m1ldslide1
Platinum Member
- Feb 20, 2006
- 2,321
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I think that just about everyone in the country agrees with your view here (myself included - I just bought my first house two years ago and I CAN afford it). The problem is that someday I want to SELL my house, and if the housing market is still in the tank, then I will not be able to. Or I will have to sell it for less than I paid for it, which will probably net me negative equity. In other words, yeah these dumbasses shouldn't have bought these houses, but dumbasses tend to do dumb things, and when you have a greedy and deregulated financial sector willing to enable them, then you're going to get a mess like this. EVERY TIME.
Personally I would rather find a way out of the mess than making sure that the dumbasses get punished. If I can start building equity again, then IMHO, being a dumbass is punishment enough for these assholes.
As a bankruptcy attorney this is going to drive our Chapter 13's through the roof. I'll be craming down mortgages and adjusting interests rates (more than likely) through the 13. A while back, I think the only qualification was that you had to have been in your mrtg. for at least 3 years. I read the bill a few weeks back but I dont recall all of the details. The law will look nothing like the bill though.
StageLeft
No Lifer
- Sep 29, 2000
- 70,150
- 5
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Hot damn, hell yeah!
Can I get in on that? I want to replace my house with a $1M house and the gov can buy $800k of it, I'll pay for the other $200k. Where do I sign up?
Well, unfortunately, tough sh*t, somebody has to pay for it, it can be you in an unfortunate upside down home or it can be everybody else via taxes, right?
There is no way out of this that won't punish somebody, unfortunately
1. Buy house(s) that are more than you can afford.
2. Vote democrats into office.
3. Profit.
Wow, there isn't even a ... step in there! Meanwhile, those of us who rented for the last ten years because we knew we couldn't afford a house will be paying money to those people who couldn't afford a house, acted irresponsibly, and got one anyway. Now I get to pay for their houses and my student loans at the same time. Apparently I should have skipped school and taken out a less responsible type of loan that all of you would pay off for me because there's no way I'll ever get a student loan bailout.
GoPackGo
Diamond Member
- Oct 10, 2003
- 6,517
- 586
- 126
Thats the problem - most people who bought or refinanced a house in the last five years or
so are upside down.
Because of this most people won't qualify for the these great rates that are going on right now.
The collusion between the banks, real estate agents, appraisers, etc... led to house being valued WAY more than they are really worth.
The bubble has burst and the responsible are being made to suffer.
The irresponsible are being rewarded.
To provide some equity to this situation all 30yr mortgages should have their rates adjusted to 4 percent. That would lower payments and allow people to put money back into the economy.
That would also give responsible people incentive to not walk away from their upside down home.
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