Senator Has New Modification Plan
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This is all a bunch of BS. Lenders should modify balances on current loans to appraised value and a market rate payment based on that value. They should then put a second DOT on the property for the difference between the current loan and the new loan based on appraised value. The second mortgage will have no payment attached to it but lenders/banks will recoup portion of their principal in the future as homes start appreciating. This not only helps some current homeowners but is more fair and equitable to those homeowners who signed up for a mortgage and are sticking to their commitment. Not rocket science just a little bit of common sense.
That makes too much sense Gary… It’s fair to the bank and fair to honest homeowners. Therefore, it’ll never happen.
Let me tell you a story…
Middle aged woman has job, great credit. Can’t advance in career due to incomplete schooling. In 2007, uses home equity and school loans to finance return to school to improve chances for better employment. Has to leave job to return to school. Finishes school. After housing crisis, comes back to upside-down mortgage. Goes job-hunting. No jobs available especially for middle aged people. Everybody prefers hiring younger people. Can’t stay in house cuz no income. Rents out house to try to continue making payments. Payments at 5.75% interest for 1st mtge & 8.00% interest for second higher than rent income. Can’t get refinance cuz next to no W-2 income. Can’t sell cuz house upside down. Can’t short sale cuz of deficiency notice. Going deeper and deeper in debt trying to keep make payments. Wants to make payments, but can’t cuz little to no income and no job prospects. Tries entreprenurship. Works feverishly. Can’t make ends meet. Can’t keep making payments. Yes, responsible for decision to take home equity, but was in hopes that it would improve financial situation, not make it worse. Little left to do but to walk away. If only woman could reduce payments to level below rent income, she could keep home (hoping to return someday, sigh), continue making payments, save credit rating, help bank, help renters, help economy, help herself remain “responsible” and honor commitments. (shaking head in despair)
Who’s to blame for this situation? Not bank. They “helped” hopeful homeowner go back to school. Not the not-so-hopeful homeowner who made decisions based on pre-housing-crisis information with no idea that a crash was coming. Not employers who won’t hire older woman cuz “It’s not personal. It’s just a business decision.” Not government cuz they were just trying to help those who were being left out of the homeowning pool. Not investors cuz they were just trying to take care of their retirement…. etc., etc.
It seems we need to get past pointing fingers and just move on to picking up the pieces and rebuilding a new system without pointing blame and “sticking it to them” mentalities. Can’t we all just move on and try something that will spread the risk/reward around? Maybe if everyone agrees to lose a little in the short run, maybe everyone can win in the long run. But then, that would take some selflessness and compassion. Hmmm. One can only hope….
I think this is another bad idea in a long list of bad ideas. You are also assuming that values will appreciate substantially in the next few years which is not likely.I am in Georgia and there are certain areas that need to be bulldozozed as they will never recover. The entire financial crisis has been handled with the skill of a 3 year old since the beginning. Until our government deals with the issues and starts to treat this country’s problems like a business we will never get out of this mess. It is unfortunate that a great country like ours has been ruined by power hungry people that make decisions based on what is best for their own personal interests.
…Also, the rapid decline in the lenders’ share of “profits” upon sale of the home will represent a powerful financial incentive for folks to stay put in that house as long as possible. Such artificial incentives to NOT buy a new home would represent just another round of government stimulus; the very thign that caused these problems in the first place. IMO, the lenders’ share of profits on sale should start at 100%, decline by roughly 10% per year, but never decline below 50% – that deal is plenty good for the homeowners and there is no need to impose artificial incentives for people to NOT move up, or move on.
Not a bad workout plan – for many anyway. However, the adjustment due to improvements in the interim period cannot – or at least should not – come exclusively from the lender’s share at closing; it should be deducted from the gross. Let’s face it, many of those 10 Million homes are upside down becasue their owners treated them like an ATM pre-2007. Those owners enjoyed lifestyles beyond their means by constantly borrowing any equity. Allowing them a second bite at that apple – with any and all renovations coming out of someone else’s – the lenders’ – pocket, is an example of reinforcing negative behavior. Plus, it they have an 8+% default rate in a pilot program that is only 12 – 24 months old, the long-term default rate is likely to be a great deal higher if values fail to appreciate in the near term; those homeowners will have learned that they can always get a better deal if they just stop paying. We would all be better off in the end if the government focused on accelerating foreclosure processes to a reasonable rate, with no one being able to stay in the home over 12 months after they stop making payments. That way, the homes will be sold to folks who were, mostly, blameless in the mess in the first place, the delinquent debtors will learn that paying their mortgage is Job #1 if they want to stay in their home, and lenders might be willing to hazard some of their own money in lending to the residential market again.
Won’t work. FHA loans offered the same option, yet lenders, Ocwen in particular, did little to participate. Ocwen actually stated during a phone call with borrower that they had no knowledge of any such program being available…….despite being a listed lender. It’s HAMPS Principle Reduction Alternative, you morons.
This all sounds like bullsh*t. Here’s an alternate plan … underwater homeowners will be allowed to RENT their property back from the bank for the period of one year, at a payment they can afford. In return — and as long as they maintain the property — their credit will not be dinged. The banks responsibility will be to ready the property for sale as soon as the tenants leave.
This program will keep families (and neighborhoods) intact, throw the banks a bone by allowing them to collect rent (to help mitigate losses) and keep the properties maintained, increase the pool of qualified buyers going forward because of the built-in good credit statute, and give us a “soft” landing economically.
Objectivity aside, there are no laws which mandate that it’s a right to own a home, so if one is looking for sympathy, they’ll find it in the dictionary in between sh*t and syphilis…
How about having Goldman Sachs & AIG send all of their profits for the next umpteen years to the government to use to be used as downpaymetn assistance for qualified homebuyers?
If you’ve read “The Big Short” it seems as they were instrumental in creating the real estate mess. We, the taxpayers, have bailed them out, it’s time for payback.
It’s time to quit trying to figure out creative ways to help the banks “cut their losses” they sure weren’t too quick to share their windfall profits with us , the tax payers” back in the glory days of yesteryear.
I just read an article saying that the banks profits for this past year were higher than the three years leading up to the crisis. So, although your comment is a pipe dream, more power to it because these POS banks are back to making more money than before they destroyed our system.
I tried to look at this in a positive light but lets face it. This is not a good idea and it’s an accounting nightmare. Who is going to keep track of all this additional documentation that would have to be put into place? The banks? The government?
This program would be very confusing to the end user- the homeowner. I appreciate thinking outside the box but I have to oppose this idea.
Who got to you? Did somone pay you to endorse this plan? It sucks! Come on guys! Go back to promoting your no-cost ideas for fixing this mess. I am disappointed.
I am frankly shocked that, after the past 5 years, anyone would think there really is a no cost way to fix any of this mess. It involves houses, mortgages, and lawyers. None of that is free.
When are the the folks doing the right things, like making their payments on time, going to quit being punished. We taxpayers are continually picking of the tab for all these failed, pour billions of dollars down rat hole programs.
Why don’t we let everyone making their payments on time refi their existing loan balances at a 3% rate of interest even if they are up side down. No cash back refinances.
1. The benefit is more money will go into the economy, lower monthly payments equal more disposable income for job creation.
2. The investors don’t get punished with write downs of existing mortgages.
3. The goverment isn’t provided the opportunity to screw up another program.
4. Who will invest in mortgage loans in the future, if you stick it to the investor of mortgaged backed securties the price of money will increase, risk vs return. Again, consumers in the future will all pay higher loan cost.
Bottom line, we continually punish individuals that are doing the right thing,
and waste more money on thoughs we can’t help.
Goverment help ! You bet, you’re check is in the mail….
The people I help with short sales haven’t stopped paying their state, federal, and local taxes unless they are out of a job temporarily. They are tax payers like everyone else. Why not expect some of their tax money to help them when they are in need? This program has been piloted with a 2.6% default rate after implementation. That’s more like normal and more like a program that can be gotten behind.
Besides, when the banks foreclose and short sale? They get pennies on the dollar and this hurts the performing loan payer far more than anyone else because their equity tanks.
We did plan, two years ago with a small business owner on his warehouse, wherein we slashed the interest rate from 8% to 3%, and slightly reduced the payment (to what he could afford). When he sells we are to recover a percentage of the proceeds to make up for the rate reduction (if were’s lucky). The borrower is pleased to see much of his payment going to equity. We are please to see a return of capital. We too agreed to offset building improvements from the sale price, to encourage him from keeping the property up.
Many private lenders are lowering their rate to as little as 1%, while keeping the payment as high as the borrower can afford. 1% is still better than CDs and the lenders are getting their money back, while the borrowers are building equity. This is easier for private lenders as they don’t have to deal with a large class of borrowers saying: “If you do it for him, why don’t you do it for me”.
Guys,
I just had some thoughts here. We know that every thing in a real estate contract is in fact negotiate able.
The relationship between the banks and home owner should be the same and encouraged. If a bank felt it right to do a modification as did the test bank then why not. Of course this does not take into account that they are just too big to fail and that brings the feds in. Or perhaps that the view of the congress is that every one should have a government backed loan. Right?
If a law needs to be passed then maybe it should be to get regulators out of the way and let free enterprise go to work. If the banks (government backed) truly had anything to loose maybe market forces would work. Applying a government mandate or fix law is not necessary or wise in my view.
Why would a bank not work a deal like that if they had the underlying funding available to do so and it solved one of their portfolio problems? Looks like a potential real win-win to me. That is except for the poor chump that can’t ride it out is going to loose some of his equity in the long run, just maybe not as bad. If the bank can in essence keep a tenant in the property with that kind of leverage it is good policy for them.
After all with these trillion dollar bail outs and printing of paper money gone a miss we are on our way to the biggest inflation mess we have ever even imagined. It is not too hard to visualize a time in the short future where some of these properties will also rebound in terms of present day dollars to keep pace with that inflation.
The real problem which this takes the focus off of is the balance of trade defecates that we have experienced over the last 30 plus years and the impact that has had on us.
That problem is directly traced to the regressive nature of the Federal Income tax; and subsequent loss of local jobs as a result. With out jobs and income we can not make the house payments and that is the bottom line.
What I think we are seeing here is an attempt to once again put a political band aid on a broken tax system, a system which gets worse every passing year and is fundamentally flawed. Every time you wrap a bandage on yourself it gets harder to move.
To the Senator, Spend your time adopting the Fair Tax HR 25 and the Senate bill eliminating the IRS and these things will all go away for good.
First, a program that allows ‘banks’ to recapture funds on a rebound, after we paid trillions to save them from their failed lending, is not acceptable.
Second, it’s time the Government realized the best asset they have is it’s ‘happy citizens’ (then it’s natural resources, but thats a different blog)
I would recommend the 95% refi, subject to ability to pay, banks write off 50% of overage, and HUD have a 2nd loan for balance interest only 1%, to be paid upon sale, or refi, or fully amoritized for 15 years upon payment of refied first loan.
Instead of letting the ‘criminals’ who created this mess get the money, lets at leasts give ‘We the People’ a shot a paying it back to the people who put up the ‘bailout money’ in the first place.
Because the money wasn’t real to begin with, and the money won’t be real to pay it back. . .
It is great to see so many opinions from people who actually are in the business. Many of the plans or laws that have been proposed are from people who have never made a loan in their life, Frank / Dodd. They are trying to get the banks to voluntarily write down debts that were initiated on guidelines that were approved by Fannie and Freddie. Until a plan is created that makes it mandatory and beneficial for bank participation, you won’t have a successful turn around, unlimited LTV ratios, please. I am still fuming over the government ‘urging’ for Bank of America to buy Countrywide. Take a look at what transpired there after the initial blush was off the tree. The toxic loans in that massive file have beat up a once very successful bank and made them extremely cautious to move forward. If they want to help, and this is where the banks need to step up, they can slow the foreslosure numbers by rewarding the borrower who has been a good risk and has been making his/her payments even with the decrease in values. Lower their rates to market levels, without the massive amount of paperwork, and thank them for remaining loyal customers. Most of them have always wanted a home to live in not a house to flip. I hate giving hand outs to people who do not deserve it, such as ILLEGAL aliens, but I digress to another hot button. Let’s try to get the mood of America back to a positive feeling by helping the good borrowers out instead of encouraging them to walk.
I just received an email from http://www.newbottomline.com/. They ‘re launching a petition asking President Obama to replace Ed DeMarco, ActingDirector of the Federal Housing Finance Agency, and appoint an FHFA Director who is committed to helping homeowners and restoring the economy through principal reduction.
They say: “Ever heard of Ed DeMarco? Most people don’t know the name of the career bureaucrat who serves as Acting Director of the Federal Housing Finance Agency and oversees Fannie Mae and Freddie Mac. Between the two, Fannie and Freddie own or guarantee over half the mortgages in the country, making Ed DeMarco themost powerful man in housing.
“DeMarco [who, like Timothy Geithner, Secretary of Treasury] was a holdover from the Bush Administration and is staunchly opposed to providing relief to homeowners through principal reduction. After Fannie Mae won approval from federal regulators to reduce principal for underwater mortgages in 2009, the program was canceled by DeMarco and his executive team just two weeks before the first mortgages would have been written down.
“While state Attorneys General and big banks negotiated the recent mortgage settlement on illegal foreclosures, DeMarco dug in his heels against the Obama Administration and refused to bring Fannie and Freddie into the negotiations, even though Fannie and Freddie hold more mortgages than the big banks combined.”
This program sounds like something I could be interested in personally. I must refi soon and so far with $700 K on the bill that is not possible from any source with a rate that is even remotely favorable to me.
The problem I see is this legislation has about no chance of passing both houses due to the election cycle. I think menendez is a Democrat and that would fly in the Senate, but the other side will just punt.
So while Washington diddles for power we hang in the breeze. It will take some kind serious stimulus to change the way they act, and I don’t see the Will from enough people to pull it off.
Randy
About 35 years ago the Farmers Home Loan, which is now the USDA loan did this. When a loan was issued the borrower had to sign papers stating x amount of equity would go back to the government upon the sale of the house. I think the longer you stayed in the house and made your payments, the less equity went back to the government. I am not sure if it worked or not, but for some reason it was stopped.
There’s no way lenders could pull something like this off. The logic behind it makes sense but the reality is that the banks will never have the manpower to oversee the intricacies of such a program. I could only imagine everyone trying to figure out the home improvement piece too; new roof expense etc.
Not a chance!
Hi all,
This is a twist on the Hope For Homeowners program that the banks totally ignored 3 years ago and would have worked. The bottom line is there is over 3 trillion in consumer debt, home loans, credit cards, and student loans that needs to be either paid down or written off before the consumer has the extra money to get the economy going again. Until that debt is gone the economy is not going anywhere. History always repeats it’s self. Look at Japan, it was not willing to write off it’s debt and is going on 20 years of stagnation. Look at the Resolution Trust in the 90′s. That debt was written off in 1 or 2 years and the economy rebounded very quickly. Look at history for the answers they are right in front of our faces.
Respectfully,
Terry Lewis
3 trilliion in debt? I’m not disputing that but why did we PRINT 12 trillion in new money and give it the banks that didn’t help the situation? Further proof the government won’t make the smart decision. Can’t figure out why! I know our elected officials aren’t stupid but they sure act like it
The bottom line is people should be responsible for the decisions they make. They bought the house looking for the big profits. They should take the loss. The problem is that effects all of us in the values. The thing i’ve been saying for years is use a variance of the farm home loan type deed restriction. Write the payment to the current value but keep the principle where it is. If they live in the house long enough they end up making something. If they can’t pay a current market mortgage, which is less than rent in most area’s, Then they deserve to lose the house. The bill is on the right track but gives the homeowner to much! Since when should tax payers pay for other peoples’s losses based on their decisions?
Keep providing the great feedback guys! I’m pretty sure the Senator’s office will be paying attention to your comments today.
Come on Guys this is further punishing the original Buyer .. the originating lender is more responsible for this mess than the trusting Buyers most of whom were bate and switched into unreasonable/fraudulent loans. And loans are loans not equity partnerships. The banks are reluctant to foreclose or sell much of the REO inventory because they are waiting for someone else to eat the losses. Time to not further reward them with an equity share just because WE are frustrated by their inaction. i STILL SAY THE WAY OUT OF THIS IS TO FORM A TOXIC LOAN BANK AND TAKE THE LOSSES OFF THE BALANCE SHEETS OF THE LENDERS.TRANSFER OWNERSHIP OF THE REO’S TO THAT TOXIC BANK AND BLOW THEM OUT TO SHORTEN THE TIME OF THIS EXTRAORDINARY EXCESS INVENTORY. ISSUE THE BUYERS A NEW LOAN AT TODAY’S RATES AND VALUE AND IF THE BUYER STILL CAN’T MEET THE FINANCIAL RATIOS TO QUALIFY ..FORECLOSE. SOUND LIKE HUD OF THE 1990′S. THAT WORKED WHEN THE PROGRAM FINALLY GOT GOING.
Great show and service to the industry. Keep it up,
Jack Marshall
It is like I told a home owner this week. I’ve lost $20K in equity too. The difference is I had some and you put zero down when you bought. You had money to put down and you opted for a 100% loan. So to refinance, maybe you should use your down payment money now to bring to closing.
When I talk to home owners who are upside down because of their own decisions (one in a $420K home they bought with zero down) I find it difficult to feel compassion. This home owner built a home for $250K, rented that and bought a $420K home with zero down which is now worth $360K and they want tax payers to help them out. They don’t want to sell the $250K home because it is a “down market”. Hell NO!
Totally agree! or the person who has a Range Rover and BMW in front of their home, took lavish vacations and have their kids playing club sports…Obviously this is an issue of behavior and behavior change but is that behavior change possible or given the chance would they do it all again??
Stop drinking the Kool Aid people! And stop blaming the banks! Those of you who like this idea are only proving that you are part of the problem…. you are part of the entitlement generation mentality! NO ONE, i repeat….
NO ONE forced any borrower to lie about their income, lie about their ability to repay their mortgage, etc.. No BANK (you seem to like this term) forced any borrower to STEAL all the equity out of their home by making those same lies, and doing a cash-out refi. These borrowers KNEW exactly what they were doing! They wanted EVERYTHING knowing that they couldn’t afford it and know they and YOU want someone else, (the government, banks, etc.) to pat them on their little punkin heads, tell them it wasn’t their fault, and help them to feel comfortable with their irresposnible decisions. The ONLY reason any of you are in favor of this stupidity is so that YOU CAN GO BACK TO MAKING MONEY!
EVERYONE needs to begin assuming responsibility for their decisions in life! Take OWNERSHIP of YOUR actions and grow up.
Now I am sure that those of you who are in favor of this stupidity are also in favor of the BANKS, the GOVERNMENT, and the poor unfortunate taxpayers (the 49% who actually do pay income taxes), bring forth a program that will also lower the mortgages for those HONEST RESPONSIBLE homeowners who didn’t lie to get a mortgage, who have continued to make their mortgage payments, and who have not walked away from their legal, moral and ethical obligations, that will fairly lower their mortgage amount and forgive their debt also. Am I right or do we ONLY reward the irresponsible in this Polly Anna liberal world you live in?
Wait… I got even a better idea! Let’s just forgive everone for everything that they have ever done! After all they didn’t know what they were doing! The Devil made them do it!
Here is my comment. (1) Considering that plan it sounds like it could be a bookkeeping nightmare if the property appreciates determining how much the bank really gets. Home owner does upgrades, or just preventative maintenance and wants to get reimbursed. Frankly it makes me angry, who is going to help me afford my exterior painting this spring?
(2) Offer home owners a refinance at market rates today and let them keep their high balances. As they pay, they will get equity, just like the rest of us. I have someone now who is upside down $15K. She would refi in a minute if she could. She can’t because being upside down the programs don’t fit her.
Stop screwing around and let everyone refinance if it improves their cash flow or shortens their term. I am not at all interested in helping the person who put zero down and bought a home be better off financially than I am. I’ve lost equity too, I’m just not upside down. If the bank does not want to do the refi’s then let them have the damn house and block that home owner from home ownership for a minumum of 7 years under any program.
I actually enjoyed you show today, you both spoke very calmly and you had a great message to share. It’s much easier to grasp your message when you speak like this. Thanks for sharing.
Interesting, but I don’t see it coming together for any number of reasons. Mostly, the bickering in D.C. Beyond that, the proposal is just too convoluted for implementation to be effective. If it did pass, Congress would create another “arm” to supervise it and banks would need to create new divisions to monitor the reductions, future sales, etc., etc., etc.
I don’t disagree with the thought behind the bill, I just think it will amount to time spent at the water cooler. Nice conversation, but ultimately a time waster.
After bailing out the banks, why can’t our Congress require a smart restriction such as an across the board 3% mortgage rate on all predatory ARM loans issued through bail-out banks. Their illegal actions have been documented, yet there is a rush for their immunity (OUTRAGEOUS!).
Forget principal reduction or schemes of participation, reducing mortgage interest rates would save probably 50% of the millions of upcoming foreclosures. It would cost the government and we taxpayers absolutely nothing. Many of these loans were discounted purchases from failing banks. Banks still have room to profit, as they should.
You are absolutley correct. This solution being the most logical it is amazing to me Washington tries everything but this!
I wouldl like to think this would work and help stabilize the Real Estate Industry. My question is whether the public who in part blame the banks and Wall Street for the mess in the first place would be willing to share future equity with the entity who they perceive caused the mess in the first place. It certainly sounds better than anything else they have tried.
I like it. At least someone in Washington is thinking creatively. It is not perfect, but certainly a step in the right direction. It’s easy to say “it won’t work”. It’s much more difficult to say, “but here’s an idea that might…”
I like it too. This is the first idea I have liked. Good for all parties. Need to get everyone onboard quickly. Got my vote !
I can understand all of the work everyone is doing to help this ongoing crisis. However, most of this would be resolved if we got people back to work and the government stayed out of the way. Let the free capitalist system work. There always has been and always will be irresponsible people who always want to have a pity party for themselves. The responsible people will clean up the mess and we can get on with life.
Ocwen approached a friend of mine with this program 6 months ago. wrote his mortg down from $800k to $600K. he is now able to stay in his home. This will work, BUT I agree without jobs this market will continue to struggle. and yes, the Govt needs to get out of trying to help, let the free market work !
The banks don’t own the loans. The had no money invested in the mortgage lending transaction. The investors were the lenders. The “banks” have stolen money from investors, received TARP money to pay off the loan and then also got insurance money from ie. AIG on each loan that was in default. Now they want more money that they are not intitled too. Wake up America!!! How much more money are you going to let them take. out of your pockets. These loans have been paid for many times over each and everyone of them. The have been doing this since 1995. They just got caught!! The homowners deserve the truth.
Right On. Why give them 1 cent more. They need to be held accountable and stop patronizing the masses….Do some diligent research and the truth will be sobering!
Amen! …and anyone who had to move out of their home due to a job transfer; was forced to rent it out because it was under water; thus couldn’t sell it, will not be eligible for any of these mortgage reduction programs, because their home is not owner-occupied. What relief programs are for them?
I agree. Seems that few people are willing to look at the whole picture.
I know from pesonal experience what you say is true. FDIC pays, banks get paid , lenders get paid and they all write it off ta boot…….all with made up money. Sigh! If only I was a bank!
The vast majority of “investors” are actually different forms of retirements accounts. So the idea of a “write down” means that the working stiff contributing to their retirement plan must lose 20-50% of their investment towards retirement. Not only is it stealing from retirements now, but the “opportunity cost” of those funds not being “in the market” just means an entire generation without he means to retire. There is nothing worse than a politician with a “solution”……sure, let’s destroy the retirements of millions because others got loans they couldn’t afford because agents and rookies were their “trusted advisors” and “there is no chance of these loans going bad (Barney Fwank)” kinda of thinking.
No one buys a home with the intent of losing it. This offers hope to those in what they think to be a hopeless situation. I have been in this situation and it is tough to keep the hoplessness from spiraling downward into all aspects of life.
This idea would be good for ALL of us in ways we cannot even imagine.
I love that this is one of the first positive solutions I have heard that creates a combined risk / reward system for all parties to co-operate on a solution. It has a better chance of actually making a difference that way. I have not read the whole proposal so I am sure there are more details but on a general, five minute over view presentation – this is worth looking at further!
Amy:
Great comment now you can help…
Gather together your family, friends and clients and ask them how much of their money they would like you to invest in bad loans and that they might get a return on their investment in 3- 5 years….Maybe
Let me know how that goes.
Who will fund the banks for their participation in writing down these loans?
Remember banks don’t print money and the fact that they are writing down the loans who is going to invest in a hypothetical increase in value in 3 to 5 years…This is a bail out in the making.
We have Representatives starting a Program of the Month Club and avoiding the main issue of Jobs and executing foreclosures in a proper manner.
Next mo. or so the Program of the Month will be Senate Bill 1746 extending Chinese National Visas to 3 years so they can buy up our foreclosures.
Selling the foreclosures for an average of 50 cents on the dollar and then using those sales for comps is at the root of the problem – fix that
Give the borrowers who are paying the higher rates ON TIME some incentive to stay there by making the refi happen without so many strings – allowing some disposable income to put back in the economy (spending) – Maybe even allowing some investors to come into the market and turn these homes sitting in inventory to become rental properties for families that must rent because they have no other choice due to damaged credit they have to season out
Maybe even a qualifying assumption of some of these loans for investors
That would at least take some of this inventory off the market
Until so much of this inventory at so below market prices go away we will not have our noses above water again.
Let buyers pay what the market will bear and not allow the foreclosure comps to dictate – its got to start somewhere !!!
Great! More propertys in the hands of the people that CAUSED the problem to begin with. Last time I checked, over 35% of all REOs were bought by investers…the very people that artificially drove up the price of real estate, ie MBS and the rest of the garbage. It is called trickle up economics. They create the circumstances that cause the problem, then benefit. Capitalism at it’s finest. Please comment.
Home owners who are current on their loans are already reaping the benefits of the boom with interest rates as low as 3.5%. No incentive for them to ever refinance, why would then unless it went down to 2-2.5%?
The fact of the matter is if you have an area where you have REO and Short Sales driving the market, say over 50%, then the sales have to be used by appraisers. It has to do with the laws under which appraisers work, USPAP, lender guidelines, etc.
If you calculate the savings to the home owner who’s loan is current who refi’d down from 6% to 3.5% (I have appraised hundreds where that is the case), they have achieved a bonanza in the amount of mortgage interest they will save. In short, they benefited from the crisis. I don’t feel the need to address them anymore. A 3% savings on your mortgage a month gives most people a whole lot of disposable monthly money but most people now are putting that in the bank or waiting out huge sales by retailers. They aren’t running out spending like it 2099 anymore.
It’s time to help home owners who, if they all just walked away in that 10 million, will adversely affect the real estate market for at least 20 more years instead of 10.
Jobs! it all gets back to employment! Our elected officials need to stop trying to fix something most of them do not understand and provide a frame work that protects the consumer and get’s out of the way of business owners by making the decission to higher that next person easier…
Bad idea. Let’s stop using the hard earned taxpayer money for yet another scheme. What’s wrong is that all of these programs support the mindset of “how can I find a way to have someone else pay for my financial decisions” Why not work on a paradigm shift to encourage people to pay for what they signed up for? In many cases, folks are able to pay but want to “work the system” They can work more, eat out less, take fewer vacations and make their mortgage payments! Fiscal responsibility… Sure there are hardships and those folks deserve help but so many defaults are strategic these days!
Marie, you don’t have a clue. Resorts, car dealers, department stores, retailers, etc., are in dire straights due to NO BUSINESS. Many places are closing, resorts are running outrageous deals to get anyone to go, retailers are folding like accordians, mom and pop start ups have gone bust and hundreds and hundreds of lenders have imploded. Where have you been during all of this?
And the answer is to provide benefits to people who’ve made bad decisions? Pulease!!! I think it’s you who has no clue. Give up the Ranch.
Principal reduction is a bad idea. Sets the wrong precedence and rewards those who shouldn’t be rewarded. If people willfully don’t make their mortgage payment, then foreclose. The faster this happens the sooner we will be out of this mess. Just my two cents.
exactly. it’s not always about not feeling any pain. there is not quick fix to this issue. it’s got to fall to where it should have been the whole time. bubble economics.
Sure, refuse to write it down maybe 30% and then lose 50% when you foreclosure. Yeah, that’s a smart plan. That teaches those leaches. Meanwhile, back at the ranch, Ma & Pa Kettle can’t sell the ranch for what they owe because the Double Bar Bankster B has been sold so low they may never retire to that avocado ranch in Cali.
This could make things worst! At first sight Senator Menendez is on the right track offering solutions to hour national financial housing crisis. This idea is good but needs a lot of tweaking. If down the road there is appreciation and values go up…who will stop the property owner from again using it as an ATM machine. At that time the owner can add a new creditor to the property and that would be the agency that runs this program.
It could make things worst! At first sight Senator Menendez is on the right track to offer new solutions for the financial housing problem. This proposal is good but needs a lot of tweaking. We could be in a bigger whole down the road if these homeowners take advantage of their home appreciation and start using their properties as ATM machines. At that time the homeowner will add another creditor to those that have stake int he property and that would be the agency that runs this new program.
Here’s the problem that I see with this idea. The banks don’t “own” the loans, the MBS investors do. The banks are just the servicers. How do you get a bunch of retirement funds, hedge funds, and foreign banks to agree to write down the debt and go along with this scheme? Hasn’t that been the problem with a lot of the principal reduction plans, getting investors to agree to it?
You show them how much they stand to lose in foreclosure by using real numbers from the market. That should be a wake up call.
Just because these places invested doesn’t guarantee they get their investment back or it grows. It will take a hit like any other and in time it may bounce back. That is the nature of investment.
When we refer to the banks we do a disservice to ourselves because this implies that there is a bank at the helm when in fact the note holder is. Let’s start by calling them Servicers so we subconsciously ingrain the complexity of ownership and decision making involved.
I find the plan lofty but it has too many holes.
You presume that the house will appreciate 8.33 percent per year (very lofty)
Why does the servicer have to participate in the maintenance?
Is there a deed restriction prohibiting the sale, and if not why not?
This plan has not been vetted and will go no where, I like Rob’s idea, create jobs, prosperity will follow; if we can shine a light on the collusion between the banking industry and lawmakers or regulators.
Darrel, without a housing recovery there will be no total recovery in the jobs market. The two go hand in hand. Many sectors of the economy are recovering, but housing is still a drag on a full recovery in employment. How many out of work construction workers are going to want to take a job at McDonalds?
I’m talking to my Senators: “DO SOMETHING. STOP THE BLEEDING!!”
Let’s just create jobs and then demand will start coming back…
Brilliant! 1) This is really a principal write down but called a modification. 2) Repair loans, such as roof repair often needed, could be loan done through lending bank, offering interest income stream to helpful bank. 3) shared equity would quiet those against any help ideas being given to underwater homeowners.
I like the effort. Looking out for both the homeowner and lender is nice for a change.. It has some drawbacks as most programs do(many fraud possibilities). I would hope a lien would be placed on the home to help identify these.. and hopefully it wont move through at the speed of a short sale(since the banks are actually getting money you would think it wouldnt)
GREAT idea Guy’s, I think you are having a bigger impact that you think. Keep up the great work and when are you coming to Michigan?
Don’t see how it will work since banks/investors have shown a complete unwillingness to write down any principal reductions…
The cards may just have to fall, and if so, like the band-aid, the faster the better.
Can’t see it working guys, whats in it for the bank? Do they have some say on what repairs can be made. An ingenious homeowner could easily engineer a $0 appreciation share to the bank. But it is an “outside the box” try. An alternative, write a modification that qualifies the borrowers for some payment amount according to VA underwriting guidelines. Set the modified payments at that level. Leave the banks balance alone. Give the lender the right to review and adjust payments every two years according to the borrower’s then income circumstances. The banks get some rate of return on their balance, borrowers can live with it. there is fairness overtime. Most families don’t want to give up their homes. Make it possible for them to keep them! Short sales could still happen. Refinances could happen. Wouldn’t have to bulldoze as many houses. (whose great idea is that!) Servicing income would stabilize. Something along these lines could work. Next comment, please!
The problem here is there are too many steps and seriously the market pricing on these homes isn’t coming back anytime soon and in some areas – never.
The banks can’t even hold on to documents from close of escrow to the sale of the loan to another gene pool (usually 60 days) and then 2 years later you want them to magically remember to requalify people? Not a chance.
What’s in it for the bank? Well, let me think. If these 10 million people suddenly find rentals, go live with relatives, etc., many banks will crash. The average time to foreclosure being some 800 days in no pay status is a serious heads up to the state of mortgages, and the impact of foreclosure on banks, today. I say they don’t lose their collective asses, that’s what’s in it for them.
Now, what was in it for the home buyer who was lied to about interest rates, the ability to pay, and making timely disclosures about what loans would really look like if those 1% or interest only coffee arms, etc., adjusted? Nothing, they just bought bad credit, that was what was in it for them.
The banks have made money left and right through this ‘crisis’. Time for them to pay it backwards and stop the foreclosure and short sale insanity. They get far less in a short sale and foreclosure sale anyway. Why go through all the extra legal hassle and expense unless it’s just to prove a point or punish a home owner. Anyone who wonders what’s in it for the banks has little comprehension on what the banks did to the economy.
Agreed George, regular maintenance should not be deductable.
Definitely appears to be on the right track. Everybody “gives” a little………. what a concept! Did you screw-up on the roof-improvement illustration, or was it my eyes & ears(?) Also, is it OK to *presume* there are no negative financial stigmas that come with this little gift from the gods of gold?
Thanx,
Gregg
Finally somebody in DC who may be on to something. I have clients who could afford their homes if the write down to reality would happen. I hope this goes through.