More specifics on the Housing Bill bailout.. (loans, insurance, foreclosure)

[evilnewbie]

To qualify:
1) Must bought home between 2005 to 2007
2) Mortgage must be 31% or higher than GROSS income
3) Not have any Home Equity Loan or HELOC
4) Lender HAS to agree to the bailout (if they profit more from the foreclosure, you are out of luck)
5) FHA will verify income and job (this IS extremely important to make sure homeowner does not default when reworked, if successful then the only way a homeowner will default is from catastrophe or even more irresponsibility on spending, or lying about expenditures on the loan contract)...

What happens:
1) Home is written down to 90% of CURRENT value
2) Loans are made into "reasonable" fixed rate loan

Who wins:
1) Lenders: They don't have to worry about "worthless" homes in that foreclosure cost them more than giving it to the FHA. Plus any losses they have are tax deductible. They pay about 6k to do this on a 200k home. Out of everyone, the lender wins BIG....

2) FHA: They get 3% premium from lender for doing it, 1.5%/year premium from homeowner, 3% fee for selling OR refinancing the homeowner pays, 100% to 50% of PROFIT from selling of home the homeowner pays.. Assuming the government gets the correct interest rate which will be between 7-12% on subprime loans, the government stands to make 279k to 540k on interest alone on a 200k home... which is about the same amount that was "lost" in the home...

3) Homeowners: They get to keep the house but pays at most 3k per year for FHA rework "insurance" and pay 6k for selling the home (average 200k home). And profits from home will generate anywhere between 0k to 150k (I am estimating)... So about a little less than 20k after five years homeowners pay + profit from sale of home... if homeowner continues to default, we are screwed...

How the housing rescue bill can help you - Jul. 26, 2008

[MotleyCrew]

I am glad to hear that there will be no help for the ones who took out huge equity dollars and bought boats, second homes, etc.

[Obrero]

Originally Posted by MotleyCrew

I am glad to hear that there will be no help for the ones who took out huge equity dollars and bought boats, second homes, etc.

"Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time."

[alaskaboy]

I am sort of surprised the only time period to qualify is between 2005-2007. A majority of these bad home loans were written in 2004.

[GregTraub]

I don't consider this a big help to the lenders. They are losing quite a bit by writing down the loans. It's the part of the bill that gives local municipalities $ to buy homes in foreclosure that bails out the lenders.

I wonder if when they say the property must be occupied by the owner, if this will apply to second homes?

[pghquest]

Originally Posted by alaskaboy

I am sort of surprised the only time period to qualify is between 2005-2007. A majority of these bad home loans were written in 2004.

Truth be told, this started in the 1990's, when the powers that be thought that everyone should be home owners, not just those who had a down payment, had good credit, or decent history of paying their bills.

[Rose Red]

So it's for owner occupied primary residence.

I'm glad it's not applying to all those cash out refi's, inv properties or 2nd homes.

[evilnewbie]

Originally Posted by GregTraub

I don't consider this a big help to the lenders. They are losing quite a bit by writing down the loans. It's the part of the bill that gives local municipalities $ to buy homes in foreclosure that bails out the lenders.

I wonder if when they say the property must be occupied by the owner, if this will apply to second homes?

1) To me it says its up to the lender who "they" want to let FHA take over the loans... basically, its saying give the FHA the "worst" loans you made and are sure to make nothing and will lose money on... that's a pretty good deal considering they are getting back current market value of the home instead of nothing... the lender wins several hundred thousand dollars from just that...

2) When these lenders foreclose on these "worthless" homes that they can't sell, they have to maintain and try to sell it as best they can.. that costs them a lot of money... saving them thousands of dollars for upkeep of the home and listing it to sell

3) The lenders CONTINUE to foreclose on properties where they can still profit on and not give homeowners the option of FHA... they make money on that...

How can the lender not make out like bandits? If the homeowners continue to foreclose its the FHA's problem (i.e. your tax dollars that is going to pay for all the loses and upkeep of the home as well as selling it...), not the lenders...

[bentlebee]

Originally Posted by MotleyCrew

I am glad to hear that there will be no help for the ones who took out huge equity dollars and bought boats, second homes, etc.

In my street some one refinanced by changing their mortgage to a rediculous high one and the value has never been that high. So these might be able to refinance while on purpose they were getting the equity out and used that for the luxurious stuff. So if they refinance they already used that money on a car, fitness equipment, paying for a nanny because after they refinanced 2 more kidss were born on top of the 2 they already had....no that I'm against having babies, but they scammed on purpose. They asked so many people in our neighborhood if they knew a appraisser who would come up with a higher value than it really was and they found one

Last year they didn't pay the property taxes so their tax was sold and they still owe that money.....I hope they have no change on refi under the new law...the haven't got into the stage of lis pendens so they might still pay but I wonder what will happen to people like this?

[bentlebee]

Originally Posted by evilnewbie

1) To me it says its up to the lender who "they" want to let FHA take over the loans... basically, its saying give the FHA the "worst" loans you made and are sure to make nothing and will lose money on... that's a pretty good deal considering they are getting back current market value of the home instead of nothing... the lender wins several hundred thousand dollars from just that...

2) When these lenders foreclose on these "worthless" homes that they can't sell, they have to maintain and try to sell it as best they can.. that costs them a lot of money... saving them thousands of dollars for upkeep of the home and listing it to sell

3) The lenders CONTINUE to foreclose on properties where they can still profit on and not give homeowners the option of FHA... they make money on that...

How can the lender not make out like bandits? If the homeowners continue to foreclose its the FHA's problem (i.e. your tax dollars that is going to pay for all the loses and upkeep of the home as well as selling it...), not the lenders...

No not IMO, we have 60 out of 400 homes in foreclosure and if you look up up the owners names in the public records and see their history of paying...you'll be shocked. Many had lis pendens in the past, many had zero down and expensive cars in the driveway, etc....so IMO all involved are at fault not just the lenders, just a few can't help what is happening to them but as I say, just a few.