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This bill is a two edges sword that has some people in the clouds and others just plain bitter. For those just starting the incentives are great 3% down, 7500 tax credit, bail outs for forclosures thru short sales (good luck with that). And otherswho have made all efforts to pay there mortgage on time dont get anything. The shortsales are going to effect appraisals and comparibles. The market must adjust and this will take awhile. What are your opinions on this bill?
The only real "incentive" is the up to $7500 tax credit... which is an interest free loan, not a tax credit. It has to be paid back, so its not a great incentive.
There is no 3% down incentive, I think you mean the FHA down payment... it WAS 3%, now its going to be 3.5%... so its actually higher than before. Also, seller-funded DPA is gone (+/- on that one) so it's harder to buy with FHA now.
There really isnt any bailout for forelcosure through short sales in the bill. There is a provision to refinance current owners into affordable FHA loans. But in my opinion very few people will ever qualify for this.
The biggest provisions are the increase in max loan amounts on FHA and Fannie Mae/Freddie Mac loans and the potential "bailout" of Fannie Mae/Freddie Mac That one is very controversial and I am not sure how I feel about it... lots of posts on the pros/cons and I lean towards it being dangerous, but perhaps necessary.
Most of this bill is typical Washington: all show to win votes, little substance to help anyone except perhaps the lenders that made risky business decisions. I don't think it will help many homeonwers, and not sure how much it will stabalize housing markets.
This bill is a two edges sword that has some people in the clouds and others just plain bitter. For those just starting the incentives are great 3% down, 7500 tax credit, bail outs for forclosures thru short sales (good luck with that). And otherswho have made all efforts to pay there mortgage on time dont get anything. The shortsales are going to effect appraisals and comparibles. The market must adjust and this will take awhile. What are your opinions on this bill?
First.. short sales have been around for quite some time. A short sale is simply selling hte home for less than it's worth.. NOT neccesarily below market. It simply means that the market value is now less than what the borrower owes on the home. My house was re-appraised in prep for a short sale and it appraised $120K less than it was in 2005. The banks will take 90% of the appraised value as the lowest acceptable offer. Pretty much still within fair market value. Short sales will NOT really pull down the market.. FORECLOSURES are what pulls down the market., because banks let htem go for fire sale prices and below value to get rid of them. Also, the pool of buyers in a tighter credit market and slow economy also pulss downt eh price of homes.. supply and demand. There are so many houses out there for sale and so few buyers.. quite the opposit of 3 years ago!
As for the bill it's not so much a "bail out". It kind of is like a short sale, only sold back right to the homeowner. Being that it is voluntary the banks will decide wether writing down the value and modifying the mortgage costs them less of a loss than foreclosing. Also, the homeowner does now have to prove that the new mortgage rate with 5 principal is affordable and sustainable to them. All the gov't is doing is insuring that mortgage by backign it up as an FHA.. the bank is NOT giving anyone any money. The homeowner is paying a PMI on the home to the feds for the FHA secured loan . yes, the homeonwer has now a 15-10% equity stake in their home, but not really. For one, the gov't will take the full equity should they sell withing the first yearor two .. and I believe that % decreases till it hits 50% . If I'm not mistaken the homeowner msut pay the gov't 50% of the equity whenever they sell the home.. and I believe that goes forever (I could be mistaken).
No one is getting anything for free. What it is doing is preventing yet another foreclosure from sitting on your block further drivign down the prices of homes around in and god knows what else. It's also keeping families in their home that could prove that they otherwise could afford their home. NOt all people bought hoems that they coulnd't afford.. they just bought with a product that was bad.. that product being an ARM. Those that truly can't pay a 5 or 6% interest rate on what their house is worth today will not get any help from this bill.
And , bTW.. if you want to call it a "bail out" you need to understand that this is a bail out for the banks. The govt could care less aobut homeowners.. it's all about investors and wall street people!
Tristans Mommy - thanks for mentioning the equity sharing part, I left that out of my answer... oops.
I agree with the rest, except that a short sale MIGHT also decrease the value of other homes in the neighborhood. If the home sells for 95% of appraised value, technically that is lowering the price of nearby homes as well. Not all foreclosures lower the prices either, as some are sold at market value, but most of the time they do. However I do agree that a short sale is almost always better for the owner and the community than a foreclosure. Especially if the home sits vacant for months while it is being sold.
Last edited by rcarrillo; 08-05-2008 at 07:21 PM..
Well i see that this bill is actually a model bail for huge lenders such as countrywide who even still are getting bailed by feds. They were the ones whom were selling the payoptions, intrest only and nina loans. They got bailed twice already and now the little guy (homeowners) are suffering from the greed of politics. They are screeming they are helping the people but i dont see that to be true at all.This bill is a fascade that is not helping the homeowner but indeed the banks that allowed this mess to begin with.Short sales have been here awhile..... and they do affect neighboring homes when a appraisal is done and comps are pulled
I think the notion that this bill will "bailout" banks is making the bill sound way more important than it is. The Fannie/Freddie provisions could have that affect and was one of the most controversial aspects of the bill.
The other 90% of the 700 pages is just plain political junk. It looks nice and pretty and is supposed to show the people that the government cares about you, but it does very little to offer real solutions.
It perhaps prevents a few problems from occurying again and offers a several "psychological supports" but overall I think the total effect will be minimial. If the US Treasury decides to flex its new muscles with Fannie/Freddie however.....
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