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First, the Democrats do not want us potential home buyers (who can actually afford home (s) a 15K housing stimulus tax credit. They tried to eliminate the AMT relief bill. (AMT is not for rich people any more. It affects the middle class more and more). AMT was never intended to raise revenue, just punish "super rich people" from claiming too many tax deduction and force them to pay some income tax.
Now, I see the Obama administratin is proposal taking over the mortgages of people in "danger" of foreclosure. They are basically giving these people a 50K-200K credit by cramming down the principal mortgage. This is a bunch of crap. So they want to give the "biggest tax credits" to those who least deserve it.
Why don't they just move these people who are about to lose their homes into Section 8 housing? Or if they can't afford it, invest more into housing projects so these people can at least have a roof over their heads.
If they want to do mortgage cram downs, no investor will ever want to invest in real estate securities. What they are proposing is that a mortgage originally valued at 300K and the home is only worth 200K. The White House will take over the mortgage at 200K and have the investors just eat the 100K lost.
They want to resell the 200K mortgage security to "investors". However, what happens if that 200K mortgage security decreases to say 150K. Are they saying they will reimbuse those new investors so screw them and rewrite the mortgages over and cram down the values to 150K. It will be a never ending cycle.
What about the private mortgage sector (where most of the mortgages still exist) Lenders would want 30-40% downpayment if they knew their was a chance for a mortgage principal reduction by the US government. This will just blow up the interest rates.
I just posted about what I THINK this is - not as you described. My belief is they will just guarantee the upside down refis of people who are otherwise current on their mortgage - similar to FHA streamline.
See my post.
I could be wrong, but I believe this is what they are talking about.
I just posted about what I THINK this is - not as you described. My belief is they will just guarantee the upside down refis of people who are otherwise current on their mortgage - similar to FHA streamline.
See my post.
I could be wrong, but I believe this is what they are talking about.
I read your post. I believe we are talking about two separate points. What you mentioned was Fannie/Freddie allowing people to refinance on their upside mortgages. Say they owe 600K on their mortgages and their home is only worth "450K" They put zero money down, interest only. So in order to even qualify for a refinance, they would need to come up with 150K to refinance. What you think they are doing is letting these people refinance for the entire 600K at lower interest rates. I'm not opposed to that idea.
What I'm opposed to (and lots of others too) is principal mortgage reduction. What Obama wants to do is just let the investors "eat" the paper losses. Say the people owe 600K on their homes. Instead of letting them refinance 600K into a lower interest rate, Obama says "well your home is only worth 450K, we'll screw the mortgage security investors and tell them they will just have to eat 150K and let the homeowners refinance for 450K and reset their principal balance" In essence, Obama is letting the people who least deserve it a 150K "mortgage credit"
One person in the article was quoted as saying their was "universal support for this cram down" Universal support? From who? And also they said, “These investors have suffered this loss — they just haven’t realized it yet,” he said. “It’s an unrealized loss that the government takes and then converts it into a gain for millions of homeowners.” Well if I am an investor, and I had financial stability and holding power, a real estate investment is not like a stock. Even if the value goes down, the property item, along with the land still holds value. The construction material still is worth something. So if I have holding power, I would just hold onto the property for as long as it takes. No government entity can just take over an investment. They will have to reimburse me. If I'm in no mood to sell the investment, they will have to pay a premium for what it's currently worth. Government just can't force a sell of a security from individual investors. There are just too many of them out there.
But this proposal will come at a cost. Who's going to pay for this? There will be lawsuits. This proposal will never fly in a court of law (with the current law the way it stands). It's going to get bogged down in the courts for years because investors want their money. Someone's going to pay and in the end, the taxpayers all pay for this. Mortgage cram downs are just a dumb idea. What about people who put "real money say 150K cash downpayment " And they lose all this money but are able to sell their home and walk away. It's unfair and Obama will not get a lot of support for this.
Most homeowner are responsible. I believe 85% of homeowner pay their mortgages on time. Why reward those who got themselves into this situation.
Well, as the minutes tick by (this is gonna be another one of those rumors rumors rumors things like the 15K tax credit), I am still NOT hearing anything about reduction of principal. Rather a guarantee of PART of the loan payment reduction. IE if the payment is lowered 500 bucks a month, and then later went into default, the bank would eat 50% and the govt would eat 50%.
Unfortunately I am also hearing now that this may end up being only for "troubled" borrowers, meaning you would need to make the case that the payment you are making (even if current right now) is beyond your means and you deserve a reduction. How do you show that? Who knows! Thats the reason I think all current borrowers should be able to refi as long as the payment per month goes DOWN.
Not as good as I had hoped, but I dont think as bad as the OP is thinking either.
Of course NONE of this is being confirmed by Treasury yet anyway!
. Rather a guarantee of PART of the loan payment reduction. IE if the payment is lowered 500 bucks a month, and then later went into default, the bank would eat 50% and the govt would eat 50%.
!
This is still bad. The taxpayers will still foot the bill for this mess.
Remember those who had received mortgage help in the past 18 months had a 50% re-default within 1 year. There's a reason these homeowners are in trouble. They didn't have the finances to afford their homes in the first place. Even if you shave off $500 a month in a $2000 mortgage payment, I doubt most of these troubled homeowner have any cash reserves left. What if they lost their jobs? What if they needed money to fix a broken pipe.
These people (along with too many Americans) are living month to month. Subsidizing the inevitable foreclosure is like wasting billions of dollars in taxpayers money.
Obama is all about wealth redistribution. Everything he proposes backdoors into that. He's going to cram his agenda down people's throats one way or the other, then raise taxes to pay for it.
When the government guarantees something, the taxpayers foot the bill. So people who can barely afford to pay their own mortgage will be subsidizing other people's. It's the height of stupidity.
this whole proposal is going to be a total disaster. What do you think this is going to do to new mortgage funding if lenders are taking a bath on existing loans? Absolutely ridiculous!
If there is no demand that will drive prices even lower and the mortgage they just modified is going to be upside down again, it's just going to go into a death spiral.
Obama is going to speak on his foreclosure plan next Wed and I am holding my breath. If it is anything like this moronic bill they are passing now, God help us.
Uh, in case you haven't noticed, smart guy, we have a MAJOR recession going on (that will turn depression if it keeps up). Thousands upon thousands of ordinary people, like you & I, have lost their jobs due to the collapse of the economy. And you wanna throw these people & their families in section 8? If you're serious, I sincerely hope you lose your job so you can see how it feels. And then lets see you go crying to the Gov for help because you wont have anywhere else to turn.
Im just saying. You sound like ignorant boob who just wants to blame the Dems for everything. You know Obama just got into office, right? Why dont you blame your precious Bush for the shape we're in right now instead? Oh right. Because you're probably a typical Neocon & its all Obama's fault.
Your beloved democratic party has had a major hand in this depresion buddy. For 25 years we have been piling on one social program after another including Freddie and Fannie which started the domino's falling. You are the one who is ignorant and refuse to think outside the liberal professor's box. Obama was the one who claimed that he had the answer to fix this mess and guess what? He is spending just like the moron Bush was spending. Won't work.
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