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I am still sifting through all the info on the plan. Since I am planning on buying a home very soon, does anyone know if Obama's new plan will do anything to lower mortgage rates on new loans?
I was wondering the same thing. But from all the news stories, it looks like the plan is designed to ONLY help those who are in or close to foreclosure status. One strategy may be to buy a place above your means forcing you to foreclose in a year so that you get one of the reduced rates and subsidies from the govt!
Details of Obama’s plan Details of President Barack Obama’s $75 billion plan to help up to 9 million families restructure or refinance their mortgages to avoid losing their homes to foreclosure. Remove restrictions
Remove restrictions on Fannie Mae and Freddie Mac that prohibit the institutions, both taken over by the government last year, from refinancing mortgages they own or have guaranteed when more is owed on a home than it is worth. The White House says this could reduce monthly payments for up to 5 million homeowners. Create incentives Create incentives for lenders to modify subprime loans at risk of default or foreclosure. For lenders that agree to reduce rates to levels borrowers can afford, the government will make up part of the difference between the old monthly payment and the new payment. Participating lenders also will be required to cut payments to no more than 31 percent of a borrower’s income. Up to 4 million homeowners could benefit. Keep mortgage rates low
Keep mortgage rates low for millions of middle-class families seeking new mortgages. Using money already approved by Congress for this purpose, the Treasury Department and the Federal Reserve will continue to buy Fannie and Freddie mortgage-backed securities to maintain stability and liquidity in the marketplace. The department, through its existing authority, will provide up to $200 billion in capital for this purpose. Pursue reforms
Pursue reforms to help families avoid foreclosure. The administration will continue to support changing bankruptcy rules so judges can reduce mortgages on primary homes to their fair market value, as long as the borrower sticks to a court-ordered repayment plan. As part of the $787 billion stimulus package that Obama signed into law on Tuesday, the administration will award $2 billion in competitive grants to communities experimenting with innovative ways to prevent foreclosures.
It is the first reasonable plan I have seen to address the current foreclosure crisis. It has no direct impact on new loans and we will have to see what impact there will be on rates.
Yep. This plan helps all the people that are currently about to be foreclosed on.
It does not help future buyers. (maybe by keeping mortgage rates low)
Who it helps with foreclosures? Obama says not the people who bought above their means with exotic loan, etc... We will see.
Like in the long run if they actaully pass the bankrusy part where they can reduse the principal; the lenders will go up to pay for it.They most likely will creat a new insurnace to guadr their interest and look at the risk in laons even more;so refuse more.
It really was clever to put so much emphasis on how this is going to help those that acted responsibly and were just overtaken by events, as well as emphasizing that the not-so-responsible, quick-buck folks would not be welcomed in the dole line. What did strike me was the very straight-forward path he laid out as to how many folks - even the responsible ones - had fallen onto hard times...
they bought a house (even if they pushed the envelope a little)
they got a fixed rate and made their payments
they lost a job or got sick or had decreased hours/income
they dipped into savings
they dipped into retirement
they ended up living off credit cards....
their home value dropped, so they could not sell to break even or refinance (didn't have enough for a SECOND downpayment to get an 80% refinance loan)...
and there they sit....
In listening to the various proposals, I understand that his focus is on mortgages and making them affordable, but with all the bailouts and handouts, and finger-pointing, there is one more rabbit that can be pulled out of this hat...
did you see it listed above?
It's the credit card factor. I know there are the "miracle restrictions/regulations" that are set to come into play in - what? June 2010??? But how many people could possibly squeak by if their credit card interest rates were not pegged at... I forget... was it 29% or 39%? Let me see, I can charge 5% on a home loan, I can get 3% on a CD investment... but we are still allowing credit card interest rates to peg out at those outrageous amounts? Even if the rates were lowered to 18% ... that sure looks like a good profit/return to me. How many families would be able to afford to live in their homes if they hadn't fallen on hard times and then the credit card double and triple whammy had not hit them... One of the "poster" families shown on some of the news programs recently was barely making it on $90.00 month in credit card payments... so they had a bad month and their payments went to over $200.00 per month immediately... and the safeguards to keep OTHER debtors from piling on is not in place for a while yet.
Perhaps something as simple as putting an immediate limit and freeze on credit card rates could help - this would keep just a little more money in people's wallets, so they themselves can contribute more towards the mortgage payments...
The taxpayer is taking a major hit on these bailouts, we are now looking at the banks to take some modifications... but if we still allow the credit card sector to sit back and get their profits unscathed, it seems odd. We're telling the mortgage lending banks that they need to realize that a lower, "guaranteed" payment is a good thing... why isn't the same rationale being shown to the credit card sector. (In my opinion, they are even less discriminating in their lending practices than any of the mortgage banks).
Six questions that Republicans are asking about Obama's Housing Bailout:
What will your plan do for the over 90 percent of homeowners who are playing and paying by the rules?
Does your plan compensate banks for bad mortgages they should have never made in the first place?
Will individuals who misrepresented their income or assets on their original mortgage application be eligible to get the taxpayer funded assistance under your plan?
Will you require mortgage servicers to verify income and other eligibility standards before modifying mortgages?
What will you do to prevent the same mortgages that receive assistance and are modified from going into default three, six or eight months later?
How do you intend to move forward in the drafting of the legislation and who will author it?
" Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:
o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today's low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance"
I get a good laugh of this example the White House made. Why didn't they make a prime example of real life mortgage situations?
Like Jon and Jan took out a 3 year ARM no interest no money down at 300K at an interest rate of 5.5% (80% ) first loan and a 7.25% (second loan 20%). Today the Home has fallen 20% and their value of their home is now 240K. But the mortgage they owe is still 300K because this couple chose not to pay into the principal.
These are the real people Obama is truly planning to bail out. In Obama's mind, these people made mortgage payments on time and never missed a payment and "were responsible".
If you actually put money down (say even 5-10% downpayment) and are paying into the principal each month and can't refinance because you are under water....than I think these are the true "responsible homeowners"
Now, what is Obama's definition of "responsible homeowners" Someone paying an interest only mortgage who did not make a down-payment and after 3 years is in trouble, do you want Uncle Sam to bail them out? Fine let them refinance to a lower rate 300K mortgage but can they afford the increase payments? I doubt it. And this is where there will be lucky winners in this game. Because I think Obama is telling the banks to just eat the 60K in principal these no interest, no down payment "responsible homeowners" The banks will eat 50% of the principal reduction costs while the taxpayers eat the other 50%.
Sure, I agree we should help out homeowners (using the government's first example) But how many people do you know who made downpayments and paid into the principal are truly in trouble? It's mainly the ones who overbought, put zero down, negative amortization, or interest only.
Oh, I hope the government can sort through all the mortgage mess and find out people who used cash out their home equity and and "under water". However, I doubt the government has the time or resources to figure that part of the under water mortgage mess and let those "responsible homeowners" slide and bail them out also.
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