Fed and Banks make home loan deal ! (bankruptcy, loans, foreclosure)
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Banks, U.S. near deal on mortgages - Mortgage mess - MSNBC.com (broken link)
If this deal goes through, the housing market is going to make a turnaround and go uphill again. Not only will this encourage ARM mortgage holders to hold on to their homes, it will pull new buyers to buy houses sooner!
I heard a news analysis that said this will only help those who were able to afford their mortgages before the increase in rates for their ARMs. Those folks who bought houses that were more than they could afford are out of luck.
Well, the major reason why someone wouldn't be able to afford the house is if their payment went up like in an ARM. After the ARM expires, the interest rates go up and the owners aren't able to make a payment. Its less common to see a foreclosure while the owners are still in their ARM period.
What this new deal does is protect the owners and allows them to make the same payment they were paying during the ARM. So, in reality, their montly payment would never go up and this allows them to hold on to their homes!
If this didn't work, why would the fed even consider this?
The plan doesn't help new buyers. Where will the banks get the money to subsidize these borrowers who get stay in their homes. They'll have to charge higher interest rates and higher fees to new borrowers.
"Those folks who bought houses that were more than they could afford are out of luck."
A large segment of the buyers in 2005-2006 got into the low payment loans, such as teaser rates, pay options, and interest-only, using debt-to-income ratios of 40 to 55 percent. It may be as high as 70 percent of the buyers. Those buyers and the no income verification borrowers are failing to make payments often before the first rate reset.
Well I have an ARM that is set to reset this summer. I am one who DID NOT buy more than I could afford - I purchased a normal home in a price range condusive of a first time home buyer although with my income (at the time) I could afford a lot more, but I did not because I've always been taught to prepare for a "rainy day". BTW, I had to do a no-doc loan because all of my income was not taxed and my credit score was 20pts shy of being able to do a stated income loan with Bank of America. Unfortunately I was forced to go thru a subprime lender.
Nevertheless, I've made and still make all payments ON TIME and I had hoped I could convert to to a fixed rate mortgage, but unfortunately, my credit score hasn't increased since I purchased the home - which I don't understand why. Everything is reported and I didn't go out and obtain any debt.
I hope that the deal with the Feds and the Banks goes through for all homeowners, like myself. Those that went out lying about their income just to get into a home that they couldn't otherwise afford should be held accountable, IMO. If the deal doesn't go through, hopefully by summer I'll be able to refi into a fixed rate however, if I can't then I'll be stuck for a while paying a higher mortgage - which I should be able to do with no problem since I didn't purchase something that I wouldn't be able to afford
Sorry for the rant but I just wanted to state for the record that not all people who were in ARMS were irresponsible purchasers of homes
As long as you continue to make payments, the deal doesn't help you. You have to be in a situation where you can afford to stay in the home at the initial interest rate. It's not clear whether they intend to requalify the incomes of borrowers who took out stated loans.
35-45 percent of the borrowers they help are likely to go on to lose their homes within two years. It's likely they've already tapped other sources to try to hold onto their homes before the missed payments started, and they're close to bankruptcy on more than one front (housing, credit cards, heloc's, auto, etc.).
Well, the major reason why someone wouldn't be able to afford the house is if their payment went up like in an ARM. After the ARM expires, the interest rates go up and the owners aren't able to make a payment. Its less common to see a foreclosure while the owners are still in their ARM period.
What this new deal does is protect the owners and allows them to make the same payment they were paying during the ARM. So, in reality, their montly payment would never go up and this allows them to hold on to their homes!
If this didn't work, why would the fed even consider this?
What about the people who bought homes with interest-only ARMs, counting on appreciation to allow them to sell at higher prices and cash out?
The plan under consideration does not include any government funds, but it would mean losses for investors who purchased mortgage-backed securities because they would be getting a lower income stream reflecting the delay in having the introductory interest rates reset. But it would still represent more money than if the mortgage went into default.
Looks like this will not bring any more new "mad mortgages" into the market. Who will invest in mortgage securities anymore if they are not going to perform as expected. I can live with this plan as long as no government funds are used and no debts are forgiven. Some of these people will continue to pile up interest on top of principal, as well as being upside-down in "equity". This would only slow the decline of property prices for a period of time.
The discounted interest for the modified loans will be charged against the property; perhaps 2 percent or more of the loan balance will be tacked on each year until you refinance out of the bailout loan or sell the home. There's a balloon payment due after 3 or 5 years. Very doubtful the renters, er homeowners, will dig themselves out...
BTW, I had to do a no-doc loan because all of my income was not taxed and my credit score was 20pts shy of being able to do a stated income loan with Bank of America.
....
Sorry for the rant but I just wanted to state for the record that not all people who were in ARMS were irresponsible purchasers of homes
Maybe not irresponsible purchaser of a home, but it seems you are admitting to income tax fraud.
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