U.S. Sets Big Incentives to Head Off Foreclosures

[Pirate Smile]

Source: The New York Times

WASHINGTON — The Obama administration on Wednesday began the most ambitious effort since the 1930s to help troubled homeowners, offering lenders and borrowers big incentives and subsidies to try to stem the wave of foreclosures.

People with mortgages as high as $729,750 could qualify for help, and there is no ceiling on how high their income can be as long as they are in danger of losing their homes. Interest rates on loans could go as low as 2 percent for some. Many homeowners could see their mortgage payments drop by several hundred dollars a month, and some could save more than $1,000 a month.

Administration officials estimate that the plan will help as many as four million people avoid foreclosure, at a cost to taxpayers of about $75 billion. In addition, the Treasury Department said it intended to follow up with a plan to help troubled borrowers with second mortgages, which many homebuyers used as “piggyback” loans to buy houses with no money down.

-snip-
The new plan, which takes effect immediately, is intended to win much bigger concessions from lenders by offering a mix of generous financial incentives and regulatory arm-twisting. The final impact will depend on how both lenders and the investors who own mortgages respond, but housing experts said the administration had a good chance of achieving its goal.

The eagerness with which lenders agree to modify loans is likely to be affected by a bill that the House is expected to take up on Thursday.
It would give bankruptcy judges the power to order changes in mortgages on primary residences and would protect loan-servicing companies from lawsuits by investors.
Several of the nation’s biggest mortgage-servicing companies, overseeing two-thirds of all home loans in the country — Citigroup, JPMorgan Chase, Bank of Amer ica and Wells Fargo — are expected to participate in the plan.



Read more: http://www.nytimes.com/2009/03/05/business/05housing.html?hp

[babylonsister]

1. My brain! Ouch! Thanks.

Helping 'people with mortgages as high as $729,750'?

Wow.

[cloudythescribbler]

5. In some areas, like the NYC metro area, $800K for a house isn't upper class at all --

it all depends on the particulars of these policies, and how they are applied -- you have families with huge numbers of kids, extended families living in one house, HUGELY expensive regional real estate markets, etc

I am still suspicious with Geithner and Summers running this thing tho. It's enough already with appeasing the Wall St elite

[Igel]

6. And still ...

You have a $2 million mortgage, let's say.

The house is now worth $1 million. You're likely to stay even though you're 'upside down', but if the house is foreclosed on the bank's on the hook for at least $1 million.

Now let's say you have a $100k mortgage, and the house is worth $80k. You're upside down and would likely stay anyway, and if the house is foreclosed on the bank's on the hook for at least $20k.

That one jumbo mortgage will undo any good from fixing 50 of the smaller mortgages.


People have argued ethics--do we help people who got in over their heads, subsidizing their stupidity--and the "out" from the ethics argument is utilitarianism. In other words, what's ethical doesn't matter because what we need to do, ethics be damned, is what helps stabilize the banks. So we have to help people regardless of their idiocy or poor judgment, and moral hazard be damned (and we'll deal with morale hazard later, I guess).

But then as soon as the people helped aren't simple folk of modest means, utilitarianism is chucked. Suddenly the only inference is that utilitarianism was a pretense to achieve other goals, and those who made the argument are revealed as hypocrites and those who accepted the argument were hoodwinked. Not an ally-building endeavor, that.

If we stick with an utilitarian argument, then up past $725k isn't a problem as long as it meets the argument's assumptions. Larger mortgages meet the assumptions, so $725k mortgages certainly would. Justifications like "in many areas, houses in excess of $800k are still middle class" just undermine the argumentation.

[texastoast]

2. That all sounds very complicated, tax-payer expensive, and hard to manage

I think it could be fixed very simply by resetting ARMs back to a reasonable fixed rate and refinancing the remainder of the mortgage and reinstating the usury laws across the board at 10% max for all credit. That way, the banks have to pay for the administration of the refinance and foreclosures won't be tied up with not enough bankruptcy judges to go around.

And NOOO protection for banks against lawsuits. Screw them like they are screwing the taxpayer.

Fucking robber banks.

[xchrom]

3. unnecessarily complicated -- and weighted too heavily towards the financial institutions -- BUT

recommend because we need the help.

[ORDagnabbit]

4. wow

[WriteDown]

7. 2% interest for some???

Why on Earth am I paying my mortgage? Better question is why I saved for 10 years to put 20% down on a house.

[w4rma]

8. Life isn't fair, but it would appear this type of policy is needed to get society working again.(nt)

[WriteDown]

9. No, but its a valuable lesson...

You need to cheat and steal and do whatever you have to to get ahead in this world. Those that believe otherwise, like myself, are fools and will always end up with the short end of the stick.

[w4rma]

10. I see all of these folks whom have made themselves very wealthy through con-games and I wonder

what the percentage of those whom are very wealthy did it without cheating and stealing (or inheriting the money from someone who cheated and stole) is.

I notice that they are not being convicted or imprisoned.

[Mr. Hyde]

11. This is fucking bullshit. Create some god damned jobs you stupid fucks

and quit giving my money away to idiots and assholes who made bad choices.