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Under the new program, mortgages on owner-occupied homes that are at least 90-days past due with a loan-to-value of 90% or more will be eligible for the streamlined modification. Homeowners who owe more on their home than it is worth will be eligible.
Borrowers should contact their servicer - the company they pay each month - to see if they are eligible.
The borrower will ultimately be responsible for paying the full amount of the principal borrowed, but payment on part of the principal can be deferred to make the monthly payment affordable.
Homeowners who purposefully default on their mortgage to get a modification will not be eligible. Borrowers will have to submit a statement showing financial hardship or a change in financial circumstances, along with proof of their income.
The modification will become final once a borrower has made three payments under the modified terms. Mortgage-servicers will be paid a fee of $800 to modify loans to encourage them to participate.
Metric said:Bailout coming To qualify, borrowers would have to be at least three months behind on their home loans, and would need to have home loans worth at least 90 percent their house's value. The interest rate or principal amount of the loan would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses, the industry official said.
Looks like it pays to be stupid and financially irresponsible under the current circumstances. It sickens me to notice that my tax dollar is going to help gold diggers (or house diggers) instead of building a decent a public transport system or a universal healthcare system.
Metric said:Yep, so those who kept to a good income to debt ratio are finding the squeeze tough but making payments and staying current get jack.Not true - responsible homeowners will get a clean credit report. You can bet that people who end up using this plan will have their credit negatively impacted, same as a foreclosure.
So in a 2 income househould one person could quit or get fired then skip mortgage payment they could take advantage to get the refi? sounds like a plan hunh? How can we make this work for the responseable folk.
sensia said:Looks like it pays to be stupid and financially irresponsible under the current circumstances. It sickens me to notice that my tax dollar is going to help gold diggers (or house diggers) instead of building a decent a public transport system or a universal healthcare system.It's not clear from the story that taxpayer dollars would be used in this plan. It is in the lender's best interest to negotiate a lower payment if the only other option is foreclosure, even if the lender has to absorb some of the cost.
jayK said:Metric said:Yep, so those who kept to a good income to debt ratio are finding the squeeze tough but making payments and staying current get jack.Not true - responsible homeowners will get a clean credit report. You can bet that people who end up using this plan will have their credit negatively impacted, same as a foreclosure.
But...they get to keep their house...not to mention the housing price gets propped up as well.
Strabo said:But...they get to keep their house...not to mention the housing price gets propped up as well.That's the point of the plan...fewer vacant houses, more people continue paying property taxes, lower overhead costs for the banks.
jayK said:Not true - responsible homeowners will get a clean credit report. You can bet that people who end up using this plan will have their credit negatively impacted, same as a foreclosure.
Maybe I'm in the minority Jay, but I would give 2 sh*s about a "clean credit report" if I could "wipe away" a couple hundred grand loss in exchange for an ugly credit report. The credit report will come back in a decade. The price of the house? Doubtful. Question is.. who eats the loss with this plan, the bank or the taxpayers? Guess we'll find out at 2.
When you consider the amount of money that banks make on a home loan over 30 yrs, they can easily "afford" to "writedown" the principal amount of the loan for the borrower a substantial percentage. The only question is whether they have the reserves/cash to cover the immediate losses.
Dealguy123 said:Maybe I'm in the minority Jay, but I would give 2 sh*s about a "clean credit report" if I could "wipe away" a couple hundred grand loss in exchange for an ugly credit report.We're not talking about negative equity homes here - in those cases, the homeowners would just walk away. This plan is aimed at people who miss mortgage payments, either because they were laid off or their ARMs adjusted.
I certainly don't think it's "fair", but it's probably the best choice among several bad options.
Is the 38% including PITI or just principal? I rent but paying 38% of income in housing costs seems like a lot. What happens when property taxes and insurance increases take the ratio over 38%? Will these people have money left over for maintenance or will their homes fall into disrepair. How are they going to compute income?
jayK said:We're not talking about negative equity homes here - in those cases, the homeowners would just walk away. This plan is aimed at people who miss mortgage payments, either because they were laid off or their ARMs adjusted.
Are you sure Jay? We'll find out for sure at 2pm, but here's what the article said:
article said:To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses, the industry official said. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount owed to be deferred.
All I see is "90 percent or more," so who's to say a LTV of 130% (since the home depreciated) can't be re-negotiated? Ahh, guess we'll find out soon enough. Seeing as how banks don't actually HAVE money, I just wonder how I'm going to be f'ed in the ass this time.
jayK said:Metric said:Yep, so those who kept to a good income to debt ratio are finding the squeeze tough but making payments and staying current get jack.Not true - responsible homeowners will get a clean credit report. You can bet that people who end up using this plan will have their credit negatively impacted, same as a foreclosure.
You think it really matters? those with good credit now are feeling the credit crunch. You better have some steller credit score when we get to the other side of this because simply being clean wont cut it. I also dont see this being the same stigma as foreclosure... after all, it will be a mass culling of loans and put down to everyone being in the same boat.
Ill also take a hit for 1-200k off my mortgage, hell id take a rate of 3% for 5yrs like indymac did; with the extra cash i wont need any credit thanks.
Dealguy123 said:All I see is "90 percent or more," so who's to say a LTV of 130% (since the home depreciated) can't be re-negotiated?I'm sure there will be many 100%+ LTV loans renegotiated, and the goal of the lender is to make the renegotiation more financially attractive than the existing alternative of defaulting.
Mass renegotiation seems to incur less of a cost on everyone than mass defaults.
EDIT: To clarify, my earlier statement was incorrect, negative equity loans will probably be a big part of this plan.
jayK said:Dealguy123 said:All I see is "90 percent or more," so who's to say a LTV of 130% (since the home depreciated) can't be re-negotiated?I'm sure there will be many 100%+ LTV loans renegotiated, and the goal of the lender is to make the renegotiation more financially attractive than the existing alternative of defaulting.
Mass renegotiation seems to incur less of a cost on everyone than mass defaults.
I understand that.. I just wanted to clarify that we ARE dealing with negative equity homes. By definition >100% LTV are negative equity. You said:
jayK said:We're not talking about negative equity homes here - in those cases, the homeowners would just walk away.
So, my point is, this bailout is very broad, and could be structured to help the worst of the worst (those with substantial negative equity). My question still stands, who eats the loss. Banks or taxpayers? Stay tuned for your next bailout at its next scheduled time of 2pm!
Now a good question is how is real estae industry going to take advantage of this. Think about it, a builder or broker advertizes that anyone can buy a home with 0% apr simply by missing payments, changing jobs for a short period and only having 90% LTV. THIS WILL HAPPEN - BELIEVE IT
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