Federal government and the mortgage industry to announce a plan..

Bailout coming

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.

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.

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.

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: 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.

Here we go again....

W....T....F....

Dealguy123 said: By definition >100% LTV are negative equity.I know, my earlier statement was incorrect, see my edit above.

My question still stands, who eats the loss. Banks or taxpayers?If taxpayers are on the hook, that would be good news for mortgage holders, since there would be less of a financial impact on lenders and thus fewer costs to pass on to its customers. It would be bad news for renters and those with no mortgages, since those groups would be subsidizing people who renegotiate their loan AND the rest of the customers of the lenders who renegotiate the loans.

jayK said: 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.

We, the taxpayer, ARE the lenders now.

People look at it this way. No matter what the government or the RE industry try to do it will NOT WORK. If you think things are bad now, just remember we are just really entering into a long recession. The massive layoff just getting started. Consumer spending will drop like its hot, usually its the job and spending that drags down housing, but this time around its housing that's draging everything down and in turn everything will continue to drag housing down. So unless some how our great government take over all housing and rent those houses out to us like the commies did back in 50s then there really is nothing anyone can do but to wait for the RE market to correct itself, but back to what level? At this point its anyone's guess. We are already back around the 2003 level and we are not even done yet.

Dealguy123 said: jayK said: DamnoIT said: 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 ITIncorrect. Lending standards have tightened significantly, so this will not happen.

Sadly, while standards have tightened, they're still a ways off thanks to the BS programs available via FHA. A friend just bought a new townhome (although in his defense, the guy didn't buy a gigantic house, he has a good job, and has a renter (or maybe two), so he SHOULD be ok). But.. how much was his downpayment? 3%

If things go in the shatter, you can bet plenty of "first time homebuyers" via FHA will be looking to suckle on the government teat for assistance.

Dude 3% that's high I know people here in Cali that still getting 0% or ARM due to first time buyer or military service.

This is crap, I work and work and save and scrimp, wait to buy until I can afford it, and now the assholes who got us into this mess get bailed out with my tax dollars. I know that in the long run our economy will probably be better with a bailout, but it still burns.

jayK said: skagen said: We, the taxpayer, ARE the lenders now.Alright, so:

It is in the taxpayers' best interest to negotiate a lower payment if the only other option is foreclosure, even if the taxpayers have to absorb some of the cost.

I don't think so, because it sets precident that continues to encourage irresponsibility.

I would rather lose 30% of my house's value and have everybody suffer and learn rather than watching my children continue to get burdened by other peoples' mistakes - because that is what's happening.

I could possibly support this if 100% of any equity gains is handed back to the government on a dollar for dollar basis upon a house sale until the "forgiveness has been repaid".

As crappy as it was, I imagine, to go through the great depression -- people who came out of that were far more useful to society than the boomers of today who are going to rip this nation right down like an anchor with their entitlement attitude. I know not every individual boomer is like this, but as a whole, the boomer generation has been a big negative to this country.

Economy is like the Titanic, expecting some people to drown while others to stay relatively dry is wishful thinking. There are no lifeboats, either we avoid the iceberg or we all sink.

DamnoIT said: Well the person can enter the position with a good job with high security and with ablity to engage this contract however after they get the home then quit thier job and not pay mortgage for 3 months and refi to 0% lock it then pick right back up right?There's no guarantee the borrower can "refi to 0%". IMHO most cases will involve deferral of principal. While I'm sure someone could try to execute this plan, they would probably end up making more money by simply keeping their job.

Lenders aren't stupid, they aren't going to be handing out interest-free loans to everyone who loses their job.

HumDoHamaraDo said: Economy is like the Titanic, expecting some people to drown while others to stay relatively dry is wishful thinking. There are no lifeboats, either we avoid the iceberg or we all sink.

Hmmm I don't know about you, but I know people that are making a killing right now. There always ways to make money, even if the economy tanks. There still people that are very well off. Its all about how you position yourself.

DamnoIT said: hope69 said: HumDoHamaraDo said: Economy is like the Titanic, expecting some people to drown while others to stay relatively dry is wishful thinking. There are no lifeboats, either we avoid the iceberg or we all sink.

Hmmm I don't know about you, but I know people that are making a killing right now. There always ways to make money, even if the economy tanks. There still people that are very well off. Its all about how you position yourself.

Do share, just shorts across the board or?

Read my other posts. I don't share information over online forums, most information I got cost money. But I can tell you that in addition to shorts you can play market VIX. In short look at the price in comm and what's being bailout.

Mulligan said: ....Where should house prices be? Look at your county assessors website for prices in 2000, then see what the price would be 8 years later with normal average house appreciation, usually around 3 or 4 percent. That should be highest sustainable prices...Around here, assessed values have no relation to actual market values. They do not increase or decrease in relation to the market, either. They're artificial numbers, used solely for taxation purposes.

I would never consider assessed value as being accurate of any real market price nor would I ever trust the government to calculate market value for me.

Consider that your scheme assumes that the 2000 assessed value was correct and that all properties appreciate at the same rate. Neither assumption is valid.Mulligan said: The problem with houses is they cost too much for the average responsible budget minded family.Do you have some data to support that? The affordability index suggests that this is not the case, that in fact, homes have continued to be more affordable over time.