The White House is considering a mass-refinancing plan that would enable homeowners with government-backed mortgages to refinance into today’s low interest rates. The Obama administration hopes that if the plan comes to fruition the refinancing would leave consumers with lower mortgage bills and more spending money. Currently, many homeowners are too “underwater” on their mortgages or lack the credit standing to have a chance of refinancing[1]. The plan comes on the heels of another proposal, to sell foreclosures en masse to real estate investors and allow them to rent them out, that was met with a similarly mixed reaction. That program has continued in development, however, with the administration requesting ideas for execution from individuals and companies in the private sector earlier in August[2]. By some estimates, a federally-sponsored refinancing program could save homeowners $85 billion a year.
Critics of these plans remind audiences that there are many federal homeowner assistance plans out there already, and that they are complex and largely ineffective. However, Phyllis Caldwell, director of housing policy at the U.S. Treasury Department, says that the administration hopes to “encourage more participation in all of the programs [to help homeowners] including those that help with refinancing.” Frank Nothaft, Freddie Mac’s chief economist, thinks that this additional proposed federal action could alleviate the fears that are keeping consumers out of one of the most affordable markets in decades. “You want to have some type of announcement or policy, program or something from the federal government that provides a clear signal that we are here supporting the housing market and this is indeed a good time to really consider buying,” Nothaft explained.
Do you think that a mass-refi for the country is a good idea? Should the government be in charge of it?
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[1] http://realtormag.realtor.org/daily-news/2011/08/25/white-house-weighs-mass-refinancing-plan
[2] http://www.nytimes.com/2011/08/25/business/economy/us-may-back-mortgage-refinancing-for-millions.html?_r=2&partner=rss&emc=rss
And the loan principal? How does this address the issues for the millions underwater on their mortgages?
And how about the delinquent homeowners or those with poor credit or reduced income?
Also, in a refinance the borrower gets to start ALL OVER again at the beginning of that 30 year amortization MONSTER. So if the homeowner was 5, 10, 15 years into their existing mortgage, they get to trade higher percentage principal payments for higher percentage interest payments (plus another 360 of those payments) and the lender makes out like a bandito once again. Even at a lower rate, pretty good deal for the lenders
Sorry, lots of barriers while pressing issues are ignored it seems.
Actually, this may be a good idea. FHA does a streamline refi without regard to current value, credit or income as long as there is no cash out and the mortgage has been current for the last year. That is a very generous move and it makes sense for that market. If they are current, why not allow them to refi to a better rate that is the prevailing rate. That makes the loan less likely to go into default.
Certainly it is not great for the packager or the investor into that security, but that rule was in place before anyone invested in those loans.
Given the current situation, I think it may be equitable to follow those same rules for all other GSE loans. That would significantly reduce the strategic defaults. I’d say, if htey are current, do it like the FHA. If they are not current, they’d have to make some provision for the back payments and they’d have to take a rate a point higher than those who were current.
Beyond that, it would really be forcing too much on lenders and investors.
However, I’d really like to see this for all loans since most of the foreclosures are related to this crisis through general conditions and job losses. That probably would not be an easy deal to push on the lenders.
Truly if they had allowed this a few years ago, there would be much less of a problem. If people didn’t have to prove income when they took out the loan, how does it hurt to allow no income verification now?
It shouldn’t change anything except increase the capacity and incentive to pay. If kept with the same lender it would improve that lender’s position by transferring the loan to the performing ranks.
We do not want to interfere in private contracts. That is against the grain of our system and interference could ruin the system. However, there may be some deal to cut with our conscience to make this work.
Other attempts were absolutely ridiculous. Any savvy person knew that those plans were impossible to work on the grand scale.
I am generally against federal (no caps intended)intervention, but if done as FHA and with the cooperation of hte lenders, this could actually help. There will still be a need for investors. What is it with the word “allow” as in “allow” investors to purchase…?? I hope we are not accepting that much control from the mighty know it alls.
On the investor side of this deal, I do not want to see the mass sell off. That would concentrate the holdings in a small sector once again. Sell them individually as normal, but remove the restrictions. Don’t make it difficult for investors to resell in a day or a week or a month. Don’t make it impossible for a buyer to finance that purchase if the sale is more than 20% higher than the prior sale.
I can personally do a one or two week remodel, transition of a house. My crews can do a 20 hour day, seven day week and get it done. I don’t want money out for 90 days or the 150 days as it may take to have a new loan done for a buyer (after the initial wait). Further, the limit of 20% is really only a 10% margin after closing costs. One can easily spend 20 to 40% on a rehab. All those restrictions on resales only pushes the cost up for the end buyer.
Let all buyers attempt to purchase the deals individually. This spreads out the opportunity and does not give control to the few large buyers.
The refi is a good start, but I think the banking industry is not going to be very understanding or reasonable in their efforts. It is more viable to try relieving the problem with real estate investors– without using the multipal leveraged investors who purchase hundreds of mortgages at a time. The latter only adds to the problem.
I am not a big believer in gov’t bailouts but all the banks who offered the loan programs that were condoned by the gon’t were bailed out and continue to get bailout money. It is only fair that the consumer’s who were dupped by the banks offering those unrealistic programs should have an equal chance by refinancing their underwater loans. it is a make sense program and could very possibly be one of the only programs offered so far that has a chance to stimulate the economy. It would also make sense to have a government loan modification program for these underwater mortgages by reducing principal to a level that is in line with current home values. This program would help save peoples credit so they can move forward with their lives and then I hope we can put this all behind us and learn from these horrific mistakes.
If the feds stay out of it and listen to RE investors instead OF the REAL ESTATE industry and the academic PINHEADS we could resolve this problem.. “ASSIGNMENT OF MORTGAGE” program could do alot more than any proposal that the gov’t develops (they are always to complicated). In the AMPS program the seller has a contract that states the seller sells the underwater home to a Buyer and the buyer takes over the mortgage payments. The seller actually hands their DEED over to the buyer and the buyer picks-up the mortgage payments. Seller gains as follows: maint. credit rating, no closing cost and no future Deficiency Judgements. The BUYER gains as follows: can’t get a loan thru the banks because of the restrictive regulations.They get the home of choice and pay all closing costs including any fees which are tremendously less than the normal process. Their is NO BANK REQUIRED w/ exception to notify them of the assignment and what bank is going to turn down a plan that gets rid of their DEBT and keeps the mortgage payment intact. Of course, I have an idea how the Banks could be involved and would love the opportunity to discuss this with any BANK interested. States that have Transfer Taxes could exempt those taxes from this transaction. Which would mean more money in their economy instead of the states waisting the money on yet another outrageous
program. Statistics show that the buyers in these transactions, credit ratings are are for the most part very good. There you have it in a nut shell, LETS TAKE ACTION, and get the market back where it should be. OH BY THE WAY, this is a LEGAL in every state in the U.S.A. and Canada and we have title companies and attorneys working this program thru-out the U.S.
Unified, show me one current contract that allows assignment! Wait, they no longer exist! Stating it is legal, is kind of like saying I did not get caught speeding. It is not illegal, but if the rates go up, then the lender has the right to call the contract due, lender has the right to call the contract due anyhow. They just don’t want to call the contract because it makes no sense, AT THIS TIME!
As for this program idea, when the government quits attempting to help us out of this mess, things will get better, but not a day before! Dealing with the FHA is one step removed from insanity, why hold them up as an example? GSEs all have one thing in common, overspending, small minded ideology, and all are in finacial trouble! So what part of giving more money to any of them, or starting a new one makes any sense????
We do not need a new, another or any government help with this, the government’s oversight is largely what drove the bus on this trip, and until we get off the government buss, things are just not going to improve.
This plan is one more idiot idea, would be run by moron pencil pushers, with the real goal of increasing their budget for the coming year so the could become more powerful and higher paid. All of the back of taxpayers!! Enough is Enough already!
First, I do not believe the government fixes anything, so our government sticking their nose in and telling the banks to do something is against what I believe. Now, that being said, since the banks do not do the right thing by anyone but themselves, maybe they need a push and have someone who bailed them out give them a condition or two.
This whole bubble and bailout is getting crazier by the day and I am getting tired of the actions of our government and the banks’ self-centered attitudes. Asking for the banks to give up principle and lower the rates is unrealistic as it affects their bottom line; but less money is better than no money–unless you get more guarantees from the government.
The banks are not hurting, and until they do, nothing good will come from them and I do not want to force something onto them. Remember the credit card regulations? Our government, in it’s infinite wisdom(?), regulated that area and gave them 9 months to figure out how to stick it to the people and circumvent the language of the regulations.
BTW we don’t need scams like Mortgage Assignment either. The banks at any instant can call that note due and if they get overregulated, they just might do it.
unless the bank of Bernanke is going to pay out the $$$ for those write-offs, this program will not accomplish what the Wall Street whiz kids want.
Central Banks and Congress caused this entire mess with their central planning, and repeal of Glass Steagall Act, which allowed the bandits to package their mess through wall street and foist it off onto the public worldwide. While this was going on the RE bubble was inflated by the Banksters and deflated when they pulled the rug out from under everyone!!
Therefore forced interest reductions should be the norm!! Instead of more bailouts to the cronies, it is time the public was finally helped!!!
I think the refinance program would help a lot of people if they elect to do it. My concern, is the red tape?, the attached strings, and why would the program exclude individuals who have conventional loans? Again, it is not fair to pick and choose winners!
In my humble opinion, if home owners were sucked into these no income verification loans, and this was a deliberate well planned executed plan for the top dogs in major financial institutions to suck as much money out from lower and middle social class with these types of loans, then why should the banks who participated in these risky loans help out the homeowner and at the same time help them selves minimize any further defaulted loans which will spiral into once again more foreclosures.
May not be good for real estate investors who buy and sell properties, but they will survive and still have a nice feed on the rest of mess out there…;>)
I think it will be good idea at least for the moment!!!
After reading these comments, there are some that have validity in what they say regarding our Gov’mt having too much involvement. I think, that what was done a couple of years ago to strengthen the banks was necessary to keep our financial system from going broke. The problem was that too much trust and not enough regulation was put in place to ensure the banks would do their part and began lending and refinancing homes while putting in some restrictions to prevent what had happened in the past. There are many people who have lost value in their homes but find themselves unable to take advantage of the new lower rates because of the appraisal. I say that they should be allowed to refinance at the current market value which would save many who bought during the hyper housing boom. Those who have lost income and suffered a reduction in credit scores but prior to the loss of that income had good credit scores should be allowed to refi as long as they have been current with their house payments. Most of us will pay our house note at the expense of other creditors which affect our FICO scores. So in conclusion I say that if the Gov’mt can come up with a program that works for all which means they could do away with the HAMP and other programs that did not work and only have one program that everyone buys into that would be great. The investors and banks are still going to make their money you can be sure.
The answer is so simple. EXTEND THE TERMS OF THE LOANS TO REDUCE THE CASH FLOW PROBLEMS. Americans will pay for thier loans and do not want a hand out. All we really need is a program that will offset the problems created by the predatory loans, robo signing and greedy banks, loan officiers and deregulation. Anyone who “qualified” for a loan that should not have, should be able to increase the term with no cost and and get a low interest rate to make up for the suffering caused by the banking industry that failed to do it’s job. The banks need to return to normal underwriting standards instead of holding up the recovery by swinging in the complete opposite direction and not giving out loans to qualified buyers. Women should take over the banking industry and Washington DC, since the men have had their chance and can’t get it done. It was so easy to get into a predatory loan, and almost impossible to get it modified. Many investors are entrenpreneurs that wanted to start a small realestate business by fixing up homes, and renting them out to build equity for the future. The predatory loans eat up all of the equity and the banks kept doing refi’s when the owner had to lower the rate. The banks sold the loans before the ink was dry and they knew that what they were doing was wrong and illegal to the customer. They only wanted the fees and to steal the equity. By modifying the loans and providing low interest and longer terms, we could offset the corruption that was done to the people. It would also improve the economy. Families that had good credit all of thier lives and lost their homes, still need a roof over their head, and can’t get a mortgage. The first bail out money should have been used in this way and an agency made up of new graduates that are not tied to Wall Street or Washington DC should be hired to set it up and get it done. In other words, don’t use anyone who owes favors, pick a fresh apple rather than one that is rotted on the ground. The CEO’s, Board of Directors, Wall Street and DC are all in each others pockets. Why would they pass a law to increase taxes for millionaires, since they themselves are millionaires. When they can’t complete a task, they should not get paid, just like the rest of us. Start fresh and make it illegal for the boards, CEO’s and DC to vote on things that are a conflict of interests. Get rid of deregulation and go back to tradiction. Start a bank owned by the taxpayers so that the banks that are causing all of these problems have competition. Give local small banks an incentive to do what the large banks have failed to do. Tax all of the Executive that profited from the “Era of Corruption in the Banking Industry and Wall Street” 80% on the profits from raping their companies, and causing hardship to the citizens of the United States. Why do they get to walk away with billions and everyone has to worry about our retirement funds disappearing. This corruption has to stop and the money that was stolen should be returned.