Last Thursday, the president announced that in order to spur job creation, the administration would be revamping the Home Affordable Refinance Program (HARP) in order to broaden the number of people who can take advantage of the program. He believes that it will “help responsible homeowners by reducing their monthly mortgage payments and bolster the economy as they spend the money on other things instead”[1]. HARP, along with the other “Home Affordable” programs, has received a great deal of negative press because it has, thus far, helped far fewer homeowners than White House analysts originally predicted. To date, 838,000 refinances have been completed when millions were predicted. The new program is projected to save homeowners $7.4 billion in the first year and help a little over 100,000 of those homeowners avoid default. However, critics point out that the government will end up losing about $600 million in revenue on interest payments.
Currently, HARP applies only to mortgages originated before June 2009 and owned by Fannie Mae or Freddie Mac. Loans cannot be made for more than 125 percent of the value of the home[2]. This 125 percent barrier is one of the things that the administration hopes to change.
Do you think that the administration can restructure HARP to make it more effective? Is this a good way to handle the housing crisis? Should they do less/more?
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[1] http://www.nytimes.com/2011/09/10/us/10housing.html
[2] http://www.reuters.com/article/2011/09/10/us-usa-mortgages-refinancing-idUSTRE7887D120110910
How does this spur job creation? I’m sure Obama was able to eloquently tie it together with some nice linguistic gymnastics but bottom-line is all were doing here is propping up a system that should have been allowed to self correct from the very beginning. We need a total shift in directives it’s like were propping up a superstructure from the thin outer skin buttressing the outside when it’s the infrastructure the very skeleton of the thing that’s failing.
Best bet if there is one, is to bring back tax credits to home buyers regardless of first time or not. No weird deals just straight tax credits. Also allow the retirement acct. tap with straight income tax verses tax hit. Loans provided via freddie or fanny to those qualified income wise against the house.
Otherwise anything that ends up with a 600m lose is a bad program. Dump it.
This proposal is lunacy. We wouldn’t be in this trouble in the first place if Congress had not sold out to the bank lobbies and repealed the laws that were imposed after the great depression to ensure the integrity of the banking system. We have paid for this twice: during the savings and loan crisis and during the 2008 real estate collapse. In both cases, the bankers committing the fraud have been rewarded by their cronies in the government. Now Obama wants to get the government involved directly in issuing bad real estate loans?
The job of the government is to ensure the integrity of our economic system by passing laws to prevent people from deceiving and cheating others. It is about time it got around to doing that.
The gov’t can do the most good for the lowest amount of money by fixing Nevada first because that tiny (population-wise) state single-handedly managed to created hundreds of thousands of (now very badly needed) construction and other non-degreed jobs that brought workers in from hundreds or thousands of miles away to send money home to places like Michigan and California where it spurred further economic growth. (Nevada was the fastest growing economy in the country in the 1930s and in the 2000s.) Unlike California or Florida, the gov’t ___can___ afford to offer direct relief to the existing small population of homeowners in Nevada and because the State is still mostly undeveloped and under BLM control, the government can do the real estate equivalent of “printing money”, by releasing land on affordable rates to developers (who will hire construction workers from all across the country) without hurting anyone –and there are plans the gov’t could instantly fund to build a 300mph mag-lev from Anaheim to Las Vegas (employing 20,000 workers and forever allowing all kinds of job-creating commerce between Southern Nevada/Utah/Northern Arizona and the 25 million people on the other side of the Mojave desert in Southern California via a short 45 minute electric ride), plus they could build power plants to feed energy into the grid (and for desalinization plants in Baja or San Diego) out in the remote Nevada desert area –all a great opportunity where a (relatively) small amount of government stimulus would create an instant and lasting economic impact for millions of Americans.
Example: the gov’t could offer a 1% loan to __any__ Nevada homeowner as of Jan 1 2008 that’s enough to buy out their current mortgages, even though most homes there are typically “worth” 25%-50% of their mortgage balance “on paper”, allowing the current lenders “off the hook”. (Don’t worry about the moral hazard, the lenders have learned their lessons not to do this again and are under increased scrutiny now.) The home owners are then left with a mortgage-free home and a personal government lien (that attaches to “all” of the homeowner’s property), with some deferred payment plan that would be setup like a “student loans” (ie, must be paid back even if the owner goes BK, but no monthly payments until the deferement-period is over and during future periods of bonafide economic hardship). The gov’t can then come up with some fancy formula for deciding when the payments come out of deferment and start collection based on owner income vs. average owner income in the area (so no dead beats get a free ride, while nearly-starving Americans get relief and nobody gets away from their personal responsibility). This means that the housing supply in the area will dry up very quickly (due to almost no foreclosures and people unwilling to sell their homesteaded paid-off house) and prices will start climbing –especially as people come from all over the country (as they did in the 1930s and 2000s) for construction jobs. One housing prices go back to 2007 levels, then people have options –they can sell and payoff their gov’t lien or they can let the bank take back the property if they chose to ignore the gov’t financing program (and move on with their life without a lien or even a deficiency judgment). In the meantime, Nevadans would also be able to sell their home for whatever it’s currently worth and move if they want (for example, to gain a job somewhere else), taking their government lien with them and freeing up their home for incoming construction workers who are out building the mag-lev or massive mag-lev-connected developments on newly-released BLM land.
The following changes are essential for the new program to be practical and useful:
1. Banks need to equally share in the loss of value (New value – old owed ammount). For example if the outstanding balance on an underwater property is $150K and the current market value is $100K, The $50K loss in value should be equally shared (shared on paper for taxes) between the distressed home owner and and Bank that holds the note…($25K each, in this case).
2. Amended loans should be instituted requiring a 10% down ($10K down in above case) with 90% financed at a subsidized interest rate (eg: 2-3% fix for at least 7 years with zero or minimal origination fees & points). This would guarantee home owner commitment and collateral as an alternative to impractical qualifying requirements (credit/income ratios).
3. Access to the money supply. With foreclosures abundant, bank requirements need to become more adaptive to enable refinance money supply to distressed homeowners via intelligent exception handling. For example, in case where the homeowner can prove job loss to justify lower credit scores, banks should be able to architect loan packages for owners with financial hardship or lower than 700+ FICO credit scores.
Difficult times require adaptive partnering between the Govt policy, banks and homeowners/investors to come up with realistic solutions for REAL Estate problems of today.
If the powers that be want to get real results ,they need to make it as eady to get out of this mess as they made it to get in it.RE-FINANCE AT CURRENT INTEREST RATES AND VALUES! MOVE ON!Some will make it out and some will not,but at least they will stand a chance.The shitty wage market is not going to get us out no matter what.People will sign the note re-do the loans and all of the robo crap will at last be a thing of the past.MOVE MOVE MOVE FASTER!tHIS WHOLE DISCUSS IT TO DEATH CRAP IS SO CRAZY!jUST MAKE THE NEW LOANS WITH NEW RULES ,THAT IF YOU DONT PAY NOW,YOU DONT STAY!
Lowering interest rates does very very little good.
What needs to be done is to relieve us of 10 to 20 percent of our loan balances because the banks were at fault in stupidly pushing high LTV without documentation and screwing up the entire housing market. That would be worthwhile and would allow us to have a chance to sell our houses without becoming destitute.
In order to do that, the banks will unreasonably claim that they should be reimbursed, but they have no reason to expect fair treatment from everyone they hurt.
The government has “helped” the people enough. I do not want gov’t to get bigger, while losing more money at it. They are very good at operating at a loss. Although a refi would benefit me with two of my properties, I do not want the gov’t involved with extending credit or regulating the banks to do it. Wouldn’t it be nice if someone from the banking community would step up to the plate and do the right thing for once?
StayWithNevada doesn’t remember history: “(Don’t worry about the moral hazard, the lenders have learned their lessons not to do this again and are under increased scrutiny now.)”
After the savings and loan ‘crisis’ an astute observer was asked if he thought the bankers had learned anything and he replied, “Yes. They learned that they can make any loans they want, to any deadbeats they want to, and when the loans go sideways, the taxpayers will bail them out.”
With all the FDIC forced mergers, there are more banks that are “too big to fail.”