Thursday, February 19, 2009

What Happens Six Months After Homeowner Bailout?

If you are a home owner that is on the brink of foreclosure for whatever reason -- you are in a house too big and expensive for your income, you bought it with a short-term view that you would sell it a few years after buying it -- what will you do after Obama gives you a payment lifeline?

Obama is offering a $75 billion lifeline to millions of Americans on the brink of foreclosure.
The administration's $75 billion plan is designed to allow 7 million to 9 million homeowners to restructure or refinance their mortgages -- including relief for as many as 3 million to 4 million homeowners "at risk'' of foreclosure.

If your total monthly home payments (interest, principal and taxes) are greater than 31% of your monthly, pre-tax income you may qualify.

Normally it’s difficult to refinance if you owe more than 80% of what your home is worth. But under new rules you may be able to refinance up to 105% of the home’s value. Not all mortgages will be eligible. They have to be owned or insured by Fannie Mae, Freddie Mac or one of the other government-backed programs. High-value, “jumbo” loans may not meet the test.
If a person has missed his mortgage payments before this bailout, how many will continue to miss payments afterward? If GM and Chrysler can come back from more money, why can't the encumbered homeowner?

The bulk of the American people buy homes they can afford, furnish and upkeep. Convince these people why the people that spent money on extra bathrooms, game rooms entertainment rooms, wave runners, snow machines, ATVs, boats, RVs and vacation properties should be bailed out. Why is it going to be so much worse if we do not?


mfmosman said...

There's a morality section to this argument that may lack a little nuance: if the homeowner was in fact trying to "game the system," flip a house, or genuinely get in over their heads, then this is all good stuff.

But if, as has been reported over and over, many Americans were essentially DUPED into taking on these complicated mortgage instruments by predatory lenders -- well, then the moral high ground shifts, doesn't it?

I don't have an answer as to which is true -- predatory buyers or predatory lenders. Probably there's some of both.


Rachel Hauck said...

I'm with you, Jeff. But libs believe it's a right, a social injustice, if every person who wants to own a house can't have one.

They are locked into the'50s and '60s mindset that minorities and lower income people are purposefully discriminated against and cannot get ahead to buy a home. Read: Fannie and Freddie recent debacles.

Either the ultimate plan is to regain power and never give it up or they really believe what they preach.

I think it's the former.


mfmosman said...

Rachel, one thing I like about Jeff is that he doesn't subscribe to that many "lefty conspiracy theories." He disagrees, but respectfully and usually without suggesting that we're power-mad partisans who hate America.

As a lefty (one who likes Jeff a lot), it always feels weird to have someone toss me into a bucket of thought that exists only at the fringes of my party -- if it exists at all.

I don't know anyone, for example, who actually believes that "it's a right, a social injustice, if every person who wants to own a house can't have one."

Please note, and I say this respectfully, that most of the deregulation that led to "every person who wants to own a house" (having one) occurred on Republican watch.

Not trying to point fingers. I'm just saying that it's a little odd to be blaming Democrats for the Fannie and Freddie debacles. Maybe you'll take at least your share?

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