A new bill that will help 1-2 million homeowners escape their unaffordable mortgages by refinancing into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA) has passed the House and will now move on to the Senate. If it is eventually passed by the Senate and signed by the President (who is no longer threatening to veto it), will it help you?
CNN says:
Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 40% of their gross monthly income on all household debt to be eligible for the program.
They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage – and attest that they are not deliberately defaulting just to obtain lower payments.
Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it’s to pay for necessary upkeep on the home.
To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home’s appraised value at the time.
Once the legislation passes, Rep. Barney Frank, D-Mass., one of the authors of the bill, says that help could come “within days of Bush signing the bill,” because lenders are familiar with the details.
How housing rescue bill can help you [CNNMoney]
Homeowners to get aggressive bailout [Star-Tribune]
(Photo: Getty)
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Got a great interest rate already, but I’ll bet with some number crunching we can buy a new car (or two) and I can quit my job long enough to qualify. Guarantee the thought’s crossing the minds of millions Americans right now.
The satisfaction of being a responsible citizen and contributing member of society has become cold comfort indeed.
Glad to pay for your house while I am struggling to pay back my student loans!
If you live in a state where your Senator agrees to this, do me I favor, and I don’t vote for them. If you can’t stand the other guy abstain.
And what happens when these guys decide to stop paying at a lower rate? Can I at least go to their house and take my percentage of what I am paying for?
@ceejeemcbeegee:
Nope, the lender has to actually reduce the principal amount (by at least 10%) on the mortgage for it to qualify for this program.
Problem is, this creates a huge adverse selection problem – if a home is worth >90% of the mortgage balance, the lender’s better off just foreclosing than cutting the loan balance. If the house is worth <90% of the loan balance, the lender will take the cut and go into the program, since that way he at least gets 90% of his money back. So, Fannie and Freddie are going to end up with the most in-the-red loans.
Well, if I hadn’t gotten a job after being laid off and unemployed for six months, we might have actually qualified for this program. Fortunately, we had enough with savings, tax refund/rebate and unemployment to keep making our mortgage payments while I wasn’t working, so we were never in fear of foreclosure. But, if I had remained unemployed for more than another three to four months, things would have started to become very difficult.
We had bought our house well within our means while we were both working, refusing to pay more than well within our budget, thankfully. At least now I’m working again, so we’re doing ok, just need to try and build back up the savings account.
Maybe my car loan is more than I can afford. Maybe my credit cards. Why doesn’t the gov’t bail me out? Because that really is the gov’ts role in America!! Maybe my wife and I should have bought a house at 40% of our gross income (instead of the 22% we really did) and then the taxpayers could redistribute their wealth to me.
I’m a little iffy on this myself,but having a bunch of empty houses in your neighborhood won’t help you either. There really doesn’t seem to be a good answer.
I’m having trouble with my mortgage because I bought what I could afford 2 years ago, with a fixed rate, and I put 25% down so I wouldn’t have to pay mortgage insurance, however because of the housing boom, my property tax went up, then our governor decided to raise property taxes again, in 2 years my mortgage payment has gone up almost $300 a month because of property taxes.
I feel I was a responsible home buyer and the raise in my mortgage was beyond my control. Since my mortgage isn’t an FHA loan and I don’t have an adjustible rate, I wonder if I would qualify for this program? I don’t want to change my loan to an FHA loan either
Socialized housing!
What a kick in the balls, Senator. What a kick in the honest citizen’s balls (or ovaries for the ladies…)
@arkitect75:
When you owe the bank $1,000, they own you. When you owe the bank $1,000,000 you own them.
Barney Frank is right that this is better for the overall economy since so many people were in over their heads. The thing is that I really don’t care if this is better for the overall economy. I’d be much more happy if we just got started with this whole Armageddon thing.
The problems with housing is houses cost too much.
How ’bout Congress show some love for the people who are responsible and in no danger of defaulting on their loans? They’re the ones who will actually be paying their taxes this year.
In a nation where endless consumption is necessary to prop up the economy, it is in the corporations’ and government’s best interest to keep the citizenry as financially illiterate as possible. Too many Americans can’t do math or science, don’t know their own history and don’t understand evolution. How in the world can they evaluate an Adjustable Rate Mortgage?
I think a few people will be helped by this bill. But most of the money will wind up in the hands of the evil corporations as per usual. Now, can I get everyone to do a “Lindy?” and waterboard some CEO’s?
“The problems with housing is houses cost too much.”
When I compare what my parents paid for their 3-bedroom, 2-bath, +family room house, which was about as much as or a little less than one year’s salary for my parents (a teacher and an engineer, so not exactly rich), to what my husband and I paid for our same sized house, which was 2.5 times our combined salary, it really goes to show how the cost of everything has gone way up compared to wages.
@FLConsumer: YES! OK we need to bail out the jackasses that are in over their heads so that are neighborhoods don’t end up full of crackheads squatting in vacant foreclosures that no one wants to or can afford to buy. I get it.
But if you’re going to basically “reward” the people who did the wrong thing, I want a “reward” for doing the right thing – an act that is normally worthy of reward. $10k off my principle works. Hell I’ll even pay income tax on it if I have to.
A lot of undeserving people are getting bailed out of trouble they got themselves into. This is happening both at the corporate and individual levels. Everyone should be pissed off about this. However, the bailouts are needed to address the big problem.
Fannie and Freddie can’t go down. They’re quasi-governmental bodies so it’d be akin to federal banks going bust. Likewise, if the market is flooded with foreclosed homes, the economic harm from that could be much worse than the taxes being used to save the assess of irresponsible companies and individuals.
It sucks, but you can’t kick the housing industry in the nuts. People think WWII or whatever got us out of the Great Depression. We _built_ our way out. Housing/construction is maybe the most important sector of the economy and if they fail, we are seriously screwed.
There’s no fair way to do this: the undeserved are going to come out slightly ahead. What else is new, though?
I hope this bill gets passed! Call them irresponsible or whatever but also don’t forget the stupid mortage plans and things like ‘adjustable interest rates’.. i mean seriously.. what’s up with that?!
Well, this’ll do wonders for the *responsible* renters and home buyers who knew they were fucked in the ballooning housing price climate and didn’t get involved in this ponzi scheme. $500,000-$800,000 for “working class” homes when typical wages have been sub-$20/hr all along. I’m no math professor, but even George W. Bush has the intelligence to know this wasn’t sustainable.
Now, Congress and the Executive Branch are going to artificially prop up housing prices rather than let the “market” adjust itself to reality? Godless “Communism,” “Socialism” I say – notice how these big “conservative” companies go running to their “Big Government” daddies as soon as their antics have had the results any 5-year old could predict? So many illustrations like this kinda puts the lie to all the “free market” propaganda we swim in – essentially, it’s a bailout of THAT ridiculous fantasy.
In addition to a tighter rental market, my taxes have to pay off the indiscretions of the thieves who deregulated the market, originated the loans and lied about their incomes to qualify? Gee, thanks.
I guess after signing this bill they’ll have another excuse to put off single-payer healthcare and/or raid Social Security or jail the increasing number of homeless – at least those homeless who were responsible enough not to play or have already lost this game before the bailout trucks arrive.
@nutrigm: It’s a way to artificially inflate housing prices, plain and simple. Unless the rest of your income and expenses are tied to the prime rate, it’s a gamble you hope to win.
A gamble insured by the full faith and liquidity of the Federal Government. Vegas, baby!
@powerball: And they will CONTINUE to “cost too much” since bills like this are meant to prop up those artificially high prices.
If you can’t afford to pay your mortgage, utilities, insurance, maintenance and home taxes with 25-30% of your gross income, the house price is not appropriate for you. Either increase wages or let housing prices deflate.
Or, pass a law bailing out the crooks.
I was thinking about this situation the other day…I do worry about something if there isn’t help to bail these people out. Imagine that there is a massive amount of people getting foreclosed on. What happens to all those homes? All these people that have now defaulted on loans won’t be able to get new loans to buy houses for a few more years. Leaving us for a few years with a wide open market for someone/some company to swoop in and purchase a vast quantity of homes. It’s just opening a door for a real estate Wal-Mart. Before we know it, everybody has to get their house from one of a few major players in the market. Nobody really owns homes anymore, we all just rent indefinitely from a large corporation. I don’t think I have to continue to go into detail about what that could mean to the ecomy our kids will be dealing with
Socialism. Didn’t work for the USSR, and it’s not gonna work for the USofA either. We’re in for some SHITE times, folks. Don’t say you weren’t warned.
As someone who shopped carefully for a home, got a mortgage I can afford, and had enough education in finance (and was lucky enough to have good professional help), I am not in trouble.
I am also not asshole enough to begrudge the people who ARE in trouble the help they need. This isn’t enough, but it will save a few responsible homeowners whose lives were decimated by job loss, illness, or the perfect storm of economic factors that have swamped many people.
It is obviously structured to avoid saving people that our oh-so-caring society has decided *deserve* to be homeless, such as those who were overly optimistic about housing prices, or who wanted a home so much that they stretched a bit out of their comfort-zone to get it. Fear not, coldhearted ones; those people and families will be on the streets soon enough. Plenty of them are already.
In fact, this bill is SO careful to avoid helping anyone that we might feel too morally-superior to help, that it will also not help a lot of people who deserve it. When housing prices have declined 40% or more in many areas, you didn’t have to have “stretched” in order to now be over a 95% mortgage-to-value differential. So all you outright bloodthirsty ones can relax too; lots of innocent people are still going to drown, and you’ll have front-row seats.
Since obviously this society doesn’t care about its own in the larger sense, I do hope the oncoming crisis teaches us to care about our neighbors. *Somebody’s* going to have to care, because a lot of people, deserving or not, are about to need it.
The government has failed its people pretty consistently lately, but I’m glad to see anything that might help even a little. Every one who qualifies for this is one less family that I have to break the news to that they’re losing their home.
Gah, a lot of you guys completely disgust me, though. May you never have bad luck and rely on your fellow citizens for help…or if you do, may you get what you gave.
Well, well, well… It is quite interesting to read most of these postings.
Really now, many of them remind me of Marie Antoinette’s “let them eat
cake”. Believe me I strongly agree that this assistance is to protect the
institutions that tempted people/families into getting more house for low
payments. Then again, there was a real estate craze going on in this
country. It was like a drug induced euphoria. The everyday person didn’t
realize it was all staged to get to this point, they just rode with the
wave. You know that people, in general, tend to see/hear what they want to
hear. Back in the heyday (the very recent past) when people were looking for
homes (inflated prices) the lenders were “adjusting” the numbers to get
homes financed. People, getting financing for the high priced properties,
were barely directed to the pages in the legal mumbo jumbo instrument that
outlined how payments “could” change in the future. There, for the most
part, was NO emphasis on that as that could scare a borrower away, and they
didn’t want to do that for sure. If you are not in this situation, as I am
not, then that’s wonderful, we have no problems and stress about this matter
at this time of “depression” in our country. Greed is what was driving the
prices up and greed was what was driving the lenders to push and dreams were
what was driving those people to buy the houses and take those mortgages. I
don’t know for sure how this will help the people, it may not help too many
and it surely does have some weird strings attached, so, hopefully it will
be structured to educate those that are eligible as to how all the strings
can be manipulated to make it work for them in the best way now and in the
future. I am hoping, in a positive way, that this will be the start of the
government actually opening their eyes and giving assistance to the people,
looking out for us. No, I am not delirious. I know that this is probably
another way to line pockets (as one comment suggested), but, if it helps
people along the way so be it for now. I just feel that at some point in
this universe, in this country, the government will be by and for the
people. I believe the greed must stop and we must not get jealous if
programs that come out cannot help us. As long as people are being helped I
feel we should be happy for them. It is true that this is all too new to
criticize it. It’s deeds (good or bad) will only be witnessed as people
become eligible and use it.
When making comments in the future, I believe we should make sure we do not
put other people down, ever. Check out what you wrote, of course it is up to
you, though, if you please think about what I wrote I hope you will find it
makes sense and it’s time for us to begin to “pay it forward”. Paying
forward what how we would like to be treated and it will come back to you a
thousand fold. This country will never get anywhere if we continue to spiral
down a path of selfishness and greed.
artale/palm beach florida
-namaste