Will The New Homeowner Rescue Bill Help Rescue You?

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)

Comments

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  1. blue_duck says:

    Good times.

  2. cmdrsass says:

    Since this bill aids stupid, gullible, and/or irresponsible parties, I doubt anyone reading the consumerist will be helped by this.

  3. arkitect75 says:

    Does this bother anyone else? I mean, I went out, found a house that I could AFFORD the mortgage on, and purchased it. I’m not getting bailed out/helped out. I researched before buying and steered clear of adjustable rates because, hmmm, those rate just may balloon one day.

    ARG!

  4. CajunGuy says:

    Color me heartless, but if you couldn’t afford your house note to begin with, and you signed for a variable rate mortgage, aren’t YOU the moron to begin with? I mean, how did a change in home prices on the market change your note unless you have a variable rate mortgage?

    I bought what I was able to afford, have a fixed mortgage rate, and nothing has changed for me since this supposed market crash.

  5. **cough** **cough** wealth redistribution **cough** **cough**

  6. othium says:

    I feel that the government is willing to bail out large banking institutions (Fannie Mae/ Freddie Mac) – they should extend this same help to ordinary homeowners that are in trouble. It’s only fair.

  7. CajunGuy says:

    Arrgggh! Stupid “no edit button”.

    I also meant to say, aren’t WE (responsible home owners) footing the bill for this as well? Why should I, a middle-income, responsible home owner have to pay for the idiots of the world who make $30 thousand a year and signed for a $300 thousand loan?

    This really pisses me off.

  8. shadax says:

    Seriously, the only thing a bill like this is going to do is line the pockets of whoever’s collecting on the bad mortgages. If everything was left alone, these would be the people who lose out as everyone defaulted. The reality is that as prices decline another 20-30% in the coming years, many of these “rescued” folk will default anyway. Why, you ask? Well, for the same reason many are defaulting right now. They can afford their payment, they just don’t see the point in paying for a depreciating asset that’s already underwater. Just leave the system alone. The greedy and foolhardy should pay for their stupid decisions, not the taxpayers.

  9. I was thinking about this the other day. Personally, I’m hoping for a balance. Not so much of a bailout that I feel like a sucker for being responsible about housing and personal debt, but enough that my less-responsible brother-in-law doesn’t end up moving in with us.

  10. anthonyhasp says:

    Yes, it will help me because next time I buy a house I know that I can safely purchase a house that I can’t afford knowing that mommy government will bail me out at your expense.

  11. TouchMyMonkey says:

    I mean seriously. Rescue me from what? Japanese beetles? 5.5% fixed and no HELOC. Suck it.

    I’m a pretty liberal guy, but I am highly skeptical about helping out the irresponsible and the greedy. Why are we doing this? Simple. So YOUR BANK doesn’t have to sit on a stack of deeds to foreclosed properties, not because you personally might need help. If it were just homeowners being helped, I doubt anyone in the Bush Administration would care what happened next.

  12. Erwos says:

    @arkitect75: I’m in the same position, having just responsibly purchased a home a bit less than two months ago. Where’s my hand-out for being responsible? Why are we rewarding people for bad behavior, and screwing people for good behavior?

    I don’t believe in bailing out anyone, individual or corporate.

  13. MPHinPgh says:

    Well, it looks like I really F’ed up by paying my mortgage on tiem, every month. Next time maybe I’ll know better.

    Those smart people who bought WAAAAAAAY too much house without being able to pay for it must be laughing their asses off at me.

  14. GoldHoops says:

    No. I already sold my house, at a loss. I posted my story before and don’t feel like posting it again.

    Not for nothing, given the restrictions noted above, the law will help very few people who are in trouble.

  15. wgrune says:

    @arkitect75:

    Yes, it bothers me quite a bit. I also bought a house I could actually afford to pay for, and got a fixed rate mortgage. I guess I should have bought a house twice as big/expensive with an ARM and then cried when my rate reset and I couldn’t make the payment.

    I guess the moral of the story is that stupidity and irresponsibility trump hard work and living within your means as long as you are in a large enough group. Accountability seems to be fleeing this country at an alarming rate.

    PS – I do empathize with those who were lied to or duped by their lenders and the above does not apply to them

  16. Jevia says:

    What does “household debt” mean? Is that just the mortgage payment (along with escrowed taxes, insurance, pmi) or does that include other debts by the homeowner (such as credit cards, student loans, etc.)?

    Sounds to me like there are so many restrictions in the bill, that really its going to help very few people.

  17. backbroken says:

    Did I just get pwned by the people who took out ridiculous adjustable rate mortgages?

    I think I did.

    I think we all did.

  18. ryan89 says:

    PLEASE SENATE: Do NOT pass this! This is adding $800B to our debt and devaluing our dollar even more!

    And why didn’t anyone notice that also thrown into this bill, all credit card transactions will be reported to the IRS. First, this is completely unrelated, and second, I don’t want big mommy government knowing what I spend money on!

  19. @finite_elephant: Ah, you have the same problem with in-laws too? Thankfully, mine aren’t on the verge of moving in with US…him and his wife are on the verge of moving in with his parents. Along with their two kids. And two dogs.

    Good times.

  20. julienne says:

    I’m curious as to how many people in trouble DON’T have a home equity loan. Those things have been trumpeted as salvation for years. Here in Texas, where we were one of the last to allow them, they’re as rampant as cockroaches. I rarely see a case across my desk without a 2d mortgage used to forestall the inevitable.

    Yet another legislative piece of crap.

  21. SadSam says:

    @ryan89:

    Not just credit card, every electronic transaction. Back to cash.

  22. Ass_Cobra says:

    Ownership society my ass. When you own something you take the good and the bad. I guess me realizing that housing prices were getting berserk because you could finance more house on the same payment for an introductory period was a bad thing now that I look at it.

  23. SadSam says:
  24. angryhippo says:

    This strikes me as double-dipping for some financial institutions who handed out bad loans. Some are getting help via direct bailouts while others (in some cases both) are getting an indirect bailout by having their bad loans propped up. As one who was waiting for housing prices to adjust to something resembling sane, I’m greatly pissed as this will artificially keep them high.

    Here’s to you, Mr. I Don’t Know What the Hell I’m Signing Guy. DIAF.

  25. arkitect75 says:

    God, you gotta love this country.. no wonder other nations look at the US and think that we’re idiots… we buy things we can’t afford, then cry until our government pats us on the head and says that it’ll be alright.

  26. legwork says:

    Worry not, sour pusses. The 95% clause says the crazy fugly cases aren’t covered. With home values down 15-35% and falling, the 95% clause eliminates most of the NegAm & similar crap loans. Those people will still walk away or they’ll be drowning for decades.

    The people this bill may help are those who bought more conventionally but are having trouble keeping current due to the rest of the mess (glut, unemployment, inflation, etc.)

  27. gretch9er says:

    Ok. I understand that some people who this may help were perhaps “not given” all the information they needed before they entered into their mortgages (I’m going to skip my rant about how people should, first and foremost, be educated consumers – ESPECIALLY when spending the kind of money one typically spends on a mortgage). This is the wrong fix.

    I repeat – this is the wrong fix.

    SOMETHING needs to be done to reel in the mortgage lenders/bankers who made these types of loans. For the typical home-buyer, tradition would dictate that a borrower could only get a mortgage for a home whose payment would equal 30% of their income. Period. Old-school bankers will tell you that you shouldn’t make loans beyond this. Look at WaMu and Wachovia right now – bad loans are bad for banks. Period.

    I realize that Congress is looking at this as a short-term fix to help our economy right now. If Congress REALLY wants to do something to address this actual problem in the long-term, they NEED to reel in these lenders.

  28. hypnotik_jello says:

    @ryan89: Can you point me to a source about this IRS reporting nonsense? I’d like to learn more…. does this apply only to these people who get bailed out or to the rest of us as well? what the?

  29. wgrune says:

    @backbroken:

    Pwned is an understatement. They will get to stay in a larger/nicer house they never could have realistically qualified for at your and my expense. It makes me want to scream!

  30. Hogan1 says:

    I don’t support bailing out people who didn’t take the time to understand what they were getting into. It’s essentially covering people for their idiocy and lack of common sense. People need to be held accountable for their mistakes…

  31. Sandtigrr says:

    Did anyone notice it was for loans that started in 2005-2007? I don’t know about you guys but don’t most ARMs trip at about 3-5 years? What about the rest of the people that have mortgages that were originated 6+ years ago?

    This is a point outside of the whole usual “irresponsible consumer” comments that always start popping up.

  32. kapow! says:

    This law is crap. What about those in declining markets and are currently up-side down on their mortgage? You already are able to do a 95% LTV FHA refi, this only means the DTI ratios are a little more flexible (and “household debt” DOES mean ALL of it). I’m not sure what other underwriting guidelines are changing, but I’m sure that they’re minimal. What crap….and the taxpayers picking up the bill too.

    PS. The gov’t HAD to bail out Fannie/Freddie. They hold trillions of dollars in mortgages and there’s no way our economy could handle them going under….plus they are government chartered.

  33. SadSam says:
  34. kapow! says:

    Oh yeah – for those who are saying that lenders should be stopped from making these types of loans….well, if anyone hasn’t noticed, there is NO Subprime market left. Investors won’t touch these anymore. Underwriting guidelines have tightened so much that even the conforming loans are getting harder to do. FHA is pretty much all that’s left (at least for our business model).

  35. arkitect75 says:

    @SadSam: Ah, Dick Armey… or as some call him, Penis Navy, Weiner Air Force, or Vagina Coast Guard

  36. Sandtigrr says:

    Fannie/Freddie should be taken over by the FHA like the FDIC does when it comes in to save a bank. From what I’m seeing in the news and articles it appears that fannie/freddie KNEW they would get bailed out so didn’t concern themselves with avoiding this collapse.

  37. Whitey Fisk says:

    As a taxpayer who has been responsibly paying his own mortgage for the last four years, no, this will not help me.

  38. LogicalOne says:

    Well, if the Bush administration is in favor of it, that’s reason enough to be against it…

    Also, except for the January 2005 thru June 2007, restriction, it looks like just about anybody could qualify for this program.

    This subprime stuff’s been going on for quite awhile, since the 1990′s I think. What about all those folks?

  39. @arkitect75:

    Does this bother anyone else? I mean, I went out, found a house that I could AFFORD the mortgage on, and purchased it. I’m not getting bailed out/helped out. I researched before buying and steered clear of adjustable rates because, hmmm, those rate just may balloon one day.

    I’m torn.

    On one hand, this is a nation (theoretically) based on personal responsibility, fairness, and exposure to the positive and negative consequences of free choice.

    On the other hand, the more foreclosures that happen in my neighborhood, the more my property value falls, and the snowball rolls downhill – people get upside down in 100% financed homes, and walk away, causing more foreclosures.

    I must grit my teeth and support this bill – though it isn’t fair to those of us who were responsible, it helps shield us from the continued consequences of the jerks who are killing our home values because they’re content to walk away.

  40. @arkitect75:

    God, you gotta love this country.. no wonder other nations look at the US and think that we’re idiots.

    Yet, a whole lost more people want into the US than want out.

  41. @LogicalOne:

    Well, if the Bush administration is in favor of it, that’s reason enough to be against it…

    I think you may want to review the Consumerist Comments Code and keep the unnecessary political rhetoric out of it.

  42. Bad formatting…darn – no edit button.

  43. Illusio26 says:

    While I don’t really like bailing out people who took retarded loans, this isn’t completely a bad thing. If you have a bunch of houses in your area they either get sold for a big loss, or foreclosed, what do you think that is going to do to your property values. I’d rather be living in a stable neighborhood where the only people selling are the ones who actually want to move. That will help my house’s value.

  44. sarabadara says:

    Damn. I wish the hubby and I had chosen a larger, more expensive house, rather than the tiny dwelling that we could afford at the time. What the hell was I thinking?

  45. @Whitey Fisk:

    As a taxpayer who has been responsibly paying his own mortgage for the last four years, no, this will not help me.

    All we responsible ones can do is hope that this stops the foreclosures, therefore slowing the depreciation on our own houses.

  46. arkitect75 says:

    check out this series by my local Miami Herald (FYI, GREAAATT housing market) about ex-con mortgage brokers scamming the elderly, disabled, etc. It’s really sad on that part, and I’m not against this bill working for those who fell victim to these scams (but you can’t separate the people out like that).

    [www.miamiherald.com]

  47. Geekybiker says:

    God, I hope this doesn’t pass. I hate to think I’ll be paying for someone’s else stupid mistakes yet again.

  48. Scoobatz says:

    Fortunately, the bill does come with lots of long strings attached. That does make me feel better as a responsible homeowner.

  49. howie_in_az says:

    This annoys me greatly because it seems like people are being rewarded for being irresponsible. Yes, it may prevent some foreclosures, thusly propping up some property values in the immediate vicinity… but at what cost? Do Joe and Sally McSpedly get to keep their McMansion they bought with 0% down and an ARM rate? Do they get refinanced into a fixed rate at no cost? Is that fixed rate lower than my fixed rate?

    To top it all off, today listening to the radio I hear some commercial about “if you have more than $10,000 in credit card debt, the credit card company is required by law to negotiate with you for a lesser amount”. What exactly is all this teaching Joe Consumer? To me it’s saying “go ahead and be irresponsible, nobody’s going to hold you accountable for anything”. Makes me want to go ahead and buy the Ferrari F430 Spyder I’ve been drooling over because hey, if I can’t afford it, the gubment and/or lender will work with me such that it’s still mine, and probably halve the monthly price I’m paying, right?

  50. chrisexv6 says:

    This sure helps me rid my wallet of that pesky extra cash I have.

    Id be glad to give it to our government in the form of higher taxes so irresponsible people don’t have to go through the heartache of (GASP!!) relocating to a home they can actually afford.

  51. Burgandy says:

    OK, calls to my senators made and filled out their little forms on the webpages. Lets see if begging to vote no works :)

  52. rainbowsandkittens says:

    I’d like to think I am pretty liberal thinker, especially when it comes to issues like health care.

    But paying the way for people who signed papers they didn’t read and shark lenders who made off with bags of money makes my skin crawl.

    With all of the corporate bail outs, claims of executive privilege and manipulation of oil markets the have happened in the last year, I’m left wondering where my country is heading. I’m a hard working American and I’m after my version of the American dream–but the grocery shrink ray and rising gas prices keep chipping away at my ability to save for that dream rather than put it on plastic.

    What’s the deal? Why does it seem like the more irresponsible one is, the more they are rewarded these days?

  53. Burgandy says:

    BTW, my letters to the senators:
    Senator Hutchison,
    As a responsible, hardworking and concerned voter, I am asking you to please vote no on this mortgage bailout bill. My husband and I have always budgeted, planned, and shopped around before making any large purchase. We don’t see where people who think that the rules don’t apply to them, those who lied on their loan applications, should benifit from those actions. Please don’t send my hard earned money to those who are to irresponsible to keep from doing it again. These people don’t need a bailout, they need to feel the consequeses of their actions. Please vote no on this bill.
    Thank you,

  54. timmus says:

    Arghhhhhhh! This is only going to prop up the overinflated housing market. It’s high time we kick everyone out of Congress and start all over again, and get our priorities straight.

  55. allnitecp says:

    I don’t think that all people who will be eligible for assistance under this legislation can be considered ‘Irresponsible’. I don’t consider myself irresponsible, but I would have what some would consider a ‘risky’ or sub-prime loan, but it is not the loan itself that makes me want to ask for assistance, its the real estate market where I live.

    When we purchased our home, it was with the intent to only stay here a few years with a low monthly payment. Then we would sell the home, pretty much for what we paid for it and move on to the next property or area. Unfortunately, it doesn’t appear that this will happen with the current market. And staying here for years and years doesn’t make fiscal sense as we are not paying down enough of the principle of the loan under the current terms.

    I bet there are quite a few more people who are in similar situations such as this that will plan on using this legislation to help them get to a place where it makes sense to stay for the long term.

  56. Another responsible home buyer here. My wife and I purchased a house about a year ago, and this has me a little ticked.
    Don’t get me wrong, I completely sympathize with those poor people talked into mortgages that they were convinced to take. I was given the “hard Sell” on a Variable Rate mortgage back in 2003, and it certainly made it look reasonable, but I just couldn’t get past the whole “Variable” interest rate was a BAD idea.

    Many people were talked into these, and actually bought places they *could* afford with a reasonable interest rate. Unfortunately those people have had their interest rates balloon, and are now upside down in addition to being behind in their now ridiculously high payments.

    These are the people who need help. For the people who continued to use their Houses like ATMs and refinanced to get cash … well you reap what you sow.

  57. kapow! says:

    @Sandtigrr

    The bill creates a GSE regulator. Bascially this means more gov’t control of Fannie/Freddie and Federal Banks.

  58. @Geekybiker:

    God, I hope this doesn’t pass. I hate to think I’ll be paying for someone’s else stupid mistakes yet again.

    Option 1: Pay for someone’s stupid mistakes through tax dollars
    Option 2: Pay for someone’s stupid mistakes through plummeting home value, and a slow economy.

    We’re going to pay for the screwups of this subprime mess one way or another. I think, unfortunately, that the bailout is the better answer.

  59. SadSam says:

    @SadSam: Did anyone look at the handy foreclosure rate chart (2001 – 2007). It is interesting to note that subprime foreclosures were at a higher rate in 2001 (I don’t recall hearing much about foreclosures back in 2001 but maybe I just wasn’t paying attention). And while there is an upward trend for foreclosures in all loans it is still below 2%.

  60. veterandem says:

    Maybe this will rid our neighborhood of the Whiskey Tango that moved in at the end of the sub prime meltdown :)
    (kids on 4 wheelers and motocross bikes up and down the road, kids (same) opening the dog pens of all the folks in the neighborhood, smashing statues in yards, etc). But then, they probably qualify. Damn!

  61. arkitect75 says:

    Oh, also, now that I’ve been in my small, affordable house, paying my mortgage on time for the past five years, the value has increased, due to my own home improvements and due to some of the idiots that got in way over their heads. Now that houses that are a “step up” from my current one are within reason (since the bloated prices have begun to come down), i still can’t “upgrade” since I can’t sell my house…

    bah-bah-bah-bah… I’m hatin’ it

  62. Illusio26 says:

    @howie_in_az: Those credit card commercials don’t bother me. If joe consumer wants to rack up thousands in debt on his CC and visa wants to let him off, go ahead, it’s their money.

    What does bother me, is those IRS commercial that say you can pay off your $10,000 in tax debt for pennies on the dollar. I pay every cent of my taxes every year. Why should someone else get out of paying their fair share?

  63. Mr_D says:

    @InfiniTrent: That’s what I see. The black-hearted Republican in me hates the fact that I have to pay to bail out people who made bad choices, while I get nothing. But then the realist in me realizes that we’re all in this together, and it’s everyone’s problem, whether we were directly involved or not.

  64. ThinkerTDM says:

    I was under the impression that this bill would not help people in trouble, but rather billion dollar corporations.

  65. I pose a related question:

    Would it be possible, without the intervention of the government, for the housing market to fix itself?

  66. AD8BC says:

    We need to allow people to fail.

    Seriously.

    In this case, that means both the borrowers and the lenders.

    People will only learn from mistakes when they are allowed to make those mistakes.

  67. tmed says:

    @Mr_D:

    The bleeding heart liberal in me thinks the banks should go under. Then I realize, that my sensibly mortgaged house is losing value because the foreclosure nightmare has reduced the price of buying a house and I realize that the bad loans and bad mortgagees are messing with my stuff.

    The last thing I want right now is the housing market to level itself off, becuase I will end up upside down on my mortgage.

  68. SkokieGuy says:

    Who has read the CNN article?

    It says that the homeowners will have to give up to 90% of the home’s increase in value if sold quickly. After five years, the homeowners will permanently have to give 50% of the home’s increase in value.

    In addition, the homeowner will have to pay insurance for the lifetime of the loan.

    So the government IS bailing people out, but these are pretty serious ‘strings’ associated with the offer.

    Remember, us responsible homeowners are still affected if our neighborhoods become slums because of vacant homes and our own property values sink.

    I’m shocked to say this, but I don’t think its a half bad proposal.

  69. ianmac47 says:

    Oh good, nothing like the government to reward irresponsible behavior. Meanwhile, the rest of us who didn’t buy a house we couldn’t afford because we are financially responsible are going to foot the bill.

  70. JoeTan says:

    It’s very easy to write people off as bums that should have known better BUT it was SHOVED DOWN PEOPLE’S THROATS.

    You telling me that if I could get you 20-50K CASH and not pay a dime more a month you wouldn’t take it?

    Also, some of us (me included) benefited greatly from these deals and so should have ANYONE with a brain.

  71. 3drage says:

    WTF? First off, who is going to check for all of those things when the glut of people come into the office asking for handouts? Secondly, I know I’m not any different from the majority of wanna-be-homeowners who were pushed about of the market by jerks that got loans they couldn’t afford. Now it’s my tax money that is going to bail them out? Hell no. This is outrageously retarded. How about letting prices for houses readjust themselves so that people can legitimately afford homes, I’ve been working hard and saving my money to become a home owner some day, and the reward goes to the greedy. What a bunch of garbage.

  72. JustThatGuy3 says:

    @Kristinap815:

    “PS. The gov’t HAD to bail out Fannie/Freddie. They hold trillions of dollars in mortgages and there’s no way our economy could handle them going under….plus they are government chartered.”

    Maybe it had to, but it certainly could have done so by putting them into receivership, and not bailing out Fannie/Freddie management and stockholders.

  73. beavis88 says:

    No. No it will not.

    @JoeTan:

    “You telling me that if I could get you 20-50K CASH and not pay a dime more a month you wouldn’t take it?”

    Not if it means I have to pay for 30 years on a new mortgage. Not everyone thinks only in terms of cost per month – though, as should now be completely obvious, many people and banks certainly do.

  74. howie_in_az says:

    @darkjedi26: I haven’t heard that one; I try to make a habit of not listening to the radio. Figures, the one day I do, I hear something that makes me want to continue not listening to the radio :)

    @JustThatGuy3: Perhaps the gubment should discontinue Fannie Mae and Freddy Mac altogether. What does the gubment have to do with housing anyway? Are people suddenly entitled to a home?

  75. trujunglist says:

    Man, now I’m kicking myself for renting for the last few years. I could’ve had a house and you all could’ve helped me pay for it.

  76. Geekybiker says:

    @InfiniTrent: I’d rather pay for it through plumeting home value. That means 1) they are punished, not rewarded for their mistakes and 2) people like me who bought conservatively may be able to pick up properties for a steal. A bail out is lose lose for me.

  77. AustinTXProgrammer says:

    I am renting right now because I am waiting till I can afford a house. That was looking less and less likely every day as people buying more house than they could afford drove the prices up and up.

    I was looking forward to a correction in the market, but now the government is going to prop it up!

    This bill isn’t helping me at all.

  78. Norcross says:

    First off, read the article. It basically gets some people out of the toxic ARM loans they’re in. Whether it was through bad decisions, shady mortgage lenders, or outright fraud, it doesn’t change the fact that it’s here, and it needs to be dealt with. The strings put on this thing will weed out most people looking to ‘get one over’ on everyone. It basically prevents you from flipping it and / or using it as an ATM going forward. In other words, it’ll keep the honest people honest. Crooks will always find a way around it.

    And the whole “my tax dollars…” arguement is thin at best. You don’t want your tax dollars paying for someone’s home, I don’t want them paying for a war, and others don’t want them paying for subsidized education or healthcare. But they do. Bottom line is that tax revenue is used where the government sees fit. While I don’t always agree with it, I understand it’s part of the package deal. Both Liberals and Conservatives want to spend my money. It’s just a difference of WHAT they want to spend it on. If it bothers you, either elect someone new, or leave the country.

  79. The funding for this bill should come out of Countrywide’s (and other mortgage company CEOs) golden parachute.

  80. Erwos says:

    @gretch9er: You’re closing the barn door after the horses have left. Lending standards have tightened up tremendously, and without the need for federal regulation.

    The entire financial system is taking a bath because of this – and that’s how it should be. Say no to bail-outs!

    (And, FYI, I’m a home owner. I’d rather see my home value go down than fund idiots through my tax dollars.)

  81. Erwos says:

    @heavylee-again: You do realize that that money would come nowhere near paying for even 1% of this, right?

  82. Wireless Joe says:

    If you voluntarily signed up for a loan that was worth more than 40% of your gross salary, I say you’re a dumbass, and before you get your taxpayer-funded bailout, you need to be institutionalized for a year of forced finance classes. That, or if you sell your home any profits you see go back to the taxpayers.

  83. I don’t see how this affects any of y’all. By re-writing the mortgage, the amount of said mortgage doesn’t get reduced, just the interest (profit) the lender makes on the mortgage. If they borrowed $100K, they still have to pay back $100K… just at a lower per month rate and over a longer period time. Right?

  84. SkokieGuy says:

    @ceejeemcbeegee: You’re close.

    The mortgage will be re-written at a fixed rate, potentially lower

    The mortgage balance may be reduced, to 90% of the home’s value, as re-appraised based on current values.

    So if you had 100% financing on a $500,000 home that is now worth $400,000, your new mortgage would be for $405,000.

    You now can stay in the house, instead of foreclosure and if you sell the house in 10 years for $600,000, you are required to pay back the government $97,500 representing 50% of the appreciation.

    It’s not a give away, it’s a government saving your ass, but you owe them big time deal.

    AND you are prohibited from taking out a home equity for 5 years (other than to maintain the home) AND when you do finally sell, you have to PAY BACK the government

  85. RagingBoehner says:

    @ceejeemcbeegee: Not quite. Lenders who voluntarily participate must write down the amount of the mortgage to 90% of Value. They must eat any losses.

    Then once the mortgage is refied into an FHA-backed loan, the borrower must pay FHA premiums (which are actuarial, meaning the premiums match the risk — risk based pricing was a key element in the reforms) and most importantly the borrowers have to SHARE FUTURE APPRECIATION with the government. This is key.

    It’s not a perfect bill, but something does have to be done. Also — the bailout here shouldn’t cost taxpayers anything (except for the $4b for community development block grants to help local govt’s buy foreclosed homes. that was a key issue of contention for the White House and almost caused the President to veto).

    The $25b figure assumes that everyone who refinances into one of these FHA-backed loans defaults and that their foreclosed properties are worthless.

  86. RagingBoehner says:

    @SkokieGuy: beat me to the punch.

  87. gretch9er says:

    @Erwos:

    I would have to say that I agree with your statement, actually. It just still feels that lenders acted in a way that was morally reprehensible, and there needs to be some follow up in SOME way for these people. Perhaps I’m just idealistic and naive, but I want to believe that the people we are supposed to trust as experts will feel some sort of responsibility for the people they are supposed to act on the behalf of in an incredibly complicated system.

    That said, I was always under the impression that the housing market was cyclical, and I was hoping that we are headed for a correction sooner than it seems we will (or we are). I am not a homeowner, but am rather a single person who has kept her credit score high and has been diligently saving so that I could get in to the market when it finally corrected. Which, at least in my area of the country, doesn’t seem to be coming as soon as I’d like…

  88. SkokieGuy says:

    Dam for the love of an edit button!

    90% of $400,000 = $360,000 for the new loan.

    $600,000 – $360,000 = $240,000 appreciation

    50% of $240,000 = $120,000 due to the government when you sell.

  89. SkokieGuy says:

    @RagingBoehner: But win for your better screen name!.

    @gretch9er: The bailout saves homeowners from being foreclosed. Punishing lenders, appraisers, speculators and such is a separate issue. Saving homeowners doesn’t preclude punishing lawbreakers and it seems that daily, news of another lending intitution being investigated means that [hopefully] something will be done.

  90. keebie81 says:

    Is the loan still subject to give 50% of profits to FHA if the property is sold after the loan is paid in full?

    Or is the 50% after 5yrs only if they still hold the loan?

  91. opsomath says:

    I am a lot more pissed about the credit card reporting to the IRS thing than I am about the bailout. The government handing out cash to other people, after taking it off me? Par for the course. Increased information gathering gives me the willies, though. Time to start paying in green paper for stuff I buy…fortunately I already started going that way on my own.

  92. domo-arigato says:

    “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.”

    How am I going to retire my $9,000 HELOC when I’m having trouble making the mortgage payments?

  93. Dave on bass says:

    I don’t *think* I get helped by this either, even though I’m not in great condition on my mortgage because of the decline in the market. But how much of a dumbass/bad borrower am I, I wonder?
    - I originally financed 95%, with two mortgages to skip PMI – typical 80/15/5 as I didn’t have a huge downpayment. Primary was and still is at 5.25%, fixed for a few more years but will then become adjustable, with a 1% cap per period. Credit score was damn good.
    - later, after a little appreciation, I took some equity cash out, turning the original 2nd into a HELOC of greater value than the original 2nd, for reasons I can’t even remember now. Total LTV was under 94% of the appraisal at the time, and I can technically afford the payments (higher than the optimal 28% of my income, closer to the “dumbass-level” 40%, but I can pay it.)
    - NOW, however, because of the market, I’m upside down by about 10% in toto – and of course if I wanted to sell, I’d need to ask even more in order to cover the realtor’s fee and closing.

    But hey, I would be in a position to appreciate maybe just a rate lock – primary is at 5.25, fixed for a couple more years or so, and HELOC is at just over 6% right now but rides along with prime.

    I say all that to say this: Not everybody who’s in bad shape on their mortgage was either a victim or a complete imbecile, and I think the bailout should perhaps apply differently based on why the homeowner is in whatever situation.

  94. snowburnt says:

    at least in this case your tax dollars are getting paid back, plus interest, plus half the equity

  95. mac-phisto says:

    @SkokieGuy & RagingBoehner: thanks for researching the subject & reflecting your knowledge in your comments.

    as for most of the rest of you…*shakes head*

  96. gretch9er says:

    @SkokieGuy:

    Thanks for that clarification! :) I do appreciate your explanations/adds to the board as this seems (to me at least) to be a pretty complicated mess… (you too, RagingBoehner).

  97. SkokieGuy says:

    @mac-phisto:
    @gretch9er:

    Thank you both, no real research, just click the CNN link in the post and read the details!

  98. Breach says:

    *waves goodbye to personal responsibility in the US*

  99. wickedpixel says:

    …and total debt cannot exceed 95% of the home’s appraised value at the time.

    That’s the kicker right there, since most folks in the shitter right now own more than their homes are worth.

  100. Maybe we should all start defaulting on our credit cards. Looks like Washington and responsible users are able to foot the bill.

  101. oldheathen says:

    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.

  102. JeffDrummer says:

    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?

  103. JustThatGuy3 says:

    @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.

  104. Jevia says:

    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.

  105. TPS Reporter says:

    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.

  106. timsgm1418 says:

    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

  107. SigmundTheSeaMonster says:

    Socialized housing!

    What a kick in the balls, Senator. What a kick in the honest citizen’s balls (or ovaries for the ladies…)

  108. stinerman says:

    @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.

  109. powerball says:

    The problems with housing is houses cost too much.

  110. FLConsumer says:

    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.

  111. parrotuya says:

    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?

  112. Jevia says:

    “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.

  113. MeOhMy says:

    @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.

  114. ppiddy says:

    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?

  115. nutrigm says:

    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?!

  116. dweebster says:

    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.

  117. dweebster says:

    @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!

  118. dweebster says:

    @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.

  119. mitchelwb says:

    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

  120. banmojo says:

    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.

  121. 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.

  122. CameoGalopamonster says:

    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