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)
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Comments:
Since this bill aids stupid, gullible, and/or irresponsible parties, I doubt anyone reading the consumerist will be helped by this.
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!
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.
**cough** **cough** wealth redistribution **cough** **cough**
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.
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.
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.
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.
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.
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.
@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.
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.
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.
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
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.
Did I just get pwned by the people who took out ridiculous adjustable rate mortgages?
I think I did.
I think we all did.
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!
@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.
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.
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.
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.
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.
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.)
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.
@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?
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!
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...
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.
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.
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).
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.
As a taxpayer who has been responsibly paying his own mortgage for the last four years, no, this will not help me.
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?
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.
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.
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.
Bad formatting...darn - no edit button.
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.
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?
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.
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).
God, I hope this doesn't pass. I hate to think I'll be paying for someone's else stupid mistakes yet again.
Fortunately, the bill does come with lots of long strings attached. That does make me feel better as a responsible homeowner.
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?
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.
Good times.