A ray of hope for homeowners? (The Week Daily/Jonathan Scheff)
The new new mortgage rescue plan
A new federal mortgage plan "won’t solve the housing bust,” said Rick Newman in Seeking Alpha, but “some beleaguered homeowners will finally be eligible for a tiny slice of the government’s huge bailout fund.” Starting Dec. 15, certain qualified non-bankrupt homeowners at least 90 days behind in their mortgage for a home they occupy will be eligible to renegotiate their payments to no more than 38 percent of household income.
The plan covers mortgages held by Fannie Mae and Freddie Mac, said Liz Moyer in Forbes online, but large banks have joined in the effort—out of “self-preservation.” For the government, as well as lenders, stopping the rash of foreclosures and steady slide in housing prices is “the holy grail of all of its big plans to prop up the ailing banking system.”
Modifying mortgages will help, but it’s “just a band-aid,” said Dean Foust in BusinessWeek online. Average housing prices, by some measures, “still need to drop another 15 to 20 percent” nationwide. The government can’t stop the “free-fall in housing,” but maybe the “secret goal” of its plan is just to cushion the fall so it doesn’t “take the broader economy down in the process.”
Another problem with the federal plan is that it only covers delinquent homeowners, said Ron Lieber in The New York Times. In that sense, the private banks are more forward-looking. Citigroup is actively looking to keep the 90 percent of homeowners current on their payments in the game, and other banks are less-publicly willing to play ball, too. Don’t be afraid to ask.
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Recent comments | 2 total
It doesn't make sense to bailout someone who got a loan that had a mortgage payment they couldn't afford. Will someone bail me out when I buy a new Lexus I can't afford so I can keep it?
After harassing citizens (I know I was one) to accept a sub-prime loan for a home purchase based upon low income and other income such as student financial aid, the lenders have earned their failure. I did not succumb to the constant phone calls and even insults that if I didn't accept their generous offers, then I didn't deserve to ever have a house. I have no sympathy for the deadbeats who accepted loans they could not repay, and now want the taxpayer and renters to bail them out. If these buyers are proven to be mentally ill, then I say help them, but if the buyer is of normal intelligence then put them on the street as they deserve. I don't go into a store where I can't afford anything, pick out a 5,000 dollar outfit, leave one dollar on the counter and expect to walk out the store with the outfit while the taxpayer picks up the balance...................."Another problem with the federal plan is that it only covers delinquent homeowners." Now there's an incentive to pay on time...get a bailout only if you're delinquent. Why shouldn't any home buyer just keep 2-4 months of payments then their loan could be renegotiated at a lower rate and a lower value? The taxpayer will pick up the tab.
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