Feds Attempt 'Balancing Act' in New Housing Bill
The seven million households that are behind on their mortgage payments aren’t the only ones who will be thrown a life vest under a new federal program announced Friday. The $50 billion program would also attempt to stabilize the housing market by creating incentives for lenders to reduce the principal on mortgages that are now…
The seven million households that are behind on their mortgage payments aren’t the only ones who will be thrown a life vest under a new federal program announced Friday. The $50 billion program would also attempt to stabilize the housing market by creating incentives for lenders to reduce the principal on mortgages that are now worth less than the homes they are secured by. The number of homeowners now estimate to be “underwater” is 11 million, though not everyone would be eligible for the principal reduction: To qualify, you must owe more than 115 percent of the value of your home and be spending more than 31 percent of your monthly income on your mortgage. The feds also plan to offer $1,500 in relocation assistance to homeowners who sell their homes rather than letting them go into foreclosure.
A Bold U.S. Plan to Help Struggling Homeowners [NY Times]
Photo by hoff_john
Breakfast meds, DIBS. Meds with lunch are for wimps.
***Bid half off peak comps***
I was wondering where all the nutjobs were today.
“NOT brownstone Brooklyn” – Grand Pa @ 10:31
YES, Brownstone Brooklyn TM too. It’s all one market. It’s all part of the same inventory. Lis pendens are up 180% between the fourth quarters of ’08 and ’09 (see propertyshark). A good chunk of those are brownstones and not limited to just Bed Stuy.
***Bid half off peak comps***
“lenders to reduce the principal on mortgages that are now worth less than the homes they are secured by”
Retroactive price drops? Awesome!
“To qualify, you must owe more than 115 percent of the value of your home and be spending more than 31 percent of your monthly income on your mortgage.”
Easy to become qualified if you aren’t already. The water level rises with unemployment. This bill will backfire.
“$1,500 in relocation assistance to homeowners who sell their homes rather than letting them go into foreclosure”
Scam to keep them in debt shackles as it will be impossible for them to sell for a gain and they will not be much more creditworthy than if they just swim away. The next leg down in prices is going to be massive.
***Bid half off peak comps***
I know life isn’t fair, but taking from the “savers” to give to the “wasters” is a cruel joke that is becoming more and more the theme of Obama’s presidency.
Posted by: IronBalls at March 29, 2010 12:27 PM
Get used to it. I fully expect that, in 20 or 30 years time, if not sooner, the government will confiscate my 401k plan for redistribution to my contemporaries who were too busy living the good life to save for their retirement.
Not to mention, when the market eventually does recover, which even I admit will happen one day, these government lottery winning fu@kers will have an extra 30% FREE GIFT PROFIT while everyone who didn’t over-extend is still renting subpar housing.
I couldn’t agree more with Grand Pa, except to add that the new government give-away makes me sick.
Plenty of folks have been saving for years, living in less desirable housing, waiting for the inevitable bubble to pop.
That morons without sufficient income agreed to mortgages far beyond their capacity to pay are now about to get up to 30% principal reductions and months of reduced payments is totally unfair to everybody who has acted prudently.
I know life isn’t fair, but taking from the “savers” to give to the “wasters” is a cruel joke that is becoming more and more the theme of Obama’s presidency.
You are a wiseman Grand Pa but don’t bother talking to DIBS he is a lost cause. He lives in his own little bubble. Housing bubble that is! He figures the idiots that bought at bubbled prices will eventually outdo the smart non-buyers.
DIBS-
Goldman is predicting a big write down of the 4Q GDP number so I would not be trumpeting it just yet. The ramp up in the stock market with little connection to the actual economy has been great for the NYC high end real estate market, I don’t deny that, but I don’t think this wealth effect will do much to address the general crisis in the broader US real estate market.
As for Citibank, it has benefited from the inane stock market ramp up, but if you included all the garbage securities that the GSE’s and the FED have purchased from Citi and other banks, then its hard to say that the taxpayer is making any money from TARP and the respective bailouts. Of course Citi’s balance sheet is looking good so long as the FASB rules have been suspended and “mark to market” has been replaced with “mark to fantasy” in order to justify record bonuses.
As for this program to “help underwater homeowners” like all policies of the FED, it is really about helping “underwater balance sheets of banks”. The FED steps in and takes on the garbage mortgage and high default risk so long as banks waive their collateral rights.
This policy encourage moral hazard both from deadbeat homeowners and deadbeat lenders. As always is the case with these bailouts, the bankrupt US government will be left holding the bag. Is it the best policy to keep unemployed homeowners in homes that they still can’t afford after write down?
There is still a second shoe to drop in the distressed real estate market (NOT brownstone Brooklyn) and I believe the best approach is to rip the band-aid off quickly instead of the perpetual denial policy.
Instead the FED should create a process encouraging expedited bankruptcy with some sort of government facilitated rental program for foreclosed homes.