Today is a great day for “some” homeowners across the country. Many will have Hope Now, but only ”some”, not “all” struggling homeowners will receive mortgage relief.
Our government has spoken and it appears that they are doing what they “can” to asist borrowers in exploding adjustable rate mortgages. The plan is far from perfect, but it’s a much needed positive step forward in the right direction.
President Bush announced details of the Hope Now initiative that Secretary Treasurer Henry Paulson has been diligently working on since August. The plan was part of deal with lenders, servicers and investors to come to some sort of “happy medium” to fast track as many loan modifications as possible.
Bush said, “The holidays are fast approaching and unfortunately this will be a time of anxiety for Americans worried about their mortgages and their homes,” Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson stood diligently by his side. Calling on Congress to do its part in providing some immediate relief, Bush said the steps were needed “so we can keep the economy healthy and the American dream alive.”
The devil is in the details. So, let’s explore those devilish details
CNBC Reports;
- The plan would apply to subprime adjustable mortgages taken out between January 2005 and July 2007, with rates to rise between January of 2008 and July of 2010.
- It would apply only to borrowers who had less than 3 per cent equity in their homes and were either current on their payments or no more than 60 days behind.
- The rate freeze would not include borrowers able to handle higher payments or those unable to make payments even under their current lower rate.
- Under the plan, mortgage servicers would agree to the five-year rate freeze voluntarily.
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Mr Bush’s proposal would identify borrowers eligible for refinancing and fast-track them into new loans offered by the Federal Housing Association and private lenders.
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The principle aim of the Bush plan is to streamline the modification process, allowing them to get fast help. Lenders will examine readily available loan criteria, such as loan-to-value ratios, loan amount, credit scores and payment history, to make a quick determination of qualifications.
- But the freeze is limited. It excludes anyone more than 30 days late at the time the mortgage would be modified or anyone who has been more than 60 days late at any time within the previous 12 months.
- Borrowers who can’t afford the loan even at low introductory rates also will be ineligible, according to Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents lenders and mortgage servicers. Those borrowers will have to work with servicers on a case-by-case basis to determine if their homes can be saved.
Moe reports; (homeowner called 995-HOPE and this is what Neighborhood Works says)
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Loans cannot have already reset
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You must have *less* than 3% equity in your home
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You can not have ANY late payments 60 days or more for the past 12 months
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You have to PROVE that you will not be able to make the payments once the loan resets
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You can’t have a credit score above 650
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Must be your primary residence
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No investment properties
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No negative amortization loans
Secretary Treasurer Paulson said, “This is no silver bullet.”
President Bush commented, “The administration’s response to foreclosure fears was designed to avoid bailing out lenders, real estate speculators or those “who made a decision to buy a home they knew they could never afford.”
House Financial Services Committee Chairman Barney Frank said, ” “I welcome it.” He then later commented, “There are a couple of problems with it. It’s a “grave error”that there’s a cutoff at a 660 FICO score,” he said. That penalizes those who struggled to maintain good credit profiles, he said. Frank also faulted the plan for failing to address the penalty for prepaying many subprime mortgages.”
Rep. Maxine Waters (D-Los Angeles) had this to say, “”We may never know how many borrowers could have kept their homes if the process had started sooner rather than later.”
“I think the plan is good in theory,” said Mark Zandi, chief economist for Moody’s Economy.com, “but, in practice, it’s going to come up short. There are too many impediments to its widespread adoption by investors and servicers.”
That makes it a “start in the right direction,” said Darla Keegan, speaking for Novadebt, a national nonprofit housing and credit counseling agency, because it will move some borrowers through the system quickly. Mortgage counseling services are currently stretched.
Bruce Marks of NACA.com says, “The number of borrowers affected by the plan is very small, but it sets the precedent and standard so that more borrowers can be helped down the road.”
I concluded this post with some positive comments from Bruce Marks because I also believe that this is a great step forward and that some much needed progress has been accomplished by Paulson and Hope Now.
However, there is much more that needs to be done and I think that we will see some more moves after the holidays.
But for now, many homeowners will have to fight the battle with their lenders or servicers one call, one fax, one headache at a time and many, will succumb to the pressure and just give up out of frustration or run out of time and face the inevitable, foreclosure.
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“But for now, many homeowners will have to fight the battle with their lenders or servicers one call, one fax, one headache at a time and many, will succumb to the pressure and just give up out of frustration or run out of time and face the inevitable, foreclosure.”
MOE, I think this is true. I think there are two many requirements, less than 3% equity is a joke and no neg. amor. loans is a horrible decision. I don’t like the less than 660 FICO score, and the requirement that the loan be current or less than 30 days. All of this says to me they’ve boxed out many people who NEED the help but will, under this criteria NOT receive it.
How about the many homeowners, like myself, who were defrauded?
I’m “trying” to be positive about what has been accomplished but yes JacMac, there were thousands of borrowers that were defrauded. There will be hundreds of thosuands that will have to do what you are doing and fighting with their lender one day, call, fax, headache etc at a time.
You know how difficult it is to get anywhere and you are a strong woman. You fight daily for what’s right. You are the minority. Imagine the people that are not as strong as you, they are just throwing in the towel by the 3rd or 4th call. Their Done, another foreclosure statistic.
There needs to be infrastructure to handle the case by case loan modifications that need to be done. For the people that do not “fall” into this Hope Now plan.
You know I will keep reporting on what lenders and servicers are really doing and I hope soon, it will be better news than this for borrowers such as yourself. But for now, this is it.
I am doing my best to help homeowners by giving them tools and also a website that gets a lot of traffic to have their voices heard. Hopefully more like you, will do just that.
Hmm… ok so what you are telling me is that I should default on my current mortgage then so i can qualify??? Sounds good to me…
Gosh, how horrible is it that this has come down to me and my huasband taking every dime we make to try to keep paying on our mortgage that we adjusted a fwe months ago and we have done it. And just because our credit score is too high we can’t qualify. FRUSTRATING!!! Also, we are the ones who actually want to make our payment just not like 4200 a month like we’ve been….. really really sucky.. thanks Georgie.
Yes Amanda, not much help for a lot of borrowers. But hang in there, you may get relief. If you can afford the reset, then it will be very hard/ If you can prove that you can’t then you may have a shot. Depending on your lender or servicer of course.
It is very fustrating. My husband and I re-financed our home 3 yrs ago with Wells Fargo, (before 2005), we have been in our home for 10 years. We had hoped we could re-finance our home before our loan adjusted which it did adjust on 11-3-2007. We could never re-finance because somehow our home would not appraise for what we owed. Go figure, how Wells got it to appraise for so much I will never know. We have been in Loss mitigation for 5 months now with no results. Our payment now is more than we can pay and still have living expenses (and I am talking about things like utilities and groceries). The only thing that qualifies us for this plan set forth is our credit score which has been trashed by all this. All we asked Wells to do was give us a fixed rate and add some years to mortgage which they refused to do. We could have kept house and they would still get their money. Mind you we are not stupid people who bit off more than we could chew. We really thought we could re-finance before the adjustment. We had almost perfect credit before all this drama. Maybe we should have just filed bancruptcy 3 years ago instead of re-fincing house to consolidate bills. I think we would be better off today, and that is a shame. Oh yea , our loan also re-sets every six months now. I am about to hand over the keys. I am sick of it.
Why does the government, lender, or servicer have to help all theses people? Sorry folks but if you can not afford a mortgage, sell your home or are foreclosed. I’m tired of hearing about people who can not take responsibility for their own actions. Unaffordable loans don’t cause foreclosures directly. Even as subprime lending became more common, even when people fell behind on mortgage payments – during the economic downturn in 2001, for example – foreclosures were rare because house prices continued to rise. In part, people were able to escape trouble by selling their homes at prices high enough to cover their debts. But the research also suggests that troubled borrowers tried harder to make the necessary payments, in the expectation they would profit eventually. Conversely, when prices started falling, people struggling to make payments had less incentive to find the money. And the value of the home could drop below the outstanding debt, making it impossible to sell. Over the last two years, the number of foreclosures exploded
I couldn’t understand some parts of this article oan Workout News, but I guess I just need to check some more resources regarding this, because it sounds interesting.
JacMac: have you ever been to Soviet Union or for that matter Cuba ? While I realize that type of existence (like a vegetation tended and cared for by a gardener) has certain appeals to some of the people I DO NOT WANT to live like that. If all people were nice, honest, hardworking and selfless that sort of socialist nirvana will work. However market based economy with that type of people will work even BETTER. Unfortunately not ALL people like I described and it turns out market based economy advantages increase EVEN MORE when people are selfish.
Alan, I hear you, loud and clear, but the solution is in the middle. I don’t think any of us should settle because we’re afraid of the worst case scenario. It doesn’t have to be like it was in the Soviet Union or it is in Cuba, but it certainly doesn’t have to be like it is in America.
Utopia in societies NEVER work — there’s millions of stories about that, because of what you mentioned, the human purpensity for greed.
That is why there HAS to be governing authorities to which people in the business of selling products and offering products to the masses have to be accountable.
But when greed and lack of integrity permeates our governing authorities, we are in big trouble.
We don’t have to live with greed and deceit just to have a little freedom.
I believe we CAN have freedom and integrity, don’t you?
I believe the key to this is accountability on all sides. Not just for the buyer, but for the lenders and the brokers, after all they have a responsibility for the product that they are offering to those who are not experts in the real estate field.
I love Moe’s example of a recall of a defective product. A majority of the loans which have contributed to this melt down were defective and all of the players, from the top to the bottom, EXCEPT for the buyer knew this all along.
Well there is actually a way to return a loan among with the asset against which it was lent back to the lender. It’s called jingle mail. The processes of getting out of bad debts/loans are called bankruptcy or foreclosure.
I’m just curious how loan recall would work for refinance with cash out/debt consolidation ? Those people have spent the money already what do they want now ? Have the cake and eat it too ? If they really want to unroll the transaction I guess they will have to come with amount that was cashed out/rolled in at refinance.
“I\’e2\’80\’99m just curious how loan recall would work for refinance with cash out/debt consolidation ? Those people have spent the money already what do they want now ? Have the cake and eat it too ? If they really want to unroll the transaction I guess they will have to come with amount that was cashed out/rolled in at refinance.”
Alan, it sounds like you’re jaded. You have a very polarized view of the financial reasons why those who refinanced or bought homes did, which makes it difficult not to have a biased conversation with you.
How about opening up your mind to the possibility that not every homeowner bought a new Lexus with their refi money?
I mean: Which makes it very difficult to have an UNBIASED conversation with you.
Oh, I see, my arguments are biased. I have yet to read a story where refi was done for something that can be considered prudent. I’m aware of a family who lost their home due to medical problems but they are actually happy, for them it’s pretty good deal: just another house for life saving medical treatment. You don’t see family like that complain, contrary they think they hit the jackpot.
Instead we see people complaining who refinanced car loans, credit cards, who took cash outs for “business ventures” like that old lady and so on and now wanting recall. Well if you want to return the product don’t forget about cash you pulled and put i back.
“Oh, I see, my arguments are biased. I have yet to read a story where refi was done for something that can be considered prudent. I\’e2\’80\’99m aware of a family who lost their home due to medical problems but they are actually happy, for them it\’e2\’80\’99s pretty good deal: just another house for life saving medical treatment. You don\’e2\’80\’99t see family like that complain, contrary they think they hit the jackpot.
Instead we see people complaining who refinanced car loans, credit cards, who took cash outs for \’e2\’80\’9cbusiness ventures\’e2\’80\’9d like that old lady and so on and now wanting recall. Well if you want to return the product don\’e2\’80\’99t forget about cash you pulled and put i back.”
Like I said, Alan — jaded. What did you have, an ex-wife who liked to spend money a bit too much: an over-indulgent teenager?
Open your mind. We all can’t fit into your little box. Get off of your high horse and have a little compassion — it won’t kill you and it just might make you into a better person.
Life has taught me one thing, judgmental people either do this willingly or the good Lord (karma, life — whatever you want to call it) kicks their butt to the ground and teaches them the hard way.
I have never divorced, why are you so interested in playing shrink when issue is that people feel entitled to spend as they wish and NOT PAY for consequences ? Very fine example of demagoguery on your part: when you can’t have rational argument you start attacking messenger. Grow up. There is no free money. As for life lessons, it looks like one very important one has been missed: DO NOT BUY STUFF YOU CAN NOT AFFORD. Is it really difficult to comprehend ? Or does sense of entitlement makes that simple argument as coming from “jaded person” ? I can not have compassion for people that spend on discretionary crap (business ventures, cars, kitchen remodels and what have you) and do not want to pay up. Again, if you can’t afford don’t buy it and if you do then don’t whine afterwards and suck it up. That’s all it is.
Since you’ve accused me of playing shrink, may I?
“why are you so interested in playing shrink when issue is that people feel entitled to spend as they wish and NOT PAY for consequences ? Very fine example of demagoguery on your part:When you can\’e2\’80\’99t have rational argument you start attacking messenger. Grow up.”
Psychologically, we call that projection. You are the only one attacking here.
“I can not have compassion . . .”
Psychologically, if you give a person enough “room” they will always eventually tell you some undeniable truths about the way they think and view the world.
I have zero interest in conversing with closed minded people — if I wanted to do that, all I’[d have to do is go over and see my mother.
You’re describing the world you live in, through your tainted, jaded eyes.
I live in the REAL world. In my world people vary in intentions, thoughts, desire, behaviors, and I don’t ascribe the fallibilities of one group to all.
“Why are you so interested in playing shrink when issue is that people feel entitled to spend as they wish and NOT PAY for consequences ?”
Alan, that is not the issue at all, not the entire issue, and at most only a small part of the very big issue — but I’ll let Moe explain it to you. Although, I’m sure he might be tired of repeating himself.
Oh, I see your view is untainted and your world is real because you say it is ? Waving your hand and appealing to authority, looks like next trick of demagogue. Please elaborate on undeniable truths, go on, I’m all eyes and ears. And I assume you were not jaded with the post that started this “The Wall Street high rollers have raked in a fortune at the expense of the every day American” ? You see, dear shrink, before pointing out deficiencies in others it does make sense to look in the mirror first so it wouldn’t sound ridiculous later.
When you get free time you should watch SNL clip on youtube where they present the concept that you have so hard time understanding “Do not buy stuff you can not afford”.
The simple fact is that you have to pay for what you buy. Looks like you are trying to wiggle out of the payment part and keep the stuff giving all kind of rationalizations why you deserve it. Go on, but no sane person will buy that.
To realize that you do not understand is a virtue; Not to realize that you do not understand is a defect.
Lao Tzu
Alan, you can go on all day long about homeowners that can’t afford their homes. This mortgage and real estate crisis is not about that.
It’s about a system that failed and lenders that took advantage of a failed syetem by creating defective credit instruments ie: subprime loans.
It does not matter what the end consumer did. They did not cross the line of “predatory lending”, “steering” and massive fraud. Yes, alan, some did. But in no way shape or form in the way that the dealers did.
Yes, alan, the lenders and Wall Street were the dealers of this mess that we now sit in.
NOT HOMEOWNERS.
Regardless of how and where homeowners are, it was at the finger tips of a serioulsy flawed system that was meant to fail for the have nots and make the have’s sickly rich.
You do not blame a person for eating tainted beef, because he bought it form the store. You don’t blame a person for dying, because he took a drug that he did not know that was dangerous.
Yes, some people bought homes they could not afford but it was based on lenders selling funny money.
I’ll be damned if I am going to see 2 million foreclosures because of what lenders and wall street created and just watch Alan, there will be a massive bail out of homeowners and these scams will be front page fro years to come and many CEO’s and CFO’s will perish in Federal Prisons.
Guaranfrickenteed!
Moe, lenders may very well were hustlers and pimps but stories profiled so far on your web site are about cash out refinances for various stupid reasons and they show that plenty of borrowers were addicts. They surely weren’t going after life necessities like food and medicine instead it was for more apt analogy would be booze (business ventures, WTF is that ?). Just because Stoli is sold in grocery store next to beef doesn’t mean you need to get wasted. May drug lords rot in federal prison but again I’m not going to feel sorry for addicts who were buying crap instead of life necessities.
Moe, lenders may very well were hustlers and pimps but . . .
Moe, in this sentence, “but” means, forget everything that I just said.
It doesn’t matter how many times it’s pointed out that not all homeowners were looking to strike it rich, Alan seems to be hell bent on bashing the homeowners who made bad choices. He is the supreme authority on what “life’s necessities” are and the moral police on lending practices — oops, I’m sorry, I mean borrowing practices.
Lending practices, corrupt and fraudulant though they may be, does not seem to make it onto his radar screen. In fact, the fraudulant schemes of the banks, Loan Officers and brokers to entrap borrowers into defective loan products that the professionals in the industry knew would blow up in the borrower’s face does not seem to matter in the grand scheme of things when Alan is chastising the borrowers who HE has had declared spent too much on “crap” and bought too much house.
We should all listen closely and carfully to Alan, because he has determined that MOST (?????) of the stories here are mostly about cash out refinances for “various stupid reasons” — Alan has declared it, so it must be so. He is not going to feel sorry. Well, he has spoken!
I don’t consider a homeowner who consolidates debt via a loan that they qualify for via underwriting guidelines to be an addict. Some, yes, but you can’t classify ALL in this category. This is like any type of discrimination.
The facts are that there these loans were not designed for the long term. Now, borrowers are “stuck” in them. Like a communist loan of sorts and the lenders and servicers are the dictators.
People can’t get out of them, EVER!
It’s worse then a pay day loan on steroids.
For that fact, they should be recalled immediately do to their predatory nature. Regardless of who the victims are.
I think you will agree JacMac, even if you weren’t in this situation, I feel ou would have the same view.
This will conclude the Moe Report.
Yes, I do agree Moe and you’re right, I would even if I wasn’t in the same situation because I understand what it means to be VICTIMIZED and PREYED UPON. It IS discrimination to lump all homeowners into the same group, and it’s the type of thinking that absolves lenders and industry leaders from the responsibility that they have for peddling this toxic stuff to the public in the first place. Over and Out!
I bought my house Oct. 2002, for $118,000 first with Republic and they sold to Countrywide, the 1st year was about $680 a month, 2nd year went up to $745 and 3rd year up to $959.00 . April 2005, I refinanced to a rate of 5.3% locked for 2 yrs and then told after 2 yrs the adj rate would kick in and just found it goes up every 6 mo. now I’m at 8.3 and my house payment went up $100 in Dec. to go up again in 6 mo. I was told by New Century who is no longer in busines they would flag my account and in 2 years as long as my credit stayed the same I would change to a fixed rate. They are no longer around. I’m being priced right out of my house. I bought the house on my own as a first time home buyer with Countrywide under the Nehimah program as I had no down. As my loan was creeping up to almost $1,000 I thought I was being smart to refinance with New Century. By the way they appraised my house for $125,000. I bought it for $118,000. Now I have a 2nd mortg. that never goes down $24,000 and owe about $96,000 on the 1st Mortage. I’ve never been late but am barely getting by now, only with my sons help. One Finance company told me my house was only worth $115,000, what a mess when it should be worth $135-140.