Tweet
It doesn't make home owners better off than if they were to lose their homes. Should it be any suprise with this doesn't do ****?
Only corporations will get bailed out ($3tn and counting) when the real problem is the consumer. Unless they do something about the consumer this bailout isn't going to work.
U.S. unwraps latest plan to stem foreclosures
Only corporations will get bailed out ($3tn and counting) when the real problem is the consumer. Unless they do something about the consumer this bailout isn't going to work.
U.S. unwraps latest plan to stem foreclosures
U.S. unwraps latest plan to stem foreclosures
Terms on past-due loans will be rewritten to make them affordable
By Rex Nutting & Greg Robb, MarketWatch
Last update: 3:30 p.m. EST Nov. 11, 2008Comments: 209WASHINGTON (MarketWatch) - In their most aggressive move yet to stem a tide of home foreclosures, the government and the mortgage industry said Tuesday they'll try to modify hundreds of thousands of mortgages to make them affordable.
Under the plan announced Tuesday, Fannie Mae (FNM:Fannie Mae
News, chart, profile, more
Last: 0.66-0.02-2.96%
FRE 0.80, -0.02, -2.4%) and other mortgage firms will rewrite the terms on some overdue mortgages so the homeowners won't pay more than 38% of their monthly income.
Modifications could include deferring some of the principal owed, lowering interest rates or extending maturities to as much as 40 years. The process will be streamlined and uniform.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, director of the Federal Housing Finance Agency. "We need to stop this downward spiral."
Details
Under the new program, mortgages on owner-occupied homes that are at least 90-days past due with a loan-to-value of 90% or more will be eligible for the streamlined modification. Homeowners who owe more on their home than it is worth will be eligible.
Borrowers should contact their servicer - the company they pay each month - to see if they are eligible.
The borrower will ultimately be responsible for paying the full amount of the principal borrowed, but payment on part of the principal can be deferred to make the monthly payment affordable.
Homeowners who purposefully default on their mortgage to get a modification will not be eligible. Borrowers will have to submit a statement showing financial hardship or a change in financial circumstances, along with proof of their income.
The modification will become final once a borrower has made three payments under the modified terms.
Mortgage-servicers will be paid a fee of $800 to modify loans to encourage them to participate.
The program will apply to loans guaranteed by Fannie or Freddie, including prime, Alt-A and subprime mortgages. Other kinds of loans may also be covered. Lockhart urged the private-label mortgage industry to adopt the modification plan as well.
The program will start by Dec. 15.
Flawed plan, critics say
Critics said the plan had flaws.
The modification could leave some borrowers worse off than if they lost their homes now. Because the lender won't write down any of the principal and because home prices in some areas could keep falling for years, borrowers who accept a modification now could end up owing lots of money when the house is finally sold, said Dean Baker, co-director of the Center for Economic and Policy Research. "Unless you have serious writedowns you are probably aren't doing those people any favors," he said.
Sen. Charles Schumer, D-N.Y., said the plan ignores the elephant in the room: Most of the troublesome mortgages are owned by large pools of investors, or have been securitized in a way that makes a modification impossible. "The only viable solution, and it is one we will take up under President-elect Obama, is to modify the bankruptcy code" he said.
The move on Tuesday by Fannie, Freddie, the FHFA, the Treasury Department, the Federal Housing Administration and an alliance of mortgage-servicing companies follows announcements by Citibank (C:Citigroup, Inc
News, chart, profile, more
Last: 10.72-0.08-0.74%
BAC 18.50, -0.19, -1.0%) to expand their mortgage-modification programs.
Fannie Mae and Freddie Mac, which own or guarantee about 58% of mortgages in the United States, have been under government receivership since September. About 20% of seriously delinquent loans were guaranteed by the two government-sponsored entities, according to FHFA.
On Monday, Fannie reported a quarterly loss of $29 billion, largely due to a $21.4 billion allowance for income taxes deferred and $9.2 billion in current losses due to credit-related expenses. See full story.
The new plan is designed to complement existing modification programs, not replace them, Lockhart said. The government and industry have been trying for more than a year to modify loans to prevent foreclosures, with limited success.
According to the Federal Reserve, the delinquency rate on residential mortgages at commercial banks rose to 4.3% in the second quarter from 1.6% two years earlier.
Through the third-quarter, foreclosure filings had risen 71% compared with a year earlier, according to RealtyTrac, an Irvine, Calif., company that provides real estate data.
A record 1.6 million homes will be lost to foreclosure this year and 1.9 million more next year, according to Celia Chen, an economist for Moody's Economy.com.
With home values plunging as much as 20% from their peaks, more than 12 million homeowners now owe more on their home than it is worth, according to estimates by Moody's Economy.com. Although history suggests that the vast majority of those homeowners will continue to make their payments, they are at increased risk of losing their home through foreclosure.
Rex Nutting is Washington bureau chief of MarketWatch.
Greg Robb is a senior reporter for MarketWatch in Washington.
Terms on past-due loans will be rewritten to make them affordable
By Rex Nutting & Greg Robb, MarketWatch
Last update: 3:30 p.m. EST Nov. 11, 2008Comments: 209WASHINGTON (MarketWatch) - In their most aggressive move yet to stem a tide of home foreclosures, the government and the mortgage industry said Tuesday they'll try to modify hundreds of thousands of mortgages to make them affordable.
Under the plan announced Tuesday, Fannie Mae (FNM:Fannie Mae
News, chart, profile, more
Last: 0.66-0.02-2.96%
FRE 0.80, -0.02, -2.4%) and other mortgage firms will rewrite the terms on some overdue mortgages so the homeowners won't pay more than 38% of their monthly income.
Modifications could include deferring some of the principal owed, lowering interest rates or extending maturities to as much as 40 years. The process will be streamlined and uniform.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, director of the Federal Housing Finance Agency. "We need to stop this downward spiral."
Details
Under the new program, mortgages on owner-occupied homes that are at least 90-days past due with a loan-to-value of 90% or more will be eligible for the streamlined modification. Homeowners who owe more on their home than it is worth will be eligible.
Borrowers should contact their servicer - the company they pay each month - to see if they are eligible.
The borrower will ultimately be responsible for paying the full amount of the principal borrowed, but payment on part of the principal can be deferred to make the monthly payment affordable.
Homeowners who purposefully default on their mortgage to get a modification will not be eligible. Borrowers will have to submit a statement showing financial hardship or a change in financial circumstances, along with proof of their income.
The modification will become final once a borrower has made three payments under the modified terms.
Mortgage-servicers will be paid a fee of $800 to modify loans to encourage them to participate.
The program will apply to loans guaranteed by Fannie or Freddie, including prime, Alt-A and subprime mortgages. Other kinds of loans may also be covered. Lockhart urged the private-label mortgage industry to adopt the modification plan as well.
The program will start by Dec. 15.
Flawed plan, critics say
Critics said the plan had flaws.
The modification could leave some borrowers worse off than if they lost their homes now. Because the lender won't write down any of the principal and because home prices in some areas could keep falling for years, borrowers who accept a modification now could end up owing lots of money when the house is finally sold, said Dean Baker, co-director of the Center for Economic and Policy Research. "Unless you have serious writedowns you are probably aren't doing those people any favors," he said.
Sen. Charles Schumer, D-N.Y., said the plan ignores the elephant in the room: Most of the troublesome mortgages are owned by large pools of investors, or have been securitized in a way that makes a modification impossible. "The only viable solution, and it is one we will take up under President-elect Obama, is to modify the bankruptcy code" he said.
The move on Tuesday by Fannie, Freddie, the FHFA, the Treasury Department, the Federal Housing Administration and an alliance of mortgage-servicing companies follows announcements by Citibank (C:Citigroup, Inc
News, chart, profile, more
Last: 10.72-0.08-0.74%
BAC 18.50, -0.19, -1.0%) to expand their mortgage-modification programs.
Fannie Mae and Freddie Mac, which own or guarantee about 58% of mortgages in the United States, have been under government receivership since September. About 20% of seriously delinquent loans were guaranteed by the two government-sponsored entities, according to FHFA.
On Monday, Fannie reported a quarterly loss of $29 billion, largely due to a $21.4 billion allowance for income taxes deferred and $9.2 billion in current losses due to credit-related expenses. See full story.
The new plan is designed to complement existing modification programs, not replace them, Lockhart said. The government and industry have been trying for more than a year to modify loans to prevent foreclosures, with limited success.
According to the Federal Reserve, the delinquency rate on residential mortgages at commercial banks rose to 4.3% in the second quarter from 1.6% two years earlier.
Through the third-quarter, foreclosure filings had risen 71% compared with a year earlier, according to RealtyTrac, an Irvine, Calif., company that provides real estate data.
A record 1.6 million homes will be lost to foreclosure this year and 1.9 million more next year, according to Celia Chen, an economist for Moody's Economy.com.
With home values plunging as much as 20% from their peaks, more than 12 million homeowners now owe more on their home than it is worth, according to estimates by Moody's Economy.com. Although history suggests that the vast majority of those homeowners will continue to make their payments, they are at increased risk of losing their home through foreclosure.
Rex Nutting is Washington bureau chief of MarketWatch.
Greg Robb is a senior reporter for MarketWatch in Washington.