New housing rescue bill - anyone figured it out?

[GLM]

I have also seen talk of a $7500 "credit" to stimulate new home purchases.. but it turns out that's actually a loan also. I'm not sure if that's part of this bill; just saw reference to it in passing.

Yes there is this provision in the bill. It is, as I understand it, essentially an interest free loan paid back over several years (10 I think ) . There is an income limit , and you must not have owned a home for at least the last 2 years. You deduct the $7500 max from your income taxes , and pay it back slowly - or when you sell the home.

Our son has been saving up a down payment for a couple of years and is getting ready to buy his first home . While an interest free loan is nice for him, It seems like a shortsighted idea to try and jump start getting new blood into the housing market. Anyone who buys a home because they can get a tax break in one year - and then have to pay it back slowly - probably does not plan too well. Then in a few years we will find they too can't afford all those nasty tax repayments....

 

[CitricAcid]

Yes there is this provision in the bill. It is, as I understand it, essentially an interest free loan paid back over several years (10 I think ) . There is an income limit , and you must not have owned a home for at least the last 2 years. You deduct the $7500 max from your income taxes , and pay it back slowly - or when you sell the home.

Our son has been saving up a down payment for a couple of years and is getting ready to buy his first home . While an interest free loan is nice for him, It seems like a shortsighted idea to try and jump start getting new blood into the housing market. Anyone who buys a home because they can get a tax break in one year - and then have to pay it back slowly - probably does not plan too well. Then in a few years we will find they too can't afford all those nasty tax repayments....

Money today is more valuable than money tomorrow both because of inflation and the return of the time value of money. In other words, maybe it is irresponsible for many, but if you can afford it... you should ABSOLUTELY take advantage of this. $7,500 0% 10 year loan should not be passed up for those who can take it. I think it is a very short-sighted and irresponsible provision in the bill, however.

 

[ladelfina]

Here is a partial analysis (with an interesting example applying the bill to a 'typical' CA home):

Crony Capitalism for Dummies: Housing and Economic Recovery Act of 2008. How the Bailout will not Help you and Cost you Money. A Deep Look at the 694 Pages of the Bill. » Dr. Housing Bubble Blog

 

[missionfinder]

Strange how the 800 lb gorilla about who the bad borrowers are and who is being bailed is rarely mentioned, especially by the Dems who love handouts. As is usually the case very little consideration is given to those of us who'll pay for this directly or indirectly. USA Today did some stories about it but it appears that overall the press is very quiet about the part race has played. Why are people so afraid of truth?

Close to half the housing market run-up in the past 10 years was due to new minority buyers and their default rate is several times higher, as well has nearly 4x more likely to take out a risky loan. This is all about buying votes....

 

[Htown Harry]

Strange how the 800 lb gorilla about who the bad borrowers are and who is being bailed is rarely mentioned, especially by the Dems who love handouts. As is usually the case very little consideration is given to those of us who'll pay for this directly or indirectly. USA Today did some stories about it but it appears that overall the press is very quiet about the part race has played. Why are people so afraid of truth?

Close to half the housing market run-up in the past 10 years was due to new minority buyers and their default rate is several times higher, as well has nearly 4x more likely to take out a risky loan. This is all about buying votes....

OK, I'm now an expert after 30 minutes of reading and I'll bite...

http://www.nytimes.com/2007/11/04/weekinreview/04bajaj.html

Race and the Housing Crisis - The Washington Independent - U.S. news and politics - washingtonindependent.com

A 'smoking gun' on race, subprime loans - The Boston Globe

Is Race a Factor in Atlanta Foreclosure Mess? - Black Voices Blogs

http://www.dallasfed.org/news/ca/2007/07home_yu.pdf


Yes, there is a numerical correlation between foreclosures and minority homeowners. So?

My take: Race per se isn't a root cause of any aspect of the foreclosure issue. There's a much stronger correlation between independent mortgage brokers (and complicit homebuilders) selling sub-prime products to less educated, less credit-worthy buyers.

I'm imagining a mortgage salesman at Mortgages-R-Us, sitting in a 2006 sales meeting...

[Sales Manager speaking] "OK, guys, I have great news. Wall Street just called the CFO to say they'll take any old note with a valid SSN and a signature. Marketing has created a new ARM product with a teaser rate that's just too good to be true. It squeezes the down payments to almost zip and the starting monthly payments down to just about 3/4 of prevailing rents here in Boomtown. And the new refi deals? Don't worry, those are just as sweet. Best of all, management has OK'd a bigger commission, up front and hidden in the fine print, for those of you who can get out there and sell, sell, sell. Now, I know closing the sale can be tough if they bring up that pesky "reset" issue. If the [-]fish[/-] customer does, just tell them that incomes always go up and interest rates always go down."

Mr. Salesman's reaction: "I'm looking for prospects who are _______".

"Financially ignorant" is a much more likely as a primary answer than "minority", IMHO.

Following the same line of reasoning, I conclude that Washington politicians are buying the votes of the ignorant. So what's new about that "880-pound gorilla"?:

 

[CitricAcid]

Without delving into the SoapBox too much, reading those article posted by HTown Harry, I did not see any that separated minorities from class distinctions. They only claimed that minorities on average had a higher percentage who had subprime mortgages than whites on average. Does not control for class (for example, on average, many minorities make less than a typical whites) meaning it could be a factor of income or lack of assets, which leads to 100% financing, et cetera. So, I would agree with HTown Harry, I don't think it is a matter of race, it is more a matter of financials, which gets tied back to race.

 

[cute fuzzy bunny]

Its a matter of people who took out a loan and couldnt make the payments.

Once again we're taught the lesson regarding the difference between correlation and causation.

 

[Zoocat]

Here is a partial analysis (with an interesting example applying the bill to a 'typical' CA home):

Crony Capitalism for Dummies: Housing and Economic Recovery Act of 2008. How the Bailout will not Help you and Cost you Money. A Deep Look at the 694 Pages of the Bill. » Dr. Housing Bubble Blog

ladelfina, I'm glad you posted this. I think it's an intelligent analysis, albeit from a conservative point of view.

 

[ladelfina]

Oldbabe, get with the program.. I NEVER post "conservative" things according to this crowd.
I just got waled on for posting a link to the Great Orange Satan (Daily Kos).

 

[Texarkandy]

Without delving into the SoapBox too much, reading those article posted by HTown Harry, I did not see any that separated minorities from class distinctions. They only claimed that minorities on average had a higher percentage who had subprime mortgages than whites on average. Does not control for class (for example, on average, many minorities make less than a typical whites) meaning it could be a factor of income or lack of assets, which leads to 100% financing, et cetera. So, I would agree with HTown Harry, I don't think it is a matter of race, it is more a matter of financials, which gets tied back to race.

And it could also be partially that a not small percentage of them are, dare I say it?, .... Illegal Aliens (who really don't give a rats *** about their credit ratings or defaulting on their loans)

 

[stephenandrew]

Possible to Keep 100% of Profits

From the 7/28 WSJ On-Line, by Brett Arends:

"The way the bill was written, Congress sought to make sure that the homeowners who benefited from this relief would not profit from it in due course. To that end, it stipulated that the FHA would claw back at least 50% of any profits that the homeowners made when they sold the home.
But in the fine print, there's a get-out clause. Homeowners should be able to escape most of this claw-back provision so long as they first refinance their FHA loan with a new private sector mortgage before they sell.
Obviously, if the market has rebounded enough for you to sell at a profit, it will probably have rebounded enough for you to be able to get a new mortgage without FHA help. And then you may get to keep most of your profits."

Remarkable

 

[Hamlet]

Hey, I wasn't complaining about it, just pointing out the slant. If you look at my posts to the thread, I pointed out the slant of my links as well.

I always try to keep the source in mind.

Oldbabe, get with the program.. I NEVER post "conservative" things according to this crowd.
I just got waled on for posting a link to the Great Orange Satan (Daily Kos).

 

[cute fuzzy bunny]

it will probably have rebounded enough for you to be able to get a new mortgage without FHA help. And then you may get to keep most of your profits

Hopefully the mortgage companies will be able to look at the applicants credit history and see that they had to be bailed out of the original loan by the FHA and decline to give them a new mortgage.

Unfortunately there'll always be someone who'll lend to anyone.

 

[clifp]

Wow our Congress at its brilliant best. When I first read about the clawback provision, I was think good for the law makers when the housing market recovers, at least the tax payers will get a partial refund on our bailout.

Assuming the WSJ report Brett Arends understood the provision correctly. I don't see why anybody would ever pay 1/2 there gains to the government.

A couple bought got a $450K loan a $500K house back in 2006, thanks to foreclosures in the neighborhood, the value had dropped to $300K. The wife loses her job and they are having a hard time making the payments. The get a FHA loan for 270K, 5 years latter prices have rebounded to 400K. With a 5 year history of making their (smaller) payments, and 30%+ equity in their house why wouldn't a private lender give them a loan, especially because they can get rid of the 1.5% insurance charge.

 

[laurence]

Wow our Congress at its brilliant best. When I first read about the clawback provision, I was think good for the law makers when the housing market recovers, at least the tax payers will get a partial refund on our bailout.

Assuming the WSJ report Brett Arends understood the provision correctly. I don't see why anybody would ever pay 1/2 there gains to the government.

A couple bought got a $450K loan a $500K house back in 2006, thanks to foreclosures in the neighborhood, the value had dropped to $300K. The wife loses her job and they are having a hard time making the payments. The get a FHA loan for 270K, 5 years latter prices have rebounded to 400K. With a 5 year history of making their (smaller) payments, and 30%+ equity in their house why wouldn't a private lender give them a loan, especially because they can get rid of the 1.5% insurance charge.

I suspect they'll get more people to pay back than you might imagine. Not everybody is savvy like that - unless of course we start seeing commercials on t.v. in 5 years, "Unlock your profits - you've earned it!".

 

[barbarus]

Ah, Comrade Brewer. Soon I look forward to singing the Internationale and other good Republican songs with you and Comrade President Bush. Maybe Comrade Secretary Paulson will join us too.

There are many more taxpayer-funded bailouts on the way. The "Party" is just beginning nyet?


As they say in Washington, "From each according to his abilities, to each according to his needs".

 

[ladelfina]

Another thing in the housing bill is a change to the CG exclusion, so if you were planning on using that in the future, you should investigate and plan accordingly:
Calculated Risk: Housing Bill: Change to Home Sale Tax Exclusion Rule

Instead of the old "2/5 years" it's now a ratio of qualified/unqualified use (going forward from 1/2009 so it won't start affecting people for another couple of years, it seems).

 

[clifp]

I suspect they'll get more people to pay back than you might imagine. Not everybody is savvy like that - unless of course we start seeing commercials on t.v. in 5 years, "Unlock your profits - you've earned it!".

Laurence I really really hope you are right and I am wrong, but....

Given the current situation, where people buy a 2nd home/refi before mailing the keys to the bank, delay foreclosure as long as possible, and steal everything in the house before turning the house over for forclosure, I think the chances of most people acting ethically and giving Uncle Sam the profit we deserve for bailing the out is pretty slim.

I think the chance of lender especially mortgage brokers not aggressively marketing a way of saving tens of thousands on taxes by taking advantage of our special refi before you sell program is nil.

 

[missionfinder]

Its a matter of people who took out a loan and couldnt make the payments.

Once again we're taught the lesson regarding the difference between correlation and causation.

I never said race was a cause. I simply put out some facts to imply this about votes, not to help anyone. Its why the Democratic party is so ghung-ho to bail them out... they are their constituents. Not because they are black or another minority, but because they vote primarily Democrat.

Its not much different than the Republicans giving mid-western farmers ethanol subsidies or turning a blind eye towards enforcement against businesses who hire illegals. Follow the money and it almost always has to do with politicians trying to stay in power - not about "helping" people.

What I don't understand is how anyone can make the largest purchase of their life and not do their homework about what they are getting into. Self-imposed ignorance knows no racial bounderies.

 

[cute fuzzy bunny]

Did I say anything about race?!?