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Old 10-26-2011, 09:12 AM   #61
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So what happens if you are otherwise eligible but also have a second on the house?
The FHFA FAQ does not mention this. (FAQ) From HousingWire FHFA removes barriers to refinance more borrowers « HousingWire

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Mortgage insurers agreed to automatically transfer coverage from the old loan to the new loan, and servicers agreed to resubordinate second liens into the new refinanced mortgage.
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Old 10-26-2011, 10:07 AM   #62
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Sorry I have not read all posts, so excuse me if duplicated.
I'm always confused by posters who (1) admit this and (2) still feel qualified to chip in.

I can understand it for threads like "What did you do today?" or "Tell us about your ___" or polls.

But I'm not certain how a contribution in the absence of reading keeps the thread from becoming a reciprocated diatribe-- or just a roomful of people all talking at once.
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Old 10-26-2011, 02:09 PM   #63
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But I'm not certain how a contribution in the absence of reading keeps the thread from becoming a reciprocated diatribe-- or just a roomful of people all talking at once.
At a cocktail party, I can tell by watching a group of people that many are just formulating what they want to say rather than listening actively to the others. So I guess it is human nature. When you actively listen, you often loose the opportunity to chime in.

Not agreeing with it. One of the reasons I prefer one-on-one conversations rather than group discussions.

(And I think HARP will have as much success as TARP. Some will benefit but most will not.)
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Old 10-26-2011, 02:48 PM   #64
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There was a lot of post about the yield of GNMA... but there was an article or blog in the Houston Chronicle that said it did not include GNMA loans...

Has anybody seen if it does
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Old 10-26-2011, 03:00 PM   #65
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But what about those of us whose loan is not through Fannie Mae/Mac?
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Old 10-26-2011, 03:43 PM   #66
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But what about those of us whose loan is not through Fannie Mae/Mac?
You are probably out of luck since this program is under the HARP program which only covers Fannie/Freddie loans.
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Old 10-26-2011, 08:32 PM   #67
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The gov't is not picking any winners or losers here. Just letting two parties get together.
The change in government rules does allocate winners and losers. With the restacked deck, Mr Underwater Homeowner is a winner, clifp's mom is a loser (nothing personal, clifp!).

The new loans will be originated without the normal fees charged by the GSEs. These fees covered many of the ancillary costs of originating any loan. Well, guess who is going to wind up eating those costs--taxpayers.

Until they allow the parties to come together without government funding, without government subsidies for these low-interest risky loans (and that's what a 100++% LTV, no income verification loan is--a very risky loan), and without ceding any of the rights we now have to punish those who wrote the fraudulent loans in the first place, then it's just not accurate to portray it as anything other than a government bailout that punishes the prudent and puts us all at risk. Who is going to buy these now-even-more-terrible loans?

Of course the mortgageholders like it--it's money in their pocket. They are in an unfortunate situation. I was in an unfortunate situation when my equities took a dive in 2008--where was the government program to help stockholders who were underwater in 2008? Why would anyone even consider such a program? We know that investing (in a home, stocks, bonds, etc) has risks, that mortgage rates can go up and down, and that we can lose money. Same thing.
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Old 10-27-2011, 01:55 AM   #68
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The change in government rules does allocate winners and losers. With the restacked deck, Mr Underwater Homeowner is a winner, clifp's mom is a loser (nothing personal, clifp!).

The new loans will be originated without the normal fees charged by the GSEs. These fees covered many of the ancillary costs of originating any loan. Well, guess who is going to wind up eating those costs--taxpayers.



Of course the mortgageholders like it--it's money in their pocket. They are in an unfortunate situation. I was in an unfortunate situation when my equities took a dive in 2008--where was the government program to help stockholders who were underwater in 2008? Why would anyone even consider such a program? We know that investing (in a home, stocks, bonds, etc) has risks, that mortgage rates can go up and down, and that we can lose money. Same thing.
You and I are in complete in sync. To be clear it isn't just my mom, if you own the Vanguard Total Bond market roughly 1/3 is in mortgage back securities who's yield will drop and price already has, PIMCO has 38% of its assets in MBS (almost all of these are government backed).

Fundamentally I am still trying to understand why people who's value of their homes has dropped should get some type of special compensation.
Their gain is our loss. One of the long term consequence of changing the rules mid stream is that it make these type of investment less attractive in the future. I've been shifting out of GNMA both for myself and my mom the last year or so, this is only going accelerate my move, and if lots of investor start to feel the same way this will drive up long term mortgage rates for everyone.

I think it is important to distinguish this situation from the fairly common problem where a person, bought a house and then suffered a huge financial setback due to medical problem or job loss. I have sympathy for these
people and can understand programs that try to keep them in their houses.

It has obviously be a horrible few years for the economy. Some what lost in all the bad news about unemployment is the flip side of 9% unemployment rate is that it means 91% of the population is working. Now I realize that unemployment statistic understates the problem. However, I believe somewhere in the neighborhood of 75% of Americans are basically earning what they were before the crisis. Now I am sure the pay raises have been near zero, some benefits have been cut, inflation has continue to decrease their purchasing power, but basically they have same income now as this few years ago. (Of course the value of their assets has almost certainly dropped so the feel poorer, more uncertain).

For the most part this program is designed to benefit those 75%, so my fundamental to questions Micheal and other is what is so special about this group of people that us savers should sacrifice income for their benefit? Our incomes have take a big hit, theres may or may not have.

I think one of the thing that aggravates the housing problem is when politician and pundit talk about the situation they talk about how people lost hundreds of thousands of dollars on their houses. First of all most people only put down 10-20% even if they walked away they rarely lost more than $100,000. Second and more importantly just like an under water stock it is a not loss until you sell the same thing is true for houses. I was careful in 2008, to use the word paper losses, when I said I joined the million dollar stock loss club. If you are 20% underwater today in 5-10 years there is decent chance you can do a traditional 80% refi. Just like stock prices have come back from the 2008 lows.

The other thing which politicians forget is that their are two component to owning property, one is the value of the investment and the other is the value as place to live. Certainly the person who bought my Vegas condo in 2005 for just under $195K and saw it value drop to 50K made a horrible investment. (Although the bank took most of the loss). But the drop in the price houses has little (except in the case of mass foreclosure) impact on the value of them as place to live.

For instance, when I look at my condo, I wonder what if the person instead of walking away had stayed and made the payments. I calculate that if 2005 owner had put 20% on the condo, with 6% loan their house payments include condo fees, taxes and insurance would $1200/month today, if they only put 5% down the payments would be around $1,400/month with 6.5% loan. Now the place is nothing too special 2 bdr, 2 bath 1150', but it is certainly respectable working class housing. (Much nicer than some places I've lived) At 1200-1400/month much nicer than places in Hawaii, California, and much of the east coast for the same price. More importantly somebody making an average income of $45-50,000 can afford to spend $1200-1,400/month on housing. In fact, I suspect that if we pasted a law, banning any discussion of housing prices, the 2005 owner would happily living in the property not feeling any poorer.

Obviously the renter renting the same place today at $700 (my current lower asking price ) is getting an even better deal as far as value for a place to live. Of course in 24 years the 2005 buyer will own the property free and clear and the renter will still be paying rent. So who knows will be the ultimate winner.

Price is what you pay, value is what you get. The price of stocks, and houses can change very rapidly. The value of both changes much more slowly. I think it is instructive the government has made only modest attempts to drive up stock prices and yet in 3 years, the market has gone from being very undervalued to more or less fairly valued. The government's attempts to hurry the process in the real estate market have been pretty much abject failures, they should just get out of the way and let the market work.
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Old 10-27-2011, 08:34 AM   #69
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Samclem:

Winners and losers. Clifp’s mother is an investor, like the rest of us. She is not losing anything. We all need to look harder to find investment opportunities.

Homeowners with >125% negative equity are losers any way you look at it. But they do benefit – a little from the fees and hopefully much more from the opportunity to refinance.

There is no gov’t subsidy that wasn’t already there. Whether or not the gov’t should be involved in mortgages is not the point and not relevant to this program. The bolded part about gov’t not bailing out stockholders – ok. Nothing to do with this, though.

Clifp

No special compensation for these homeowners. Sorry it is so difficult to invest your mother’s portfolio – but that is not the consequence of this program. It is hard to invest and risks abound. If this rule change makes that great an impact in her portfolio, maybe the portfolio needs greater diversification.

I didn’t really get the rest of your post, except the question “what is so special about this group of people that us savers should sacrifice income for their benefit?” That is a fair question. I don’t think there is anything special about them, except, like many other homeowners, want to refinance, the banks want to lend to them, but couldn’t. So rules preventing the banks from lending are removed. It does not solve their problems, and it only affects a small group.

Us savers are making no sacrifice.

My view of this program: I don't care for the fees waiver, but the reasoning is clear. If the outcome of this is 3/4 of the 1M homes will have zero or positive equity in 5 years, good. If this serves as a template for private mortgage refinancing of negative equity, good.
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Old 10-27-2011, 10:33 AM   #70
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It’s hard to say which way is better. If a lot of underwater homeowners (delinquent or not) take the option of strategic walk-away, then banks have to swallow the loss, so do the investors (including everyone with retirement savings). That’s probably where the deficiency judgment is originally meant for. OTOH, if government is allowed to pick winners and losers in this situation, the final outcome will be controversial and uncertain unless we know for sure that the chosen winners will be majority, demographically evenly distributed. Politicians never cease playing odds between debt and unemployment to increase their chances of (re)election. I’m afraid until everyone is (in)voluntarily to be responsible for his/her own decisions, actions and any associated consequences, there is no easy way to get out of this perpetual mess mode.

I forgot who said that US dollar “is out currency, but your problem”. We haven’t reached the red heat point where Greece has now in this country yet. I think we (as “winner” or “diluter”) got lucky so far because we can freely dilute (or shall we say rob) the savings of other people (as “loser” or “dilutee”), including people outside of US as well, by creating virtual money out of thin air, but Greece can not. If US dollar loses its status of reserve currency, we could be ended in a shape much worse than Greece now. I truly hope I will be proven to be wrong, but until then my sense tells me that the worst hasn’t come yet.
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Old 10-27-2011, 10:58 AM   #71
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Yesterday the government announced that, due to a change in policy, holders of government-backed student loans will now get more favorable terms. There will be no changes for holders of private student loans--they get the deal they originally negotiated, unless both parties decide to change things (without a taxpayer sweetener--the way business is usually conducted).

And, of course in the mortgage program we are discussing here, only holders of loans backed by the government get the benefit of a "reboot," all external costs at taxpayer expense, loss in value of the loan contracts paid for by those suckers who bought the securities because they thought the government would stick to its word. Those with private mortgages--sorry, no changes. They get the deal they originally negotiated. Just like normal.

So, here we have two cases where government loans compete with private ones in the marketplace. In both cases folks who chose the government product now get a gift from taxpayers. I think future borrowers considering whether to get a private or government loan (or private or government health insurance, etc) will certainly factor this into the equation. This "eventual taxpayer gift premium" (ETGP) will make it even more difficult for private businesses to compete with the government in the future--which I think strikes some folks as just great.
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Old 10-27-2011, 11:09 AM   #72
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I find it interesting that there is so much made about this program and the loss of income etc. etc....

What about the FED keeping rates so low That hurts all bondholders... heck, anything where you earn interest.... I think that is where someone can put up a stink...

This program, when all is said and done will probably not even register on the economy...
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Old 10-27-2011, 12:26 PM   #73
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I find it interesting that there is so much made about this program and the loss of income etc. etc....

What about the FED keeping rates so low That hurts all bondholders... heck, anything where you earn interest.... I think that is where someone can put up a stink...

This program, when all is said and done will probably not even register on the economy...
Agree

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Yesterday the government announced that, due to a change in policy, holders of government-backed student loans will now get more favorable terms. There will be no changes for holders of private student loans--they get the deal they originally negotiated, unless both parties decide to change things (without a taxpayer sweetener--the way business is usually conducted).

And, of course in the mortgage program we are discussing here, only holders of loans backed by the government get the benefit of a "reboot," all external costs at taxpayer expense, loss in value of the loan contracts paid for by those suckers who bought the securities because they thought the government would stick to its word. Those with private mortgages--sorry, no changes. They get the deal they originally negotiated. Just like normal.

So, here we have two cases where government loans compete with private ones in the marketplace. In both cases folks who chose the government product now get a gift from taxpayers. I think future borrowers considering whether to get a private or government loan (or private or government health insurance, etc) will certainly factor this into the equation. This "eventual taxpayer gift premium" (ETGP) will make it even more difficult for private businesses to compete with the government in the future--which I think strikes some folks as just great.
If you are referring to "Help Americans Manage Student Loan Debt", it's only a proposal, it is for debt consolidation and not new loans.
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Old 10-27-2011, 12:58 PM   #74
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Agree

If you are referring to "Help Americans Manage Student Loan Debt", it's only a proposal, it is for debt consolidation and not new loans.
It's "only a proposal" that will be accomplished by executive order, so it requires no one's approval but the president. Since he's the one who announced it, I think we can count on the proposal becoming policy in January, just as was announced.

Yes, as you mentioned it allows many federally-backed loans to be consolidated. It provides for a 1/2% cut in the interest rates to be paid, reduces the minimum payment to 10% of income rather than the 15% the students agreed to, and allows for forgiveness of unpaid balances after 20 years instead of the 25 to which the students agreed. It's quite a deal--again at the expense of savers and investors who trusted the government. Ha ha on them.

More.
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Old 10-27-2011, 01:31 PM   #75
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It's "only a proposal" that will be accomplished by executive order, so it requires no one's approval but the president. Since he's the one who announced it, I think we can count on the proposal becoming policy in January, just as was announced.

Yes, as you mentioned it allows many federally-backed loans to be consolidated. It provides for a 1/2% cut in the interest rates to be paid, reduces the minimum payment to 10% of income rather than the 15% the students agreed to, and allows for forgiveness of unpaid balances after 20 years instead of the 25 to which the students agreed. It's quite a deal--again at the expense of savers and investors who trusted the government. Ha ha on them.

More.

From your link:

"Congress passed similar measures last year, but they are not set to go into effect until July 2014."

I don't know how similar, but if it is like what Obama is proposing, then it is only a timing issue and not a change of debt issue...
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Old 10-27-2011, 02:08 PM   #76
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From your link:

"Congress passed similar measures last year, but they are not set to go into effect until July 2014."

I don't know how similar, but if it is like what Obama is proposing, then it is only a timing issue and not a change of debt issue...
Yes, it's the same bad idea just two years earlier. It's not a partisan issue, it goes deeper than that.
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Old 10-27-2011, 04:10 PM   #77
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I find it interesting that there is so much made about this program and the loss of income etc. etc....

What about the FED keeping rates so low That hurts all bondholders... heck, anything where you earn interest.... I think that is where someone can put up a stink...

This program, when all is said and done will probably not even register on the economy...
Hey that isn't nice of you to point out that while I am bitching about the Fed putting fertilizer on one tree which is going to grow bigger and block my sun (bond interest). I am actually in forest of Redwood trees thanks to the Fed and the .25% fed funds rate.

But it is unseemly to complain about forest, eventhough I and the rest of the small saver class is freezing down here, and we having not seen sun a couple of years.
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Old 10-27-2011, 04:34 PM   #78
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Fundamentally I am still trying to understand why people who's value of their homes has dropped should get some type of special compensation.
I don't see where "should" comes into it. Speaking as a liberal of the secular kind, it's very difficult for me to understand the moralistic tone of so much of this discussion. I want policy makers who help set our economic course to act to increase the general prosperity (but within the law). And I think that's what they're currently trying to do. Of course, any major change in government policy is going to produce winners and losers. Judging whether the current winners deserve their bounty just does not seem to me to be a legitimate policy issue. This is not a theocracy.
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Old 10-27-2011, 05:02 PM   #79
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Speaking as a liberal of the secular kind, it's very difficult for me to understand the moralistic tone of so much of this discussion. I want policy makers who help set our economic course to act to increase the general prosperity (but within the law). . . . This is not a theocracy.
For many folks, it's not about "morality" and "deserving" at all. It's not about politics. It's strictly pragmatic.

Some people see a pie, question not from whence the pie came, and want to divide that pie so the "general prosperity" is greatest. These are "pie assumers" and they usually work from very noble motives.

Others recognize that the pie came from the talents, industriousness, and capital of people, and they want to assure pie will continue to be produced for the benefit of all. These are "pie maximizers." They want to ensure the continued existence of incentives for people to make pie. Their motives may not appear to be as noble, especially to "pie assumers."

Societies organized according to the principles of "pie assumption" all run low on pie.

Encouraging people to put their capital at risk to allow home mortgages to be written encourages pie production. Changing the rules so that their piece of the pie is taken away and given to others does not encourage pie production.
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Old 10-27-2011, 05:32 PM   #80
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Encouraging people to put their capital at risk to allow home mortgages to be written encourages pie production. Changing the rules so that their piece of the pie is taken away and given to others does not encourage pie production.
I've heard of that theory, and, if it's actually true, I'm fine with it. That is, if keeping much wealth in the hands of the rich actually does increase general prosperity, I'm for it. But if it should turn out that taking a large amount from the rich is best for all of us, then I'll be for that. I'm a pragmatist. It seems to me, though, that a very prominent strain in conservative thought is that the rich have a natural right to keep what they have. This is what I can find no sympathy with. If it's expedient to take it away from them, then let's take it.
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