Mortgage bailouts - Congress to the rescue!

[jphripjah]

I guess we're all a bunch of schmucks for saving money and living below our means in houses we can afford. We should have (a) not saved money, (b) gotten big loans to move into houses we can't afford, (c) claimed we are "victims" of "predatory" loans, and (d) waitid for Congress to give us other people's tax money to keep us living in houses we can't afford and had no business being in to being with.

U.S. housing aid needed, Schumer says
By ALAN ZIBEL and DAN CATERINICCHIA, AP Business Writers
Wed Apr 11, 5:58 PM ET



WASHINGTON - Amid new signs that the housing slump is worsening, key Senate Democrats said Wednesday that hundreds of millions of dollars of new federal aid may be needed to assist homeowners at risk of foreclosure.

The call for federal involvement from New York Democrat Charles Schumer (news, bio, voting record), chairman of the Joint Economic Committee, came on the same day the National Association of Realtors forecast that the median price for existing homes will decline for the first time since 1968 as a sales slump worsens.

"We will be proposing significant amounts of dollars," Schumer told reporters after being asked if a large federal bailout may be needed.

Across town, meanwhile, an activist nonprofit group from Boston called on Wall Street to help homeowners restructure their mortgage loans.

"We've heard one heartbreaking story after another of borrowers with limited incomes being sold mortgages they could not afford," Sen. Sherrod Brown (news, bio, voting record), D-Ohio, said at a briefing on Capitol Hill.

His words were backed up by the realty group's prediction of a 0.7 percent decline to $220,300 this year in the median sale price for existing homes, down from $221,900 last year. Tighter lending standards and the continued fallout from troubled market for loans given to people with shaky credit are to blame, the group said.

The NAR also revised downward its estimate of total sales this year of existing homes to a decline of 2.2 percent, compared to an earlier forecast of a 0.9 percent decline. New home sales are expected to fall 14.2 percent compared to a previous estimate of a 10.4 percent slide, the NAR said.

Economist Edward Leamer, director of the University of California, Los Angeles' Anderson Forecast, says that estimate is too conservative.

He predicts predicts a decline in the price of existing homes of between 2 percent and 3 percent this year and expects that trend to continue for two to three more years. With high-interest rate mortgages for people with poor credit no longer available, Leamer said, "you're eliminating 20 to 30 percent of the demand for homes."

Sen. Christopher Dodd (news, bio, voting record), D-Conn, said he would call for a summit on Capitol Hill soon "to try to work out a process for providing relief to homeowners."

With 1.8 million adjustable rate mortgages resetting to higher rates this year and next, foreclosures are sure to continue rising, the 32-page report from the Joint Economic Committee said. Areas hardest hit by foreclosures include Atlanta, Indianapolis, Denver, Dallas and Detroit, the report said.

In Detroit, one of every 21 mortgages was foreclosed last year, according to the JEC, which used RealtyTrac's foreclosure database.

The Federal Housing Administration could be revamped to refinance mortgages in danger of default, the JEC's report said, citing a proposal by a Harvard professor under which the housing agency could oversee a "rescue fund" that would restructure failed or failing mortgages. Aid could also be provided to community organizations or banks that work with borrowers to refinance loans.

"We'd like to do something very quickly," Schumer said. "These statistics are new and they're startling. "

Lawmakers also are considering strengthening federal regulation of mortgages, imposing a stricter ban on predatory lending practices and requiring lenders to establish a borrower's ability to pay back a mortgage loan through the life of the loan, not just for two or three years.

Activist and community groups are stepping up efforts to aid homeowners affected by the housing market's woes. They argue that banks and mortgage brokers_not borrowers_bear most of the blame for the industry's problems.

Rising delinquencies and defaults among borrowers have resulted in more than two dozen so-called subprime lenders going out of business, moving into bankruptcy protection or putting themselves up for sale.

Last week, civil rights groups called for a six-month moratorium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders could face lawsuits if they don't help borrowers. The mortgage industry says lenders are already working to help distressed borrowers.

The Boston-based Neighborhood Assistance Corporation of America announced plans Wednesday in Washington to work with Bank of America Corp. and Citigroup Inc. on refinancing troubled loans. NACA said existing funds from those banks pledged through federal regulations requiring loans for low- to moderate-income home buyers could be used to help 7,000 to 10,000 homeowners with high-interest rate mortgages refinance at lower rates.

"We want to send out hope to the victims of the subprime lending crisis," said Bruce Marks, NACA's chief executive. "There is hope if you are about to lose your house."

Citibank in 2003 pledged $3 billion worth of financing over 10 years to NACA for affordable housing, said Citibank spokesman Mark Rodgers, adding that the bank has similar agreements with other community groups.

Greg Barnard, a spokesman for Bank of America, said the NACA plan would use previously committed dollars from the bank.

Marks said the group aims to convince other big lenders and Wall Street investors to help consumers avoid foreclosures and obtain loans that they can afford.

"The real question is how big is (the housing market's drop) going to be," Leamer said.

[brewer12345]

I don't care about the moralistic aspect, but I think this would be a huge mistake. Every time the gummint bails out people who have done stupid things in the capital markets you encourage them to do it again.

[justin]

Screw moralistic aspects!! Where do I get my ticket for the gravy train??

My ARM is getting ready to go up ANOTHER 1% (I'm stupid - dear government, please send me a LARGE check).

[Mwsinron]

What bullshit. Congress needs to stay the hell away from the markets. They fix themselves.

[samclem]

Quote:

Originally Posted by Mwsinron What bull****. Congress needs to stay the hell away from the markets. They fix themselves.

Stop that crazy talk! There's always another election coming, and votes to be bought.

With your money.

"Help us! We were victimized!!"

[OKLibrarian]

Okay, I am a flaming, bleeding heart liberal and this sounds idiotic. At some point you have to take personal responsibility, and nobody stuck a gun to these people's heads to sign mortgages they didn't understand. If we must spend money, let's put it in programs that educate young people about basic financial concepts, instead of spending FAR more on bailing people out after the fact. If this looked like the housing crash was going to trigger Great Depression II, that would be one thing, but it really looks like it's just a normal bubble popping in a normal manner.

grrrr....

[Sandy]

Quote:

Originally Posted by OKLibrarian If we must spend money, let's put it in programs that educate young people about basic financial concepts, instead of spending FAR more on bailing people out after the fact.

Absolutely.

Bailouts will also encourage the lenders to continue these poor loan practices. A coworker's son and DIL recently moved to Sarasota and they are taking out an interest only loan. How can these companies keep doing this? How can their share holders let them?

[Mwsinron]

How about those people getting those unrated 12% bonds and now are suing they lost money.

[brewer12345]

Quote:

Originally Posted by Sandy A coworker's son and DIL recently moved to Sarasota and they are taking out an interest only loan. How can these companies keep doing this?

Have you looked at how little principal gets paid off in t he first 5 or so years of a 30 year mortgage? Very little. So I can't get too excited about IO mortgages given to people who aren't stretching to make the payment, have very good credit, 20+% equity in the property, and document their income.

[Zoocat]

This is all noise and political puffery. There will be no bailout for borrowers. Wait and see.

[chinaco]

If a law was broken, prosecute the offender (predatory lender) . If a law was not broken, and there is no law against making stupid moves, then the buyer is SOL!


Brown is a boob!

[Martha]

Bailout proposals don't involve paying people's loans. Usually they involve restructures where the payments are stretched out over a longer period of time so the payment amounts are reduced. Even interest rate reductions are not common. Periodically, when foreclosures are prevalent there is a mortgage moratorium passed which allows some additional time for borrowers to catch up on their loan before it is foreclosed. This can mean that if the borrower doesn't try to catch up the borrower lives in the place for free for a while.

[haha]

Thanks Martha. But damn! We were just getting our collective dander worked up about these immoral cheater wastrel commie Democrats. And you had to spoil it for us

Ha

[HFWR]

Quote:

Originally Posted by HaHa Thanks Martha. But damn! We were just getting our collective dander worked up about these immoral cheater wastrel commie Democrats. And you had to spoil it for us Ha

[samclem]

Quote:

Originally Posted by Martha Bailout proposals don't involve paying people's loans. Usually they involve restructures where the payments are stretched out over a longer period of time so the payment amounts are reduced. Even interest rate reductions are not common. Periodically, when foreclosures are prevalent there is a mortgage moratorium passed which allows some additional time for borrowers to catch up on their loan before it is foreclosed. This can mean that if the borrower doesn't try to catch up the borrower lives in the place for free for a while.

But, if there was no malfeasance, is it proper for governmental entities to amend the provisions of an existing contract between private parties? Would government intervene if it were the mortgage companies having trouble ("Hey Senators, I'm with ABC Mortgage Company and I've had some unexpected costs. I need legislation to accelerate the loan payments from folks who borrowed from me. Ya know, just to get us through this tough time." Yep, that would go over well!). I suppose mortgage "relief" will be sold as something that serves the overall community good. Hey, free money would serve the community good even more--let's have some of that!

[Martha]

Quote:

Originally Posted by samclem But, if there was no malfeasance, is it proper for governmental entities to amend the provisions of an existing contract between private parties? Would government intervene if it were the mortgage companies having trouble ("Hey Senators, I'm with ABC Mortgage Company and I've had some unexpected costs. I need legislation to accelerate the loan payments from folks who borrowed from me. Ya know, just to get us through this tough time." Yep, that would go over well!). I suppose mortgage "relief" will be sold as something that serves the overall community good. Hey, free money would serve the community good even more--let's have some of that!

The US constitution provides:

Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.


A state would not be able to unilaterally reduce interest rates from that agreed to between the parties. However, the lender, especially if compensated by government, may chose to reduce interest rates. Moratoriums are different, as this has to do with foreclosure remedies. A state government should be able to modify the law to impose delays in the foreclosure process. The question as to the federal government's power to modify lending contracts is a more complicated question.

[DRiP Guy]

Quote:

Activist and community groups are stepping up efforts to aid homeowners affected by the housing market's woes. They argue that banks and mortgage brokers_not borrowers_bear most of the blame for the industry's problems. "We want to send out hope to the victims of the subprime lending crisis,"

I think I just threw up in my mouth a little.

[Zoocat]

Colorado has a hot line for those in danger of foreclosure. They can help the borrower negotiate with the lender. This seems like a really good service to stave off the foreclosure process. They claim a high rate of success. Of course this is in the short term. No data on the long term yet.

[lets-retire]

Martha wouldn't delaying the foreclosure process raise costs for the banks? I would think, if it did, that would hurt the situation more than help. The banks would have to receive even more money for the properties during a soft market.

[riskadverse]

The government will bail out people and companies because it is in their best interest to keep the markets rising. If the markets start faltering because of these mortgage problems, everyone would be wanting the fed to step in.