Wednesday, February 18, 2009

The foreclosure plan: What's in it for Charlotte?

The $75 billion Homeowner Affordability and Stability Plan, which President Barack Obama unveiled moments ago in Arizona, carries two components that directly target foreclosure problems stifling Charlotte's housing market and economy.

Headlining the proposal is a plan that would provide incentives to lenders to cut monthly mortgage payments on troubled mortgages. If a lender agrees to modify a mortgage so that payments are no more than 31 percent of a homeowners income, the government will make up some of the gap between the old payments and new payments.

Why would lenders agree to participate? Doing so will help prevent the foreclosures that were at the heart of the current financial crisis, the White House says. But just in case that's not enough motivation, mortgage servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative, the White House says. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.

Another key part of the plan: a new program aimed at helping homeowners said to be "under water" — owing more in principal than their home in currently worth. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 to 5 million families do just that by loosening restrictions on those loans.

Details on how to participate in these programs will come within the next two weeks.


Both components could especially benefit cities like Charlotte, where foreclosures struck not because of a burst housing bubble or job losses, but because homebuyers were offered and accepted mortgage terms they ultimately could not afford.

Those homebuyers are largely located in a crescent of starter-home neighborhoods that threatens to squeeze the city's economy from its perimeter. Already, the damage has rippled into surrounding neighborhoods, where property values are dropping. Even stable neighborhoods/markets are stagnant throughout Charlotte, in part because people are unable to move in without selling their homes in potentially troubled areas.

Said Obama: "In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen."

An important note for this banking town: Obama said his administration would "continue to support" reforming rules to allow judges to alter the terms of mortgages in bankruptcy proceedings. Lenders have bristled at this possibility.


How forcefully will Obama back such legislation? The threat of such support might be enough to convince lenders to take part in the proposal made today.

31 comments:

Anonymous said...

"If a lender agrees to modify a mortgage so that payments are no more than 31 percent of a homeowners income, the government will make up some of the gap between the old payments and new payments." Ever hear of moral hazard? Ultimately no one forced these people to sign the docs. If we rescue them, how will they ever learn not to take such foolish risks? Moreover, and more appalling, Obama has effectively made all the responsible citizens in this country pay these people's bills.

Anonymous said...

Hey Barry...I missed my Master Card payment last month. You mind picking that up for me. And while your there, can you pay off the balance on my other 9 credit cards. Thanks man...now I can go to the mall again without having to play roulette with my cards.

Anonymous said...

I wonder how many illegal aliens are going to get bailed out?

Anonymous said...

Its funny how these same people said nothing when Bush passed a 750 billison dollar plan to bail out banks. Now Obama has a plan that directly helps the public, and people are whining. If he did nothing and all these foreclusures went through they would be screaming about their home values and inactivity. Silly republicans.

Anonymous said...

"They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years."

I've been paying for six years. Will I get my fee from the govmt?

And to the Anon 1:15 - the bailout was designed by the very same Tim Geithner, our current tax-cheat Treasury Secretary. That's why it's working so well. Bush signed it because that he was advised by the brainiacs at Fed and Treasury Dept.

chupacabra said...

I agree with this plan, but even so a tiny itty bitty part of me can't help but feel like I'm being punished by buying a house that I can afford and making personal sacrifices in order to keep up the payments.

I also put a lot of the blame for this on real estate agents and banks. I still remember when we were a bit hesitant over the purchase price of our first home the real estate agent telling us that "you'll never make less money that you do right now."

The implication there being that as time goes on you get raises and end up with a higher income, but that sure doesn't take into account normal ordinary things like illnesses, job loss, having kids. There are a lot of reasons why you may end up with less money than you think, but hey don't think about that just LOOK at this fabulous yard...

RIGHTISRIGHT said...

TO 2/18 1:15 pm WHO SAID: "Its funny how these same people said nothing when Bush passed a 750 billison dollar plan to bail out banks. Now Obama has a plan that directly helps the public, and people are whining. If he did nothing and all these foreclusures went through they would be screaming about their home values and inactivity. Silly republicans."

POINT 1: that bailout had a TOTALLY DIFFERENT PURPOSE from this porkfest. Credit markets had frozen up. Do you realize what it means when commercial paper markets don't function? Payroll, suppliers, utilities, etc. don't get paid. Some action was needed to get the markets going again. This thing is NOT a stimulus. $1B for STD prevention? $2B for voter fraud group ACORN? $30M for a mouse in SanFran? Millions for drug abuse programs? Harvard economist Robert Barro called it "garbage" per IBD 2/13. POINT 2: you assume we are against foreclosures. Wrong again. Letting businesses fail and homeowners learn lessons are the same desirable thing: get the badly used capital freed up for more productive purposes. You offer no facts or economic knowledge, only name-calling against Reps, as well as defending a bill that is not stimulus but a huge liberal wish list, so I'd say you are the silly one.

Anonymous said...

Wait, wait, wait. Let me get this straight... I'm living in a smaller, normal sized house that I bought well within my budget and I'm going to have to bail out people who are living in houses that are either bigger or in more desirable locations that they bought KNOWING they couldn't afford them, or knowing interest rates could go up forcing them to sell? Seriously? Those folks in California and Florida that we're bailing out better get ready - if I'm helping pay for your house I'm coming to visit whether you like it or not.

Anonymous said...

I'd like to see them extend mortgage terms. Force people who have 30 year loans they can't afford to extend it at a lower payment to 40 or 45. I also think that if the borrower gets this assistance, they should forfeit the tax deduction on interest and be required to pay tax when they sell the house on any appreciation they might see.

And punish the banks- make them accept a lower interest rate.

Anonymous said...

You dumb people don't realize that people are losing their jobs hence the main reason they can no longer pay their mortgages. It is not that they got a house or a mortgage they could not afford. The same thing would happen to you if you lose your job and that income is the only one coming into the household. Funny how you are quick to judge but the bible says "judge ye not". Let the truth be told everyone is hurting from this countries economic mess everything is costing more everyday however your pay does not increase to accomodate.

Anonymous said...

It's the fact that by this plan we are NOT making people take responsibility for their actions. People knew they could not afford a more expensive house, but did nothing but sign up to buy it. Why should I not get any benefit because I actually bought a house I could afford and was a responsible adult? Let's not save the irresponsible - don't give them a reason to do it again.

Anonymous said...

I'd like to see the numbers on how many of these people actually lost their jobs and THAT forced them to not pay their mortage. What happened to their savings???

Anonymous said...

"Its funny how these same people said nothing when Bush passed a 750 billison dollar plan to bail out banks. Now Obama has a plan that directly helps the public, and people are whining. If he did nothing and all these foreclusures went through they would be screaming about their home values and inactivity. Silly republicans."

If I recall correctly the republicans got called to the carpet for not supporting the first bailout. Bush and the Dems were in bed with each other on this deal. This is not a republican issue. This is an accountability issue.

Anonymous said...

here is what I have learned.. respect other peoples opinions, but don't pay attention to what people say..

This President is serious about "attempting" to help everyday people.. I did not vote for the guy.. shame on me..

but da-- he is really trying to what he said he would do..

I love America and will not participate with those of us on this blog, that look for any excuse to criticize at all cost.. not seeing anything remotely positive about what the administrations is trying to do, for the American people.

Levy

BHO said...

Why should I have to pay for someone else's mortgage? It is almost time for a tea party.

Anonymous said...

so here's what I wonder: there are many of us who have homes that we could afford and have managed to keep up with the payments - have been responsible. But now - with the economy like it is - are losing money and making that payment is getting to be really tough. Is anyone going to help US out? That's what I want to know!!

Anonymous said...

I'd like to see the numbers on how many of these people actually lost their jobs and THAT forced them to not pay their mortage. What happened to their savings???

February 18, 2009 2:19 PM

There are many of us out there who don't have savings - because we have children to care for, etc. Not having any saving does not equal irresponsibility. I have no savings - no retirement - nothing. However - I take care of my self, my child - I have health issues that are costly. People need to quit being so harsh in judgement, and we should want to help other people out. There but for the grace of God...

Anonymous said...

I would like to remortgage and was wondering if anyone knows if "The Stimulus Plan" is going to lower rates are going to go lower in the next month or so.

Anonymous said...

Be responsible is all I am asking. I understand people may find themselves in trouble with job loss, but let's find a fair way of helping people out of it. It's not fair for someone who has a modest home, and can afford the payments to be stuck with a higher interest rate and payments because they were responsible.

hfs450 said...

The mortgage industry has gone in the complete opposite direction from where it was. I own a mortgage company and I honestly try to do the right thing each day. It was a tough situation to be in during the subprime era. It was a catch 22 situation. I depend on client referrals and real estate agent referrals. When someone is referred and they specifically ask for a product or loan that isn't the best fit, it's tough. On the one hand, you know that people are buying homes that they can't afford. But, on the other hand, you can't really do anything about it. If I say no, I risk losing the relationship of the agent because they are going to find someone that will do the loan. In addition, there are fair lending guidelines. If someone actually qualifies for a program that is offered by a bank, I can't just tell them that I don't think they'll make the payments. I can't just tell someone that they shouldn't have something that they rightfully qualify for. I'll get sued. The problem now is that even the best customers can't get loans. This 31% is absurd because most people either can't claim their income or it can't be proven in a manner that is acceptable by Fannie or Freddie. They have very strict guidelines as to how to qualify a person's income and it's not easy or fair. If conforming lenders could find a way to help the customers with a great mortgage rating refinance to the lower rates, everyone would win. Government loans(FHA and VA) guarantee that if a person is making the mortgage payment on time that they qill qualify for the refi to a lower rate and thus a lower payment. Conventional loans won't. So, if I have a credit score in the high 700s and I only owe 50% of the value of my home, I can't refinance without proving income that is accepted by Fannie and Freddie. Not even if I've been paying on the mortgage for 10 years and never missed a payment. It's completely absurd. If they would figure out how to help the people that have done the right thing by paying the mortgage on time by giving them market rates, they would lower payments, and stimulate the economy by proving additional income to the family each paycheck.

Anonymous said...

To be fair, seems like the mortgage assistance from the government to the individual shoud be treated as taxable income.

Anonymous said...

For the all people on here complaining that this is going to help you. HAVE YOU LOOKED AT YOUR HOME VALUE LATELY. Foreclosures affect everybody, and we stop the homes forclosures, then home values will rebound some what.

Anonymous said...

What a joke! The mortgage companies will not only be compensated for lowering monthly payments, but also handed thousands in incentives if their customer pays. Nothing like being rewarded for failure.

Anonymous said...

So 10 years ago, I purchased a house with a payment less than 20% of my monthly income. I have now been unemployed for 7 months due to my employer closing and moving to Europe. and have been working two jobs to make ends meet and continue keeping my mortgage current. Is this proposal going to help me or just those who did not do everything possible to save their home.

Anonymous said...

I still live in an apartment because I wasn't going to buy a house I can barely afford, or maybe not afford. Now I feel like I should have bought the house because my taxes are paying for other people who did. This is a joke, punish the responsible and reward the ignorant.

Tom said...

Doing nothing is not an option...that's what the past 8 years have got us. I am one of those who bought responsibly and paid my bills...but that said, the spiral needs to stop before it spills over to more foreclosures which ultimately impacts the value of my home. Also, the folks who over bought, etc. were part of the 1st phase of this crisis (which took place over 18 months ago)...folks now are those who have been laid off. Unless you like living in this maze that we are, it's time to get behind a plan that at least has some intelligence and thought behind taking care of the people.

Anonymous said...

My house is currently is in foreclosure. I don't live in an expensive house, it would cost the same if I rented an apartment. The cause is my deadbeat husband who drained our bank account. He took off after seven years and hasn't looked back. NC has let him walk away from the house and other things we bought together. I'm a teacher so to try to make ends meet and I have three jobs.
I would be grateful if this plan would allow me to keep my home.

Vincent said...

I think what everyone fails to see with this "stimulus" package..is that regardless of each of our valid, and well pointed individual opinions....not one the individuals we elected to represent us, nor our newly appointed president actually read the thing before voting yes on it. I understand the individual provisions have been floating about awhile, but still everyone of those that voted yes for this bill said that they did not read the final draft before voting on it.


Tell me, if anyone can, what gets lost when voting so blindly.

Anonymous said...

Ya know, I am sick of hearing "the last 8 years". The first 6 years and part of the 7th were some of the best economic times we've seen. Yes, something needs to be done now. Our elected Congress men and women should have been camping out 24-7 working together to create a stimulus package that we could be proud of without the garbage waste that we as taxpayers are footing the bill for. Glad the democrats think the goverment can spend our money more wisely than we can because obviously they are proving that they can't.

Anonymous said...

On a side note Obama needs to brag on himself since the first month of his presidency he has kept America safe and prevented another 911. Tell lying Bush to stick that in his crack pipe and smoke it.

This plan will a total failure and unfair to all others who played by the book and didnt lie to get loans for homes they couldnt afford regardless of the economy bust.

These 9 million homeowners were bogus to begin with and should have never gotten a loan. Banks had no idea the bottom would fall out and were trying to help them although the derivative creation was a scam.

The way things are headed is America is becoming a socialist state that will fail in the end like the USSR neocons who are still around but in this nation now dictating policy directly or indirectly. Putin is laughing his azz off at Americas transformation knowing this Marxism was a total failure after 80 yrs in Russia and it was all split up in the end.

America too will be split up in the end since there is no other alternative and this is the best way to solve the problems that are insurmoutable and too complex for a large bloated indebted conglomerate of choas as this nation has become.

America may have to split into 4 regions with north south east west or if worse comes to worse split into 50 separate state nations for better management on a micro scale.
America was never intended to become what it has now become and only intended to be a loosely joined confederacy of states with no centralized government that Lincoln created centralizing all powers as good fascist would do in 1860 with his new Republican party that is leading the way to hell for this nation.

FOMC neocon Greenspan created this current crisis in 2001 with his initial dropping the rates to as low as 1% to prop up the Bush sand castle economy in order to go to these bogus rigged wars that caused all this in the first place.

We know it was a bogus indebted sand castle economy because we saw how quickly the waves washed in down right before Bush left office so he got the blame and this was excellent.

We must also understand that not only is America as much as 100trillion in long term debt as the fed prints money 24/7 since the gold standard was dropped in the mid 60s that has ultimatley led us into this crisis, but also the trillions lost in real estate value have not stopped the tax offices in each county across America to reduce taxations.

In effect counties are still taxing at the same or higher rate even as peoples homes have decreased up to 50% or more and all point sin between and they cant pay their tax bills notwithstanding the fact that most eveyr county in America in still in a red sea of ink along with the state governments and of course federal government.


Everything is coming to head and this will ultimately prescipitate the break up of America into smaller nations that in effect with relieve and default itself of the 100 trillion debtload it owes around the world as China and others are pulling the plug anyway.

Meanwhile the main culprit neocon GOP puppet Bush lives in comfy 10 mill pad in Dallas on the tax dole for 400,000 a yr the rest of his life ... and whether Obama knows it or not he will get the blame in the end also and be tarnished irreparably.

People in this soon to be split up nation will come to understand that bigger is not better and America has become something it was never intended being a world policeman that is a proven failure as Rome and all other empires were including the UK and Germany and USSR in more modern times.

Empires all eventually crumble under their weight and basically self implode due to waste fraud and corruption of its elected officials.
America is on the edge of a massive breakup reorganization and the end is rapidly approaching.
There is no other alternative and the only solution.
Otherwise the American Titanic will sink to the bottom of the red sea of ink and corruption.
A break up is the only thing that will save it.

Anonymous said...

On Thursday, February 5th, 2009, NPR’s “Morning Edition”, ran a piece on 4% home mortgages. I have never heard such a common sense solution to, not only the housing issues, but also to the entire economic situation that we now face. My question is, why does Congress and the entire news media totally ignore this very simple idea and insist on spending large amounts of taxpayers’ money on a bill that has no guarantee of getting us out of our current recession? I am a registered “Independent”, but feel this proposal is not a "Republican“ or “Democrat“ idea, but rather a “What is Good for the Country” solution!
My present mortgage is at 5.85 % and my payment is $822.00 per month. If my mortgage was at 4%, my payment would be $573.00, a $249.00 savings per month. Multiply that by the tens of thousands of homeowners that would re-finance their present loans and you will see the enormous amounts of money that would be available for us to spend every month. I would think that many would take that extra money and purchase a new car, a boat, furniture, etc.