patrick.net

Still outrageous!

They're still drowning, but now you've handed them a government pamphlet that says "How to Deal with Drowning" complete with helpful illustrations by third graders.

I want me some!

thomhall says

How are you going to keep people in their homes when they are under water? Let them refi the underwater house!

That's not nearly as bad as you make it sound.

Most people plan on staying in their homes, and keeping people in their homes is good for society as a whole (strong, established communities, stable schools, etc.)

If someone is stretched and you can lower their payment by enough to convince them not to walk away, you're helping the economy:

1. The owner has more spare cash to save or buy stuff with.
2. The bank doesn't have another foreclosure on their hands.
3. Consumer confidence is lifted, which is really the biggest key to the overall health of the economy.

Now, I'm skeptical that these modifications will actually make any difference in the long run, but they might. If you can reduce the interest rate by at least 1 percentage point, you may very well be making the difference between staying and walking for many owners.

It sounds like they're trying keep prices artificially high and create another mini bubble.

Er, yeah. I don't see how prolonging a bad situation even by a little makes it better for anyone in the broader picture. If the government really wants to stanch the bleeding, I think it could be done more effectively by establishing a program where Uncle Sam acts as guarantor in lease agreements for people who have foreclosed and have wrecked credit -- that way they can rent without any hassle until their credit rating improves.

I'm not sure I see how consumer confidence would be lifted. That's a stretch. Besides, consumer confidence isn't what is paramount in the economy, it's employment and savings rates.

Anybody understand how this program works?

I know someone that has an underwater loan from the bank and they would like to refinance at a lower rate but the bank will not allow it due to the drop in the appraised price of the house.

How would this person take advantage of this program?

StillLooking says

Anybody understand how this program works?
I know someone that has an underwater loan from the bank and they would like to refinance at a lower rate but the bank will not allow it due to the drop in the appraised price of the house.
How would this person take advantage of this program?

You just call around. The thing they do not tell you in any of the media is that anything over 80% LTV "program" or no "program" is priced at a much higher rate than the advertised low rates. Those rates are for people with verifiable income, high credit scores, AND 80% LTV. When I called BAC about my loan and a 105% LTV refi (when advertised loans were sub 5%) the loan they would give me was minimum 6%. My current is a 5.375% 30/fixed. The loan officer said I will never beat that rate without paying down my principle to 80% LTV.

Unless the government starts a program with guaranteed low interest rates for anybody with a pulse, this program will FAIL.

Austinhousingbubble says

Er, yeah. I don’t see how prolonging a bad situation even by a little makes it better for anyone in the broader picture.

Well not every person a small amount underwater should walk, so I do think that in some cases allowing people to refi into fixed loans will help people. I am probably 20% underwater now (after having 50% equity at one point). I have a fixed rate loan, and my PITI is about what I would pay to rent a SFH in my area. The difference is, I am paying principle and have a tax write off, and eventually I will own this house. I also have the freedom to have my dogs, my home is in good shape and comfortable, and I like my neighbors. I can certainly see someone in my situation who has an adjustable rate want to (and benefit from) being able to get a low fixed rate and hunker down.

Tude,

Why should we the taxpayers subsidize anyone in your position, but who had an adjustable rate? Sounds like they are just fine. Even with the rate adjusting up it won't be that much more expensive than rent. So these people wouldn't default in the first place, so why exactly should my tax dollars go to them?

sfbubblebuyer says

Tude,
Why should we the taxpayers subsidize anyone in your position, but who had an adjustable rate? Sounds like they are just fine. Even with the rate adjusting up it won’t be that much more expensive than rent. So these people wouldn’t default in the first place, so why exactly should my tax dollars go to them?

And how are your tax dollars "going to" them any more than any F/F mortgage?

I am MUCH more concerned with all these tax credits for buyers getting more people into homes they cannot afford than allowing someone with good credit and verifiable income to refi their underwater mortgage into a fixed rate.

If the government is guaranteeing the loans through Fannie Mae it is USA dollars that are financing the loans.

This means that when all these loans that Fannie Mae and Freddie Mac are now buying go south, the value of the USA dollar will go south with them. This also means that these loans directly make buying anything at the grocery store more expensive since the loans hurt the value of the dollar.

The housing bust should have caused deflation meaning that everyone's cost for food and groceries and the needs of life should have been dropping. Instead all these government bailouts are keeping prices higher so anyone that is not getting bailed out is subsidizing those that do get government handouts and they are paying the subsidy at the grocery store.