patrick.net

unreal

This is not a bail out. No govt. money is being used.

Oh...come...on...

If the money isn't coming out of the front pocket of the taxpayer, it's coming out of the back pocket.

In short, the orginal sales prices which were published public during the boom years and used as comps for other sales were never viable sales in prior years. Will the former sale price numbers be restated because they were wrong, full of errors republished to the public? Will they be restated on local services like Zillow and Refind? Sure does not seem that way.
Pretty much every sale in prior years is bogus considering the loans are being restated yet the public somehow still believes they are valid. An this is just the subprime. Now that the Alt-As are coming down the road, just another example of how bogus these sales were. Even if some past buyers were able to make the payments, they still overpaid due to comps. Bogus as hell!

Bank of America estimates that about 45,000 customers will qualify for its plan. The offer will cut total reduced principal by about $3 billion.

Some banks said they have already reduced principal on some mortgages. Wells Fargo & Co. said Wednesday it has modified more than 52,000 adjustable-rate mortgages that it inherited through its acquisition of Wachovia Corp. in late 2008. As of the fourth quarter, the bank also had reduced the principal on those mortgages by more than $2.6 billion.

Sounds like a bailout to me. Obviously to censor the public from foreclosures. Now that foreclosures will come to a halt, "prices have stabilized." I've been hearing that we are getting out of the recession, and prices have stabilized for the housing market every single month since 2008.

I feel that all these government programs to encourage buying were a waste of time. Low interest rates? Sellers are quick at adjusting their prices higher so that they are the ones taking advantage of the low interest rate. $8000 credit you say? The sellers are quick to increase their prices by $8000.

Maybe it would have been a better idea from the get-go to just spend government money reducing all these principles rather than a $750b bail out and the trillions of dollars buying MBS's.

Principal reductions are actually a GOOD thing. They help restore house values to a realistic level. There are a couple of problems with the BofA plan however:

1. They are only rolling it out to 45,000 people; mostly sub prime and liar loans that should have never been written in the first place.
2. It's not a real principal reduction. What they do is if your house is worth $200,000 and your loan balance is $250,000, they take $50,000 off your loan balance, but, they put it in another loan in your name that you don't have to pay on unless you leave the house or stop paying on the mortgage.

So, the problem is, once you take one of these, you're still stuck in your home. This doesn't help people that just want to sell their houses and not take too much of a loss. This is designed to keep people in their homes paying on their debts.

It does, however, help reduce the value of other houses in the neighborhood in the long run, which is a good thing.

This is all based on the idea that people who have lost jobs want to permanently stay in areas where there are not going to be any jobs for many years. That seems crazy.
Do these rejiggered loans become recourse? If so that
again only helps the bank.
What gets me is that I know lots of people who want to buy and have the money and credit rating to do so but banks won't deal with them at all and focus endlessly on extending "ownership" by people who
have no realistic chance of ever paying off the loan even with a greatly reduced balance.
That's why sales are down because qualified buyers are tired of wasting time trying to buy properties that the banks apparently don't want to sell.
Meanwhile local foreclosure sale notices have tripled in the past few weeks.
Go figure.

This is total crap. There is no way someone who made a bad decision should get a retroactive discount on his home. This would mean that these people will get the same price as the prudent savers were waiting for, plus a few months with no rent.

It's come down to a business decision on the part of BOA to keep these people paying their debts. They know full well that people under these kinds of situations are likely to walk away, and thus really hurt them. Foreclosing, holding costs, reselling costs are all expensive. These people aren't getting some hand out that is meant to help them, it's meant to ensure the banks don't lose more money. Simple business decision.

If lyoungblood is correct, these people aren't getting a deal at all. They're getting screwed by the same people who told them they could afford these loans in the first place. It sounds like if they try and sell, they'll have to repay the full amount, essentially the bank gets all their money back in the end. They just get what appears to be a discount.

I'm betting they won't put them at par with comps, they'll bring them down to a 20% underwater pricing. Just enough to keep them interested in keeping the house, but screwing them over non the less.

I think your right pkennedy so far it seems like most of these programs aren't really a good deal. I hear that some of the refis just extend the loans. I suppose the bank is always going to try and get their money in one way or another.

Principal reductions are actually a GOOD thing. They help restore house values to a realistic level.

They really don't, you know. That's one of the snags: the adjusted mortgage balance will not reflect in the value assessment. I'm guessing this means you'll still be paying taxes for the original price, too.

What would make sense is if the government created a much less expensive program in which distressed home debtors were given a modest relocation stipend and also acted as guarantor on any lease agreement so that said owner could rent someplace while rebuilding their finances. Instead, the policies in place encourage debt bias, and fosters the idea that housing appreciation is dark magic that defies the established laws of economics.

Principal reductions are actually a GOOD thing. They help restore house values to a realistic level.

What and whose values? .. will be published publically and factored into current numbers sales figures, will US Census be updated. Nope! Nada ! Zip ! If anything buyers are more in the dark then ever!

what happens if the "owners" decide to sell the house down the road? do they get to keep the profit if the price go back up?

The government is paying the banks to do these deals.

This is completely unfair to anybody that rents.

I guess the objective here was not to make homes affordable. The objective was to keep the property taxes high to benefit the states. Bravo. They will have stabilized home prices by doing this.

HousingWatcher says

This is not a bail out. No govt. money is being used.

It might not be a bail-out but rather a result of the bank being bailed out. Now they can afford to lower principles and take a lesser loss. the bank wouldnt be in that position if the bank had not been bailed out. So in a sense, it is government money being used er uh I mean our money.

fil says

I think your right pkennedy so far it seems like most of these programs aren’t really a good deal. I hear that some of the refis just extend the loans. I suppose the bank is always going to try and get their money in one way or another.

Some do reduce monthly payments, but not by much apparently. HAMP seems to have reduced them by only $500 a month on average.

That isn't much wiggle room this day and age before you end up having to default, particularly if you take into account all the extra debt people these days carry.

HousingWatcher says

This is not a bail out. No govt. money is being used.

And so it is official. More bailouts with government money.

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/03/25/financial/f063429D63.DTL

I'm betting many of these loans are multi pronged. I haven't read too much into them, because I'm really not worried about home owners who take this path getting a great deal. I know the banks have been around (hundreds of years in some cases) and will still be around long after everyone here is dead. They're good at what they do.

I'm betting they're reducing the loans just enough to free up a bit of cash so the home owner fees "rich" again. They're dropping just everything just enough to prevent strategic defaulters, and probably a few non strategic defaulters from walking away. They're probably extending these mortgages WAY out there to do this. The home owner will be poorer in the long run from this.

Of course if they were stupid enough to get involved in this, after 30 more years, they'll own a property and hopefully be less likely to drain on society later on in life, when they realize saving $100/year for retirement doesn't work, and that their $3000 in savings isn't going to carry them through retirement :)