White House, banks, in rate-freeze deal?

Good morning. The Wall Street Journal is reporting today that the White House and major lenders are about to announce a deal under which lenders will freeze the interest rates on sub-prime loans.

"The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled sub-prime home loans, according to people familiar with the negotiations."

More: "Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase."

The coalition of lenders in in talks with Treasury Secretary Henry Paulson (pictured) includes Countrywide Financial, Citigroup, Wells Fargo and Washington Mutual, the Journal reports. The arrangement sounds similar to the one announced recently by Gov. Schwarzenegger. 

So many questions: Will it make a difference? (Remember, sub-prime loans that go into default often fail before the rate resets.) Is it fair? (Millions have ARMs that will reset -- where is their rate-freeze?) Is it good policy? Does it send a message to consumers that poor financial decisions will not lead to negative consequences?  Are the lenders and servicers getting something in return? Regulatory concessions? Favors? Winks and nods?

These and more questions will be answered, I suspect, in the comment section. E-mail story tips to peter.viles@latimes.com.
Photo Credit: Treasury.gov

Comments

[Steve]

This was a given months ago. Believe me we are at a point where these lenders play or the Fed will come down hard. The election year prevails.

[Jax]

#1. This essentially penalizes people who have acted responsibly and rewards liars and speculators who made bad investments.

#2. Although this makes for good political grandstanding, it really won't do anything to stop the skid on housing prices. That is a can of worms unto itself because no investor will touch the types of securities where these mortgages were being bundled up and sold. If you can't finance the homes that have already been foreclosed on plus the ones that are being sold by homeowners because buyers will now have to get a loan the old fashioned way by proving their income and meet strict ratios for debt to income...........prices will drop.

#3. Most of these people bought these homes for the primary purpose of making money from them. Now that the reward of a fat profit is off the table, watch the rats jump off the mortgage ship.

#4 Median income needs to meet the median housing price. Nationally, the median priced home sells for $220k.

Damned politicians are all alike. You can put them all in a barrel, shake it really well but all you can pour out is crap.

[Inland Empire]

Looks like another win-win situation for the lenders.

[Inland Empire]

Looks like another win-win situation for the lenders.

[gregfromcali]

I guess the moral of the story is that the government steps in to intervene for fiscally irresponsible and greedy people if there are enough registered voters among them come election time.

[waitingitout]

In the end this will help so few borrowers it's hardly worth mentioning. Like you said, Peter, many will succumb to default because they couldn't even afford the teaser rate when you factor in taxes, insurance, upkeep, utilities...Many others will barely squeak by, assigning every dollar of disposable income to a house in which they're building zero equity - actually negative equity, since the smart money says it'll be years before the home is worth as much as he paid for it. They'll effectively be paying rent, at twice or three times the going rate.

If the deal stipulates that the home has to be owner-occupied, it doesn't even benefit investors who took advantage of a teaser rate to buy more house than they otherwise could. Most of those folks would rather just walk away anyway.

I just don't see who this really helps. Somebody smarter than me, please explain!

[Angel]

THIS IS BOGUS! What about those, like me, that got a 30 year fixed rate mortgage at 5.25% exactly ONE YEAR AGO! This sucks. I better get compesated come tax time. These people did a stupid thing giving and getting these loans. LET THEM SUFFER. God, I hate republicans. What happened to LESS government involvement? Isn't that a war cry for the republicans?

[Tim K.]

This will not have any appreciable effect, because the number of loans that will be allowed to hold at introductory rates will be astonishingly small.

The reason is this - most of the volume of the loans which were made are no longer held by the banks themselves. They have been bundled into SIVs that are held in retirement accounts and pension funds. An example:

Suppose you bought into Tim's Super Fund, which yields 7% interest over 10 years. This fund was made up of loans which were purchased from hundreds of banks. You, as an investory, bought $5000 of this, expecting to get your $5000 back plus interest after a few years. Now, imagine, that someone from the government orders that these homeowners don't have to pay the expected rate. What happens to your 7% rate? Right, it goes WAY DOWN. Maybe even NEGATIVE. Who would buy into that fund in the future? What value does it have now?

That's precisely why this will not happen. The naive folks putting together this bill will come to this realization, and like Arnold S, will find out that in fact, this affects less than a few percentage of the total distressed homeowners. But they've already made waves, so for political reasons, they will announce it anyway showing "we care, we're doing something" when in fact, this will have almost no effect at all.

[anon1137]

So far, this looks exactly like the plan announced by Schwarzenegger a week ago. It looks like the federal government isn't putting in any money, thank god (aside from all the help the Fed is giving to bond investors and the hedgies).

I'll be curious to see how much in fees gets tacked on to these mortgages in exchange for extending the initial interest rate out another 5 or 7 years.

[Michael Snyder]

"Pay no attention to the man behind the curtain"...
This is clearly just another smoke screen / photo opp. to prop up Wall St. There is no "politically correct" solution to this one so the government will once again demonstrate its' impotence.
The reality is straight-forward and it’s just wrong for the government to ask us to pay someone else’s mortgage. It doesn’t matter how it’s packaged, this purposed bail out is about supporting inflated stock prices, not keeping unqualified buyers in their homes. Instead of reaching into our pockets the government should be enforcing the regulations already on the books.
If the government is really concerned about the “little guy” they should put thieves like Angelo Mozilo behind bars and use their assets to assist foreclosed upon homeowners in finding housing they can afford.

[jason]

Responsible investor's/Home owners who refinance and those who buy a new home will pay for this bailout in the form of higher points, fees and interest rates. The money has to come from somewhere. The government doesn't have the money nor do the people who took out the loans.

This program should be paid for by stripping the IRS mortgage interest deduction from these buyers to fund such a deal.

[jaded]

mainly, this benefits the politicians, who get to pretend that they're effectively dealing with a crisis while they stand around for the photo ops and the 5-second sound byte for the evening news. It's all about keeping your name out there, baby, not about doing the right thing.

[jaded]

and another thing....if the defaulters can't pay their mortgages with the higher rates now, how are they going to pay them when the rate freeze ends? Are they all going to get $25,000 raises in the next couple of years?

[waitingitout]

Angel,

While you were whining about your 5.25% 30 year fixed, did you stop to think of the millions of people who had to settle for mortgages in the 8-10% range just a few years ago? Or the folks who can't do better than 6.5% now? Do you lie awake at night wondering if the guy next to you on the flight to Chicago paid less for his seat than you did?

You know what you get that these folks being "rescued" don't get? You get to live in your home without fear that you're a leaky roof away from foreclosure. In a few years, you'll own the sucker. They won't own anything but a mountain of debt.

The "how come HE gets to do it?" routine is tired. The "I better get compensated" routine is even worse. The "let them suffer" attitude is mean-spirited. The anger at Republicans is bizarre. You want more government involvement except when it benefits others at your cost. If you represent the prevailing attitudes of democrats, no wonder we have that jackhole in the White House.

[Rob]

Okay Folks,
Here is how the political machine works. We are nearing election time and all bets are off. If the "Republicans" sit on there hands like most of them would prefer, the Dems would hammer them for letting poor Aunt Jane being forced to live in the street. And you know MSNBC will follow her with a camera for weeks from dumpster to dumpster until they muster a tear from your stone face. Now, obviously the Dems are going to milk this for every vote they can. I think I can hear the Dems spin machine starting up. This is how it will sound to the typical voter pool. "Those bad Republicans let this happen."

And, Hurricane Katrina was a plot by the Bush administration.

[TakeFive]

This won't work.

Simple explanation: market psychology.

Homeowners will not continue to pay for a home with negative and declining equity. The attitude towards the home becomes one of disgust very quickly. I saw this during the last downturn and and am begining to hear this from a coworker who bought in '05 and is facing a reset in Jan.

Even if the payment didn't reset, it is barely manageble, and the taxes are onerous, which no suprise are not in an impound account (but hey, it lowers the monthly payment!).

So freeze the rates all you want - it won't matter.

----------

If reader Nicky, who is facing this situation, it still out there - would you stay in your home and continue making payments if the rate was frozen? Or would you still want out?

[TakeFive]

For those that want to frame this as a Republican scheme, here's what the Democrats are up to:

H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007

To amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income, and for other purposes

Sponsor: Rep. Charles Rangel [D-NY]hide cosponsors
Cosponsors [as of 2007-10-20]
Rep. Robert Andrews [D-NJ]
Rep. Shelley Berkley [D-NV]
Rep. Earl Blumenauer [D-OR]
Rep. Virginia Brown-Waite [R-FL]
Rep. Joseph Crowley [D-NY]
Rep. Rahm Emanuel [D-IL]
Rep. Philip English [R-PA]
Rep. Chaka Fattah [D-PA]
Rep. Gabrielle Giffords [D-AZ]
Rep. Barton Gordon [D-TN]
Rep. Rush Holt [D-NJ]
Rep. John Larson [D-CT]
Rep. Sander Levin [D-MI]
Rep. Carolyn Maloney [D-NY]
Rep. James McDermott [D-WA]
Rep. Kendrick Meek [D-FL]
Rep. Jerrold Nadler [D-NY]
Rep. Richard Neal [D-MA]
Rep. William Pascrell [D-NJ]
Rep. Earl Pomeroy [D-ND]
Rep. James Ramstad [R-MN]
Rep. Allyson Schwartz [D-PA]
Rep. Zackary Space [D-OH]
Rep. Fortney Stark [D-CA]
Rep. Christopher Van Hollen [D-MD]

http://www.govtrack.us/congress/bill.xpd?tab=
main&bill=h110-3648

[Bubblewatcher]

While it's absolutely true that this is political grandstanding at best, and will help so few home-debtors it's practically meaningless, the broader implications for the marketplace are, in my estimation, rather scary. For starters, it represents after-the-fact government interference with private contracts signed and agreed to by both parties. If these contracts are fraudulent, fine -- prosecute somebody. But if they are voluntarily violated by one party (the bank) with the government's blessing, what does that mean for these lenders' ability to collateralize these loans down the road? My bet is it'll be the end of subprime, the end of CDO's and perhaps even the end of mortgage brokers, who rely on their ability to sell these loans to investors in order to stay in business. Who in their right mind is going to invest in mortgage-backed securities in the future if the threat of government intervention like this is looming?

The result would be much, much tighter lending standards (say hello to 20% downpayments & 720 FICO scores). Which may be a good thing. The irony, of course, is that if nothing else crashes home prices quickly, it'll be this.

As for waitingitout's bleeding heart contention that we're all a bunch of heartless vultures...might I remind him that I've no doubt these people would have been better off renting from a private party and saving rather than renting from the bank at two or three times the cost?

[Ace]

This isn't a bailout that will cost us any money. The banks are agreeing to keep the 'teaser' rates for these loans at their original amount of 7 to 9 percent instead of resetting. Of course the banks will agree. They would love to have the mortgage payment with 7 to 9 percent interest instead of having to foreclose on a house that owes 120 percent of it's value.

The banks are not doing these people a favor. They are saving themselves tons of money.

[National Bubble]

This plan is morally wrong and most likely will not work.
This real estate crash is not just about subprime or interest rates or even a credit crunch. The housing bust is about home prices not reflecting the economic fundamentals. In a normal market, consumers will only buy houses they can afford. During the boom years, people bought houses they couldn't afford assuming that they will keep going up in value and they would be able to sell it for more than what they paid for. Now that the party is over, the speculators are gone and the economic fundamentals will dictate how much people will pay for home.

Responsible consumers should call the White House and let them know that we oppose a subprime mortgage bailout. Otherwise, we tax payers will end up paying for this.

http://www.nationalbubble.com/
say-no-to-the-subprime-bailout/

[Problemwithcaring]

You see how NeoCons turn right wrong and wrong right?

6 months ago Peter blogged here about Hillary Clinton's plan to sat aside a billion dollars to counsel borrowers with salvageable credit situations; her policy was attacked from posters claiming that it was too generous and called typical liberal overspending (this despite the fact that Condi misplaced over $1 billion in war funding at the State Department, but who's counting?)

Fast forward and your man George Bush wants to offer a U.S.–backed bailout to some of the wealthiest FINANCIERS ON WALL STREET and many of the same homebuyers who misrepresented themselves on their loan documents.

Suddenly, the stock markets are rebounding and all is right in the world.

You know: I think this doesn’t stand a chance in he11 of going anywhere, but *IF* it does, the first thing I am doing in the New Year is calling a Countryfried Broker to buy that pre-War shack in El Sereno.

[jdj]

THE biggest enabler in all this mess wasn't the low interest rate (as many have commented -- They were 8-9% sometimes), the ability to buy a home with an interest-only loan or Option ARM -- In effect buy a home without paying principal for 3-5 years -- was it.

So that being said why is no one asking the most relevant question:
Will current interest-only loans (and Option ARMs) not require principal payments to begin when the loan resets, if rates are frozen?

[Anonymous]

waitingitout - you're an idiot. How can you possibly not understand Angel or anyone else's anger with this bailout? First of all, anyone who had to 'settle' for a mortgage of 8-10% just a few years ago as you put it had numerous opportunities to refi into a 30 yr. fixed in '05 and '06 when the rates were in the low 5's. Instead, these folks took out home equity lines of credit and bought jetski's and a new Tahoe to park in front of their McMansion in Riverside. That is why responsibile people are pissed-off about this mess.

[Joe Shmoe]

When was the last time George Bush cared about anyone not named Bush, Rice, Rumsfeld, al Faisal, or Saud?

Jaded is of course correct, this is fundamentally political PR. But to try to make it effective PR they have to "save" someone from foreclosure. A rate freeze plan could save a few people from foreclosure, and it could slow the process for some others . . . but absentee owners seem like they will be excluded, borrowers not meeting their current payments will be exlcuded, loans not held directly by the participating institutions (i.e., held by SIVs, etc) will be excluded, and so on.

The freeze plan will have a small effect. Prices will continue to drop. People who bought in the last year or two will be underwater for 8 to 10 years.

Waiting it Out's reply to Angel is spot on target, though I would add two points to that.

First, Angel outght to pat himself on the back for getting such a great rate on his mortgage, we ought to go after him with pitchforks and burning torches because his getting such a low rate means that the rest of us in the future will need to pay more because the godly lenders will need to make up money from the slim margins they get from Angel, not to mention the losses they will incurr from all the foreclosures Angel wants to see crash and burn.

Second, although Angel can boast about his great mortgage rate, he also says he bought one year ago, for which he should kick himself for his own bad business sense. We can all gloat as his home loses 20% or 30% or 40% or more of its value over the next 3 or 4 years. ..

Let's start the chant now. No bail out for Angel!

Meanwhile, maybe some of the neighborhoods with shuttered foreclosed houses will become homes to squatters and drug shooting galleries and then the squatters will become muggers who venture to Angel's pretty suburb . . .

Seriously, folks. The moral hazard argument has merit. So too does the argument that taxes and good government are part of living in a civilized society. The bad debt in the system needs to be expunged for the economy to recover. But the social costs of this need to be addressed, too, unless we want to the country go totally to shit . . .

Joe Shmoe

[Cal]

I think it will work.

By work I mean it will slow down the oncoming train wreck and give the market and the govt more time to deal with the issue. It is more about the financial markets blowing up than the homeowners losing their homes.

But in the end the result will be the same. It will just be the same in real dollar terms. What will be sacrificed is transactional volume, realtors and loan officers can now officially pack their bags.

The moral hazard argument isnt even part of the discussion. As I believe Paulson put it, the fire department still comes out even if you were stupid enough to smoke in bed.

[Cal]

I saw this at Housing Wire (I had let my WSJ subscription lapse during the move):

"Treasury officials say financial institutions are likely to set criteria that divide subprime borrowers into three groups: those who can continue to make their payments even if rates rise, those who can’t afford their mortgages even if rates stay steady, and those who could keep their homes if the maturity date of their mortgages were extended or the interest rates remained at the teaser rates. Only the third group would be eligible for help.

The creditors are likely to look at whether the borrowers have equity in their homes, despite falling house prices, and whether their incomes are holding steady."

It will be HIGHLY interesting how they even come up with the various figure for making the decisions. Do you accept the income on the stated income application or go back and actually underwrite the file for real post-coitus?

Just imagine someone like CFC who originates/underwrites the loan and retained servicing rights. Now the loan holder tells them to go back and underwrite the loan and see what the REAL deal is.. imagine how much fraud they find.. imagine how bad they will look..

The devil is in the details, this'll be fun to watch.

[arroyogrande]

"White House, banks, in rate-freeze deal?"

To early to make any predictions on the effects of such a deal. The devil is entirely in the details, as are any unintended consequences.

Details such as:

1. What percentage of ARM resets will qualify, and what percentage of foreclosures will it ultimately stop/postpone?

2. Related to #1, if you lied about your income, or on any loan document, are you still eligible?

3. Will the interest "forgiven" each month be added back to your loan balance (ie you still owe it, you just get to pay it later...by borrowing still more money)?

4. If you don't eventually have to pay it back, will the interest "forgiven" each month be taxed?

5. What if you can't pay your ARM reset because you took out a $400,000 cash out refinance with a teaser rate on a house you already owned? Do you get relief there as well?

So many questions...

- arroyogrande

[Dizzy Dean]

I doubt this bailout plan makes much of an impact. The Boston Globe reported last week that this year 8 states have put up nearly $1 Billion toward programs for helping distressed mortgage holders refinance and thus far fewer than 100 homeowners have actually qualified for assistance and have actually been helped.

http://www.boston.com/business/personalfinance/
articles/2007/11/21/refinancing_programs_omit_
many_borrowers/

[Andrew]

TakeFive,

I think that's a great point you made about the "disgust" many current homeowners have. I actually am one of them. My wife lost her job last month and is having a tough time finding another one. We have some savings and could continue to drain it to pay the mortgage, but we're probably $50-$100K upside down at this point with no end in sight. We sat down together the other night trying to come up with a plan that would be best for us and our family and unfortunately foreclosure looks like the best bet. It's sad and more embarrasing than anything, but we made a bad decision, have tried so hard to stay afloat but in the end we don't know what we're fighting for.

[MyLessThanPrimeBeef]

Just adding to Cal and Arroyogrande's lists:

1) How long will the rate freeze be good for?

2) If the Medellin drug cartel owns some CDO's as part of their retirement plan for their employees, will we need their approval? What if the Iranians also hold some CDO's? Or the Syrians? The Russians? The Venezuelans?

[Tombstone Realty]

Yeah, I'm angry that I didn't fall for this teaser-loan crap, and now it looks like those who did are being rewarded blah blah blah - but I also know that:

A) the speculators are still going to walk away - it's just a smart business move. In the corporate world, if a product struggles in the market, you drop it. Same goes for a house.

B) even if they freeze the rates, people will be struggling to pay what they owe, and not have money for what they "used" to buy all the time - leading to a recession, which will lead to loss of jobs, which will lead to foreclosures. All this program does is *maybe*, MAYBE, help 1 in 200 from going into foreclosure now, instead of 6 months from now.

Either way, I won't be able to afford a house myself because I will either not qualify for the new loan regimes as a single income, or I'll be unemployed by the upcoming recession and living out of a box outside of Vroman's (because I'm classy like that).

What this really shows is how frightfully ignorant all levels of the government are, from the Federal Reserve (yes, Greenspan too) down to Sacramento, about how the economics of this country operate. I'd love to know when it became "okay" for the Profit Raiders of the stock market to pressure our Reserve into making stupid policy decisions, just so they can skim an extra 1.2 cents a share.......

[Ace]

Andrew,

If you are only $50k-$100k upside down, do not get foreclosed upon! Get the house for sale today and get the bank to accept a short sale without recourse.

[TakeFive]

Andrew wrote:

"We sat down together the other night trying to come up with a plan that would be best for us and our family and unfortunately foreclosure looks like the best bet. It's sad and more embarrasing than anything,..."

Andrew - first, don't be embarrased. You lost a hundred grand, the "experts" lost a hundred billion. Buck up. Attitude is everything.

Second, don't allow the property to slip into foreclosure without a fight. Get the property listed at 20-30% below the lowest price on your street. Get an offer to submit as a short sale - even if you need to lower the price again or talk a friend into making an offer. It will take 60 to 90 days for the bank to churn through the process - and possibly reject it. But at least you'll be in the system and through the waiting period.

You're going to need a realtor for this (I know, I can hear the howls now), but the loan servicer will not talk to you and you need to show that you are trying to sell it. Make it clear to the realtor that work and patience will be involved, but you are not expecting anything out of the sale other than to perserve your credit. They still get the 6%.

You will of course have to pay the taxes on the difference, but this could be a lot less than what the bank eventually auctions the property for. Who knows H.R. 3648 might even wipe that out too.

Good luck. You've got lots of company.

[Tex]

As I see it, the politicians' reaction to this situation is based on (1) a desire to prevent recession by helping banks, corporations and Wall Street, and (2) an assumption that "homeowners" are more politically valuable, and more likely to vote, than "renters," so government should focus on helping the "homeowners."

Motivation #1 is not going anywhere, so I think there will be some form of bailout eventually. However, if motivation #2 is challenged, perhaps there are ways the inevitable "bailout" can be structured in a manner which rewards saving, fiscal responsibility, and hard work rather than rewarding fiscal irresponsibility, overspending, and speculation.

How about tax-free savings accounts that people can use to save for a downpayments -- you deposit pre-tax into the account and once you withdraw the money, you have to use it for the downpayment on a principal residence within X months, or you have to pay taxes. How about financial incentives or tax credits for qualified buyers (20% down & 30 year fixed) who buy foreclosed properties or REOs in neighborhoods blighted by foreclosures, with the intention of making it their principal residence? How about tax credits or low-interest full-doc loans for buyers to fix up foreclosed properties in these blighted neighborhoods?

How about (gasp) increased tax incentives for banks who sell their REOs at discounts to qualified buyers? I hate to say that since the banks are the root of the problem, but right now they are stubbornly listing their REOs at last year's prices, with the result that those houses are vacant, blighted, boarded up, attracting squatters, bringing down the neighborhood, etc. The way to solve that problem is to get a buyer into the house; however, it seems the banks need an extra incentive to do that.

I am just throwing out half-baked ideas for discussion purposes, but the point is, if the government is going to give out free money in an effort to prop up the housing market, why not do so in a way that rewards fiscal responsibility?

As far as freezing teaser interest rates, I just don't see how that is going to help. If you owe $600K and you earn $60K, how are you *ever* going to pay off that principal? Seems to me freezing the teaser rate is simply postponing the inevitable.

[Brother Joe]

What the fed is trying to do is put a "Patch" on someone who needs "Emergency Surgery"!...

To avoid a "Catastrophe", they need to give these Borrowers a 30-year fixed work-out...

I don't understand why the Gov't is always pandering to Bankers....

They created the mess by providing "Unrealistic Loan Programs"....
It's a bogus proposition....

[Rich]

" think that's a great point you made about the "disgust" many current homeowners have. I actually am one of them. My wife lost her job last month and is having a tough time finding another one. We have some savings and could continue to drain it to pay the mortgage, but we're probably $50-$100K upside down at this point with no end in sight. We sat down together the other night trying to come up with a plan that would be best for us and our family and unfortunately foreclosure looks like the best bet. It's sad and more embarrasing than anything, but we made a bad decision, have tried so hard to stay afloat but in the end we don't know what we're fighting for."

There you go, you hot-under-the collar types who are so sure that the only people in trouble with their mortgages must be speculators or criminals. You want so badly to blame somebody for the high housing prices that made you angry before that you're looking for somebody to punish now, but it's never as easy as you want it to be. Andrew was brave enough to throw some cold water on those hot tempers by sharing his real situation with people who are obviously so much wiser and more virtuous than the rest of us that THEY would never make any mistakes with life's big decisions...

[Robert in Palm Springs]

I agree with Cal in that this will buy time for the economy but do nothing to solve the fundamental problems we face.

The complete lack of underwriting standards created this mess because Wall Street needed new mortgage money to fund their mergers and acquisitions and LBOs. To them it had nothing to do with people owning homes, it was about making more money for themselves as it always is.
Because the standards were so lax or nonexistent, many of these people will not be able to afford their homes regardless. As another writer pointed out, they will be renting at a premium and creating more debt for themselves every month they stay in the house.

Once again the FED is pandering to Wall Street as they have all week long driving the Dow up when all the economic news of the week was worse than expected. Once again the Plunge Protection Team to the rescue. Now we have the mortgage rescue package to keep pumping up the markets artificially. It is not just a subprime problem. It is increasing unemployment, low wages for the jobs that do exist, and a society that buys everything on credit (that they have now maxed out) that is the problem AND Wall Street which has replaced economics with finance and has leveraged everything to unimaginable levels to enrich themselves and produce nothing in terms of real goods or services.

Our economy is totally out of balance. The greatest borrowing and spending binge of all time must come to an end. However, the Republicans know it is political suicide to let a recession happen before the election, hence all this interference at all levels of our economy, not to mention the faulty data they continue to generate.

As many people have pointed out, real estate prices are too high relative to household income. Prices must come down. However, when this happens, the Virtuous Circle economic platform (created by Greenspan and continued by Bernanke) no longer works because it depends upon ever increasing asset prices such as property and stocks.

It is time for fundamental change in this country. Our values and expectations are not realistic. We cannot live on credit forever. With the collapse of the residential real estate market, the coming collapse of the commercial real estate market and ultimately the stock market, the wealth effect will be wiped out. Finally people will have to have real money to make real purchases in real time. I do not think the adjustment will come easily, but it essential for our society to survive. Sometimes a little suffering is helpful to get us back to reality.

[LaLaLa]

Is there still time for me to purchase a home, and qualify for the "Federal government interest rate"?

[toby]

The White House doesn't what all this on their watch, so they are trying their best to push this Sub-prime mess to the next White House.

That's why they are saying "temporary"...The simple fact of the matter is the lenders literally cannot afford to freeze these super low interest rates. They will go bankrupt if they do.

[Andrew]

TakeFive and Ace,

Thanks for the reply. Its a scary place to be right now.

I do have one question though. Don't we need to be delinquent on our payments for the banks to even begin to think about accepting a short sale?

[toby]

Oh and I think this is a very interesting article about the effects of foreclosure and Renters.

http://www.cnn.com/2007/US/11/30/
willis.rentervictims/index.html

[Enlightenment]

I'm have always been in the opinion that your signature means that you will do what the contract says. If you signed a messed up contract, then it is your fault, and no one should bail out your dumb a$$.

At most, if they help anyone, it should ONLY be for people that ONLY own one home. The house flippers and greedy scum that helped cause this mess should get what they deserve...nothing!!!

The politicians are ONLY doing this to save their a$$ in the 2008 election year. I will vote against any politician that votes in favor of supporting house flippers and multiple home owners!

[are they crazy]

So many things wrong here. Starting with no one was "forced" to settle for any loan because no one was forced to buy a house or to buy a house that was unaffordable for them. How many of these people facing foreclosure had a decent loan and CHOSE to refy or HELOC? How many of them already received hundreds of thousands in tax free money and spent it all being nouveau riche wannabes? Who many are 2nd home owners, failed flippers or investors? How many either lied about it being a primary residence or lied about their income on the loan application? The press and public are just blindly accepting these sob stories without really investigating the truth. And who exactly is going to decide who gets the bailout - the same underwriters and mortgage clowns that made the bad loans to begin with? What will the criteria be to determine who can afford to pay the reset? What if folks maxed out credit cards and bought tons of junk on credit and now say they can't pay their reset? What if they have luxury cars or heavy gas expenses for gas guzzling SUVs? What if they have a house full of electronics, closets busting with more clothes than anyone needs? I seriously doubt there are very many REAL victims of job loss, identity theft or out and out rip off - most are people that were greedy and/or stupid and the best reward they could have to start over and learn to live within their means. - That would be better for the entire society.

[waitingitout]

To Anonymous: calling someone an idiot while hiding behind an anonymous moniker is one sure way to show the world what you're made of. Oh, and you misspelled "responsible." But I'm the idiot.

The point I'm making is that financial responsibility is its own reward, just like health or education. Borrowers facing resets they can't handle are going to be perpetually swimming upstream whether this plan goes through or not - a fate Angel - thank heavens - will not have to face. They're not "getting away with" anything. (If you think this is a bailout, you have to read the fine print: at best this plan postpones the inevitable short sale or foreclosure. At worst, it does nothing.) So it baffles me that Angel or you would waste your time worrying about something that doesn't materially affect you. You have your homes. Let it go, already.

One more thing: if the lenders and borrowers are allowed to SUFFER, and foreclosed homes are dumped onto the market en masse, the net result will be further downward pressure on home values. This means Angel and anyone else in his/her camp will be even more underwater than they are now. Like it or not, your home value is directly tied to the fate of borrowers facing resets. I wonder if you stopped to think about how this might impact you on the rebound, would you be so bloodthirsty?

Bubblewatcher - you completely missed my point. I believe borrowers facing resets they can't afford are living in a hell of their own creation, and all this plan does is extend their stay. My point is that they're already paying for it, and this plan will ensure that they continue paying for it, by shelling out twice the cost of rent on a mortgage, yet building no equity. I just don't see the need to pile on.

[anon-sucker]

Bought a place w 20% down, but took an I/O.

Okay. I thought I'd have 3 years of a little extra cashflow before refi-ing into fixed. I thought having the down would keep things cool. I was wrong.

But at the time my loan, otherwise, was totally tame compared to what Countrywide, et al, were offering me.

So, now, I'm ready to refi, but about a mile away, in the same zip but not as nice an area, a boat-load of crappy conversions have come online at giveaway prices and comps have crashed.

I can't get my place to appraise at enough to get the loan.

I'll get through this, but I am pissed.

I should have taken 3/27.

I forgot the number one rule of Capitalism:

A little greed gets you in trouble.
World-class greed makes you RICH!

[Andrew]

Also, if anyone has any reference or guide or advice to start the short sale process, please feel free to post.

Thank you.

[Cal]

Andrew,

Have you called your loan servicer yet? They can do a lot.. and yes they can do more if you are defaulted (perversely).

But they are really out to get the most money out of you guys as possible, so its tough.

Heck if I was in a bad situation and I know enough about the system I could string a servicer along for 5 or 6 months without paying (or paying a little), sure my credit would be hurt at the end.. but i'd rather live for free for 5-6 months and save some money if I was just going to lose the house anyways. The hit to the credit on a foreclosure is significant though, but it isnt the end of the world, FICOs can be worked on http://www.creditboards.com/forums/ is a great place for learning how to remove negative items and get more credit.

As to how to start a short sale, which city are you in? I'd find a local realtor who is a short sale specialist, they should handle the short sale package with the servicer, but I would contact the servicer first.

[Cal]

I cant remember if I posted this, please delete if a duplicate

From National Mortgage News:
http://data.nationalmortgagenews.com/columns/hearing/

"Meanwhile, the there is plenty of talk in the media about Treasury unveiling a big plan where servicers will not "reset" subprime ARMs. Of course, many servicers, where they can, are already doing just that. One mortgage executive told us that the big problem is payment-option ARMs where the consumer has a rate of 3%. A rate that low cannot be artificially maintained by servicers. In other words, if Treasury thinks a servicer (or end investor) will roll over a 3% rate, the government is dreaming. One industry veteran — requesting his name not be used — raised another issue: "OK, so you keep the rate the same for the subprime borrower. Then the prime borrower who has been current all along and who also has an ARM says, 'Hey me too. Keep my rate the same.'" This industry vet said Treasury has to either come up with a plan where all ARM rates are frozen or none are. "Think about the lawsuits," he said."

[Ace]

Andrew,

Cal is right when he says the loan servicer will be more apt to work with you if you are behind... however, times are changing.

Get with a good agent and have him/her pull the comps. When you approach the loan servicer (who is now your new partner), explain why you will not be able to continue making the payments. Then show him/her the inventory list that your agent pulled. Once the loan servicer sees a year or two supply of inventory, they should try to help.

Cal also gave good advice on how to string them along for 6 months. If you can see that you will not be able to make ends meet in the future and plan on losing the house, I would personally stop paying the mortgage. If you think that you are going to keep the house, I would keep the mortgage current and stop paying other debt (if you have any).

[TakeFive]

Andrew wrote:

"I do have one question though. Don't we need to be delinquent on our payments for the banks to even begin to think about accepting a short sale?"

That was the case when I needed to do a short sale in 1995. My Realtor told me the lender had no reason to work with me if I was current. So I dropped the listing price and quit making the payment. It was a scary step - I received the notice of default (NOD) then the notice of trustee sale (NOTS), but by then I had an offer for about 60% of the loan balance the bank was willing to take, so they held off on forclosure. I closed the deal and my credit only showed a "settled" instead of a foreclosure.

What the banks require or are willing to do now - I don't know. But at one time I wouldn't have believed things like short sales and loan modifications were possible.

I would suggest you call your lender and ask which real estate agents are handling REO's in your area - tell them you're an investor. Then call these agents and explain the situation. Since they are already working with this lender, they should have the inside track to their workout department.

You need to act fast. The workout departments are going to be swamped. I'm looking at a neighborhood where a friend needs to sell. Her loan balance is 375,000 and the short sales are starting to pop up at 260,000. The 20 or so listings nearby for 380-420K are screwed. Their probably going to need to go short or foreclose.

[Red]

"waitingitout - you're an idiot. How can you possibly not understand Angel or anyone else's anger with this bailout? First of all, anyone who had to 'settle' for a mortgage of 8-10% just a few years ago as you put it had numerous opportunities to refi into a 30 yr. fixed in '05 and '06 when the rates were in the low 5's. Instead, these folks took out home equity lines of credit and bought jetski's and a new Tahoe to park in front of their McMansion in Riverside. That is why responsibile people are pissed-off about this mess.

Posted by: Anonymous | November 30, 2007 at 10:09 AM

THANK YOU!!!.........WELL SAID!!! Because that is EXACTLY what happened. I can't count the number of neighbors we knew who did just that!!!!

We bought in 2000 at an 8% rate and then refinanced at 5% when rates dropped. What we did NOT do is take out equity loans to buy that jetski and Tahoe for our driveway, but let me tell you, we were the ONLY one's we knew who did it this way, and everyone else thought we were NUTS for not leveraging ourselves to the gills. I lived on a fixed (higher than variable!) rate and drove a 10 year old Honda because I was not going to be one of those people who lost their homes because I was living above my means.

No, I do NOT feel sorry for those people. They certainly weren't crying or losing sleep for all those years when they were buying their big new cars, hiring trainers at the gym, and taking extravagent trips to Hawaii every year! Instead of trying to live within my means, I guess I should have been taking out those loans and going windsurfing in Hawaii too!

[Red]

Andrew - I feel for you as my husband lost his job in January. This was a lucky accident because we sold our house just before the crash, for full price - the subprime disaster had JUST hit the papers the week we were in escrow! We took our equity and moved out of state. We happened to move to a growing area, but this was all dumb luck. EXCEPT for the fact that we had lived so within our means for all of those years.

ALl of the anger you're seeing here is because I literally didn't know ANYONE like you. EVERYONE I knew was living way above their means, taking out interest only or variable loans so they could finance new SUV's, expensive trips and toys. My sister in law (no college education and combined make about $40k a year) used their equity to buy both daughters new BMW's, a horse and several trips to Hawaii to start! We were always seen as the schmo's in our community for having that fixed rate and driving the older car.

It was VERY upsetting to me this afternoon when I first heard this on NPR. They started the interview out by saying there were "Two kinds of borrowers"....the first were regular people who had struggled to own a home even before the rates were to go up, - for these people they said the lenders considered them a "lost cause" and they would lose their homes....and the second group were the people who could afford it, but had been greedy. THESE people they said, were the one's who were going to get the help. I was OUTRAGED. Help the people who were genuinely TRYING to be homeowners NOT the people who could have afforded it but were greedy!!!!!! But that's not where the money is...they're going where they believe they have the best chance to recoup their money, and the poor family who really wanted to try to be homeowners are NOT it. THEY should be the people getting the help, if anyone.

Unfortuately, as has been stated ad nauseum here today, EVERYONE I knew (Thousand Oaks) was just living in the lap of imaginary luxury all of those years, and NO, I don't feel sorry for them.

[AD]

Tex: "...if the government is going to give out free money in an effort to prop up the housing market, why not do so in a way that rewards fiscal responsibility?"

This is brilliant stuff! I've been saving money for four years, waiting for home prices to come to an affordable level, and all of the ideas Tex listed would help me out tremendously, while also helping out the market. Tex, if you read this you should send these recommendations to your congress person.

[CM]

This is an absolute mess! This government is so #(*%#&& PATHETIC. The case for stepping in and stopping this madness was, oh say THREE YEARS ago!!!! They cannot do anything now without screwing up things more than they currently are.

Prices need to come down because nothing is supporting them!

[tthgcontractor]

Instead of trying to shore up the financial institutions with more borrowed dollars, I think the government should be building camps for all the people who are going to be homeless and unemployed after our financial system collapses. MSN's Jon Markman says that every dollar in real assets has been leveraged to twenty dollars and the global economy is now beginning to collapse like a house of cards.

[sheila]

Andrew - there are a lot of non-profits out there helping people like you. One i am aware of is called ACORN. they are vastly understaffed, but they are free, and they will make you go through a class on budgeting, etc. then will, i believe, advocate for you with your lender AND shop your debt to other lenders who might re-fi at a reasonable rate. not sure if it will help:

http://acornhousing.org/TEXT/fap8.php

good luck to you.

[joe shmoe]

Red and others confuse sub-prime mortgages with all kinds of other things, such as Home Equity Lines of Credit (HELOC).

Folks who bought houses more than 3 or 4 years ago have used HELOCs to buy BMWs and plasma Tvs beyond their means, or sometimes to pay medical bills, or sometimes to be bilked by con-men and con-women.

People who bought houses with sub-prime loans bought only in the last 3 to 4 years, for the most part, and they have never had much or any equity in their homes to withdraw through HELOCS (maybe some exceptions to the extent flippers used sub-prime loans).

Interest Only and Option ARMs are not sub-prime loans, and the greedy over-stretching folks who tooks those loans are not in the current proposal to have their rates frozen . . . but they will benefit just like all other homeowners to the extent that the freeze slows or limits asset depreciation by slowing or limiting the number of foreclosures . . . and effect that will be minimal, at best, anyway.

The people we should be angry at, in my oipinion, are GWB, the people who elected him, the fools who burned the US miliitary and US treasury in the invasion of Iraq and, oh yeah, all the people who benefited from the Bush/Greenspan Administration's artificial depression of FED interest rates down to 1% and abnegatiuon of regulation so that they could buy houses with 0% to 10% down and at mortgage rates of 4.75% to 5.5% on 30 year fixed loans . . . they benefited at the expense of our country's long term future, and now some of them still don't have enough understanding of where their good fortune comes from that they just want to see everyone else burned.

I'm with waiting it out . . . waiting it out, and concerned as hell about the social consequences of shuttered up neighborhoods, diminished public services, crashing public education, and more billions of dollars of national debt than I know how to count.......................................

And I'm just a Shmoe how drives a 15 year old car and has been waiting three years already for the bubble to deflate, and will be waiting at least another 1 to 3 years to deflate sufficently to make buying a house seem a sensible move.

Waiting it Out is right: good financial decisions are their own reward. Those who save and wait will get their chance, and the chance will be better if the society is still worth living in.

If you don't feel that way, I'm sure you can buy a big house in a war zone somewhere . . . .

Joe Shmoe

[Cal]

The more I can find about this thing the more it sounds like a non-started. They are asking the bondholders to give up there right to sue? So much of this really seems more like a way to save the original lenders from failing to underwrite bad loans. The bondholders are asked to give up a lot and in return the promise is "Well it wont be as bad (we hope) if you allow us to lose a lot of your money (of which we get pretty much carte blanche to do so)".

Chris Thornberg had a phrase, the "Dopeler effect" , the tendency for stupid ideas to seem smarter when they come at you rapidly. That is all this is, the government trying to convince the bondholders it is in their best interest to lose a lot of money and give control of losing that money to other people..

Speaking of Thornberg he was on Bloomberg regarding this exact issue:
mms://media2.bloomberg.com/cache/vSZn84rvBkQA.asf

[Mike Fury]

To all of those people who got themselves into this mess, did you take whining lessons from the Katrina buffoons? It's so easy to blame that lender who held that gun to your head. Why don't you move to Kansas, get sucked up by a tornado, be deposited in OZ, and STAY THERE. We're tired of chuckleheads.

[Not Fair]

Oh, so these people would have "rate freezes" at the ridiculously low rates they initally had? Shouldn't they have gotten a fixed rate loan to begin with? Ah, of course...they probably had bad credit and /or didn't make enough money to afford the house, which is why they didn't QUALIFY for a fixed rate loan.

And once this political posturing ends and they lift the "rate freeze", chances are those people will still be financially irresponsible and will once again not be able to afford their payments. What then? More sob stories and bailouts?

Moral(s) of the story: Not everyone is meant to be a homeowner. It is not a right. If you don't make enough money to afford a house, you shouldn't buy one, no matter how much a lender or realtor tries to talk you into it. You're an adult, and you should read what you sign. If something seems too good to be true (like, I don't know, a 2% mortgage rate) then you'd better believe that there's a reason for that.

[kc]

Andrew,

My in-laws got caught in the same situation as you in the mid-90s and decided foreclosure was the best option. They worked in the mortgage industry themselves, but circumstances conspired to land them in that uncomfortable position. They've managed to get out of debt and restore their credit, and all is well now. I hope you can do a short sale, as others have recommended, but if not, all possibility for good credit is not lost from your future, and if a family who works in the business can get into this kind of trouble, there's certainly no reason for you to be embarrassed. Good luck!

[Babbette]

I think you all are missing the critical issue here--it's not about money, it's about the effects on neighborhoods when the occupancy rate tanks due to foreclosure. The mortgage crisis is effectively opening the way to MacMansion slums. You can have a perfectly good fixed, 30 year loan, but if 10% of the houses in your neighborhood go into foreclosure, or renters abandon them you know what happens? Take a look at Cayahouga County.
1. Crime goes up--empty houses are stripped of everything, siding, appliance, pipes, wiring sometimes within hours of the owners moving out.
2. Your home value tanks...who wants to live in a neighborhood where the crime is high. You probably won't be able to sell your house for any price.
3. If a home is abandoned and worthless, it can become occupied by squatters, usually assosciated with drug culture.
4. The city's income from taxes goes down so there's fewer cops and firemen
5. Eventually the lunatic arsonists come in and torch the abandoned properties.
So what the federal government, and the states have to do to prevent collapse of local cities and counties is keep people in houses and somehow keep the money flowing in taxes to the cities. The mortgage bailout is the least imaginative way forward, and I AGREE IT'S ALL A POLITICAL FRAUD AND WILL FAIL. BUT THE GOVERNMENT HAS TO FIND A SOLUTION, AND SOON. They just have find a better way forward.
Bail out the people who foreclose, we the responsible homeowners with fixed loans inside our income, we pay. Don't bail them out, we just pay a different way.

[Enlightenment]

H.R. 3915: Mortgage Reform and Anti-Predatory Lending Act of 2007
http://www.govtrack.us/congress/billtext.xpd?bill=h110-3915

[Red]

Joe Schmoe, Thank you for clarifying the difference between the HELOCS and the Sub-primes. I actually was not fully aware that the sub-primes happened in the last 3-4 years only and are un-related to the HELOCS. I am a Dem, so I fully agree with you about where to place the blame. The Republicans have no one to blame but themselves for this mess....for all of these years now THEY controlled the House, Senate & Executive. They complained that they couldn't do anything *meaningful* without FULL power, and look what they did when they got it. What a mess.

I also agree about the housing prices - and how long you may have to wait to be able to afford a house. We sold our teeny tiny 1,000 sq. ft. 50 year old crackerbox for $700k in January. I've looked online and prices in our old neighborhood for our type of house have dropped...to about $620k! We have an Ivy League education and Law School behind us as well as high level job experience, but **living within our means** we could only afford about $300k. Please also know we had ZERO additional debt. NONE. No credit cards, student loans or even car payments! With taxes, basic bills, retirement, and home upkeep, that was stretching it. This was for a TINY STARTER home. What young family can afford to take on a $620k mortgage - plus the taxes to go with it?? Furthermore, how do you save enough for the downpayment? this is becoming a big problem for the schools as they receive money based on number of students in attendance, and young families with children can't afford to live in CA any longer. There were 6 other families we knew that had left the state within weeks of our leaving. As far as I'm concerned, prices need to come down about 50%! The people who bought our home were only able to do it because someone passed away and they inherited a heafty downpayment.

Finally, my husband worked with the Police for years (as their investment advisor) and all he's been saying since this mess started is that these areas are all going to become ghettos. As the homes are abandoned crime will rise. It was all the Police talked about.

[chris theisgen]

yeah, i would say that when the doctor gives the word you should take your medicine like a real man. bad experiences in life should produce one single outcome - LEARN FROM YOUR MISTAKES!!! i say let the economy take a dive. let the housing market fall to pieces. EQUILIBRIUM!!! BRING IT ON!!! now man up and remember that you are an american. we will see our way through this. build yourself up and the next time you buy a house you'll know how to do it and not fall on your arses. EQUILIBRIUM!!!

[victor knopp]

one place to start resolving this pricing liquity issue,is to take those cdo"s to market,the markets like cme could trade these products and open them to a more fianantialy organic and profitable resolution,not to mention it seems the problem is bigger than any company could solve on there own,

[Roland]

As an investor in mortgages and mortgage backed securities I feel that I'm about to get screwed. The ones that I own have done well for me so far, but I think the rules are being changed to take something from me, against my will and without fair compensation. I probably won't be buying any more.

If others are like me, there goes the market. No buyers.

[Rodney]

After reading some of the sad and sarcastic stories, I'm still sitting on the fence with the issue. I could be bitter and say "where was the help when I needed it" but then again I survived the last downturn and saw this one coming like a whore on payday.

I bought my first place in '89 at the top of the last housing cycle. $135k, front unit condo, 20% down @10% fixed, 30 years. Prices held for about a year and started to drop in '91. Lost my management job in '91, unemployed for 11 months, and fell behind on the mortgage. My saving grace was FHA who restructured my loan and put my missed payments on the back end of the loan with a forebearance agreement. Got a part-time supervisory job for $1600 per month in
August '92 and lived meagerly for the next two years while driving a 10 year old firebird, till a full time gig came along and then I worked both jobs for 18 months before i burned myself out.

Started squirreling away some 401k savings money and ratcheting up the mortgage payment. By '96 was able to quit part time gig and earning 65K on the full time gig. Still had a lot of bills, but kept the wolves at bay. By '99 was able to negotiate myself out of the forebearance agreement with the lender. Offered them $10,000 cash to forgive missed payments and I would begin to make regular payments on time....AND THEY BOUGHT IT! By 2001, the value appreciated 30% from when I bought it, so I sold it and moved to a single family, $270K with a 20% down payment. I know you may think I put down too much, but the lender required it (negro rate) but I am still there. Yeah I did the refi thing a couple of times, but I now make over $100k and can well afford a $2200 monthly and a $500 2nd, and a whole lot else. My place is still holding it's value, currently at plus or minus $600K, I figure I have over $300k in equity,

So take heart that there is always hope that you'll come out of your situation. Get creative! THINK!!!! Try to come up with the most far fetched idea to keep that roof over your head and then pitch it, all they can tell you is no, right? Don't be ready to give up so easy, you didn't give up when your first loan application was denied, so why do it now???? Heck, by this time next year the Times will be writing about the newest housing boom in southern california.

My point is I had to suck it up. There was no bail out there when I needed it. Yeah my parents offered me my old room back, but I just could'n't do it at 35. As my father told me in my 20s, "Bought sense is some of the best sense you'll ever get". It is one of those truisms that rings throughout the ages. A lot of people, families, flippers, etc. are buying a whole lot of sense right now, so maybe the next time around they'll think about the future before signing a mountain of loan docs.

[Gnome Chomsky]

Dudes, Stop being such uber-capitalists. How about if we get rid of rent control too?!

[Jeffrey Allen Miller]

What a great Christmas gift to the wealthy. Screw the rest of us who can barely afford to make ends meet and who never would take out a loan we couldn't afford in the first place. Gotta love dictator Bush and his thousands of appointed buddies inside the Beltway for their success on dividing the nation into two groups: 28% rich, 72% poor.

[Buster]

This is another case of Bush helping out is friends; in this case bankers. Do you really think he cares about us "regular people" loosing houses? If he did, he should have been concerned on the other end, when the banks were even allowed to make those loans.

The people who bought houses under those ARMs are just as much as fault. But when all you have is the thought of home-ownership, sometimes that clouds your thought process.

btw; my family and I lost our house several years ago to foreclosure because of medical problems. Can Bush help me?

[scott]

I am so sick of these people who are crying about their ARMs! We didn't buy a house three years ago because we knew better, and were unwilling to be irresponsible. Now, the government, (aka my tax dollars) have to bale out these idiots and their lenders? The people who took out the loans deserve to be foreclosed on for being greedy, and the lenders deserve to take a bath for being even more greedy. Prices need to continue to fall to the point where middle class folks can once afford to buy a home with a fixed rate and a down payment, and without a bale out from the government.

[Village]

Republicans don't bail out people. They bail out businesses. Whatever plan in coming, it will benefit the hedge funds, not mortgage holders.

[Big Dan in Michigan]

I'm absolutely certain that this plan from the administration will be equally as successful as the myriad other plans that have eminated from President Blutarski's frat house at 1600 Pennsylvania Ave. Anything that comes from there ain't gonna help no little guy, think another corporate bail-out like we did for Daddy Bush in the S&L debacle during his tenure. The homeowners are gonna get crushed like bugs sooner or later. Invest in U-Haul stock and kick back and wait for the money to roll in!!

[joe shmoe]

Two more key points seem lost in much discussion about the proposed rate freeze (just stating facts as they appear):

1) The borrowers to whom the freeze might apply are sub-prime borrowers, which means they got 2/28 or 3/28 loans with starter rates of 7% or 8% or higher, and potential 28 or 27 year resets to 11% or 12%. These are not the Alt-A or Prime borrowers who got ARMs with 1% teaser rates. They will be frozen at 7% or 8% (above market rate for prime) for perhaps 7 years, and then face a ballooning rate, and they will likely be stuck then because home values are not likely to have rebounded in 7 years.

2) The rate freeze is not a bail-out. It is a collective renegotiation of terms on the loans. It will not cost the government or taxpayers anything. Lenders will agree to it because the alternative to a collective work-out is massive foreclosure. The lenders stand to make more (or lose less) by making a workout now. If the predicted foreclosure tsunami hits, the lenders and their investors will be toast.

oh, 3rd point.

The freeze will have minimal effect, just marginal . . .

I think the opinions of horror at the proposed freeze are part of the attitude that helped land us in this mess to begin with. Had we supported proper government regulation of mortgage lending practices and financial market transparency, then this never would have happened.

Joe shmoe

[shortseller]

TakeFive suggests you "get a friend to make an offer." That's fraud. The kind that will land you in Federal prison.

If you look into short sale, don't expect the servicer to be any help at all. They will delay and lose paperwork so they don't have to deal with it. They have no incentive to help, especially if they are in second position.

Get a Realtor or an attorney with EXPERIENCE in short sales and let them handle it.

And realize that most lenders will report the loss as a charge off. And look into BK... it's not the kiss of death. You'll be back in a mortgage in 2 years or less if you do it right.

[mato]

Ok, remember before Paulson took his job with the Feds, he was at Goldman Sachs...and this subprime stuff was being offered by Goldman too....pay back time boys..

[Mr Real Estate Man]

Now is a GREAT time to buy!
Look at all the supply to choose from!
Have a professional REALTOR at your side!

im_the_best_realtor_ever@gmail.com

haha, I crack myself up.

[Kim]

Whatever happened to the boot strap party of personal responsibility? And how is it that the American people are allowing Congress to enrich greedy speculators and irresponsible lenders and borrowers?

Criminals are running this country. The Bush dynasty makes the Kennedys look like Diogonnes.

[Diego]

We are all just one job loss, one serious injury, or one messy divorce away from foreclosure or bankruptcy.