Tracking the housing bills and bailouts

The rush in Congress to agree on an emergency housing bill appears to have given way to a three-way muddle, with the House, the Senate and the White House staking out different positions. A muddle is not necessarily a bad thing, but that's where we are:

The AP today: "The Bush administration announced new steps Wednesday to help more homeowners head off foreclosure. The Senate, in the meantime, worked to complete a bipartisan housing bill the White House says would worsen the mortgage mess."

The new White House proposal could be called Dodd-Frank Lite -- a limited and voluntary version of the widespread mortgage write-downs and new guarantees favored by Sen. Chris Dodd and Rep. Barney Frank: "It is a more modest version of a concept Democrats have recently been pushing to respond to the housing crisis, which would have the FHA back from $300 billion to $400 billion in restructured loans for distressed borrowers if lenders were willing to take a substantial loss on the mortgages. The administration's idea, however, would reach far fewer borrowers than the Democrats' proposal -- roughly 100,000 rather than between 1 million and 2 million -- without requiring lenders to take large losses."

The administration laid out its most explicit criticism of Dodd-Frank, saying it would "'essentially put taxpayers on the hook for a large number of non-performing loans." The administration also criticized the Senate's proposal for grants to allow local governments to buy foreclosed homes, calling it "a costly bailout for lenders and speculators.''

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Photo Credit: AFP/Getty Images

Comments

[Fred]

All any of this will do is prolong the inevitable correction and bury our economy in a recession lasting years and years. Better to do the damage quickly, like ripping off a band-aid.

[Cal]

http://www.usnews.com/articles/business/
real-estate/2008/04/09/fdic-chief-calls-for-a-housing-
rescue.html

Bailout Bair is at it again.

[Edgar]

My goodness, I cannot believe I prefer the White House approach over that of the Democrats, but I do. Still am against any bailout, which all three of the plans definitely are.

Still, the Democrats were not elected in 2006 to put the poor choices of some onto the backs of all taxpayers. This is, frankly (pun intended), a ridiculous approach to our current circumstances. Moral Hazard indeed. Sometimes I don't know why I bother to play by the rules, be diligent and deliberate in my approach to contractual obligations and taking on debt, and act as a rational, reasonable self-interested participant within our society. I should just become a freeloader. "Everybody is doing it...(now with Congressional legitimacy)!"

[Winfield J. Abbe]

What is to prevent many or all participants from accepting whatever of these plans may be approved, but then walking away or threatening to walk away again at some future time should the situation continue downhill as it likely will? The best solution is to let "nature" take its course. This is what free enterprise means. Morons like Dodd, Frank , Bush and all the rest should walk away from this mess lest they make it much worse for the American taxpayer, who is already receiving the shaft anyway by Mr. B and his cronies, those smiling, hand clapping "used car salesmen and women" at the New York gambling casino. Also, nothing is mentioned in these plans about properties with multiple mortgages, possibly even more than 2. I have known commercial properties to have up to 7 or 8 mortgages on them.

[arroyogrande]

Anyone have any friends in Maine that might want to have a word with Senator Olympia Snow re: "more aggressive bailouts":

WSJ - April 10, 2008 - "Underscoring the pressure to be responsive to voter worries about the economy, however, Republican Sen. Olympia Snowe of Maine said there was a "general disposition" among both parties to act more aggressively to help homeowners."

Have the majority of voter letters, emails, faxes, and phone calls been *for* a government sponsored bailout, or *against* it? Are they truly being "responsive to voter worries about the economy", or did the reporter (D. Paletta) pull that little 'factoid' out of a hat?
- arroyogrande

[Andrew]

As an alternative to a mortgage bailout at taxpayer expense, how about this: Current lenders could offer to refinance existing loans for a 100-year term.

Obviously the loan would never be paid off in a lifetime, but it would bring down payments to manageable level for many people, and buy time to work things out.

With a principal of $300K at 6% interest,
30 year term = $1789 monthly payment.
100 year term = $1496 monthly payment.

That's nearly $300/month less, or the equivalent of cutting the interest rate 1.6%. In cases where that’s not enough help, foreclosure is probably unavoidable.

Borrowers who are underwater would continue to be underwater until home prices recover, which could take a very long time, or never happen depending on the locale.

This is why only current lenders could offer this. They have something to lose if the borrower defaults. No third party will want to make a new loan for greater than market value; likewise there is no reason for the government to make that deal either.

This neither rewards irresponsible buyers or irresponsible lenders, but eases the crisis by preventing a glut of avoidable foreclosures.

[GIMME A BREAK!]

This Photo? Gomer saying 'What the 'ell do I care...Im the President!'

[IToldu2CashOut]

I don't understand why politicians think americans are so for a bailout? Maybe it because they all own homes in washington that are declining in value. Who's interest is this really in? Certainly not mine or a majority of americans.