Too bad you lost your house. Here's some money to help the next guy.

This won't help the people losing their homes, but it might help other people buy them.

The Community Redevelopment Agency of Los Angeles is proposing purchasing foreclosed houses in Boyle Heights and then selling them to first-time buyers. The new buyers could receive a $75,000 second mortgage from the CRA to help them get into the home, which they wouldn't have to pay back for 45 years (or presumably when they sell the house).

This is a classic way of helping people get into homes they couldn't otherwise afford. But wait! Isn't that what got us into trouble in the first place?

--Sharon Bernstein

Comments

[Laker]

So 80/20 loans will still be available?
No skin in the game is what got us here, and it seems our government is more stupid than the wooden chair I'm sitting on.
So where do i sign up for the sweet 45 year interest free second mortgage??

[Steve]

Who thought of brilliant idea, Bush. A 45 year loan will double the interest cost payed out and the scum that will qualify for this will most likely be foreclosed on like the last scum did. They can't afford a house make then rent or move. it is that simple.

[norman pheeny]

OK. Not perfect, but a step in the right direction. First, why does the government have to buy foreclosed homes? That's just an extra step/transaction. Now, the good part of this plan is that it does NOT reward the original owner. It gives a reward to a credit worthy new homeowner that did not buy into the bubble. Now, how could it be better? Laker and Steve hit the nail on the head, you need to have a downpayment too.

[Jim]

Cute. Another attempt to prop up the bubble. And once again at the expense of the responsible.

The other thing that politicians need to acknowledge is that there's a growing population of otherwise responsible people who have lost or surrendered their homes when they hit financial difficulties who really would be good risks, now know the ropes, but are barred from buying again for years. When we can get them back into the market, we might start to find a bottom.

[Nelcisco]

Laker my friend I share the same concerns as you ,no skin in the game is exactly why we're here & we all know that by now. Why CRA would ever consider doing anything like that is beyond me.

I've sort of taken me own survey with RE agents and colleagues in the mortgage biz, posed the question "how are we going to get out of this? most of their answer is just go hustle for more business its a numbers game, or they just need to bring back 80/20 loans, or they need to loosen up credit again thinking that it will solve the economic everything. What they're saying is lets go back and perpetuate what we had before so we can make our 10k to 50k a month again, I miss driving my 750i beemer

[J.W.]

Obviously, the chairman of The Community Redevelopment Agency of Los Angeles is Forrest Gump. Will these fools never learn anything about giving credit to people who can't afford the down payment?

[CompaJD]

Another bright idea which will prolong this recession.

[sfvrealestate]

The buyers would still need to qualify for a first loan. And that's not so easy to do these days. Yes, you need a downpayment. Therefore, it seems to me that CRA would have built in safeguards and would be selling to buyers who are already pre-qualified and have skin in the game.

[Drew]

Part of the current problem is that the lending pendulum shifted too rapidly.

Up to a year or so ago, lending requirements had been loosened to the point that people were getting loans far beyond their ability to ever repay (the "breathe on the mirror" test).

Suddenly, the pendulum shifted, and now people who are in a strong financial position cannot qualify for financing under historic lending standards (i.e., 30-yr fixed loans at 6% with 20% down and verifiable income & assets).

Or the financing is offered, but at usurious rates (5/1 ARMs at 9.5% are not uncommon for putatively qualified borrowers.)

The same thing is now happening with automobile financing. And car inventories are piling up. (Although no one is predicting a 50% drop in car prices the same way they are with housing prices.)

The one thing financial markets value is stability. Until we reach a relative equilibrium point with regard to money supply, financial markets will continue to be frozen, few transactions will be completed, and asset values will continue to decline.

Start up the flow of money again with reasonably tight but not onerous lending restrictions and we'll be back on the way to recovery.

[PeteR]

I wonder how much of this is based on prudent thinking and how much is based on political backscratching involving Villaraigosa and/or Jose Huizar.

I'll bet the LAT's own "Foreclosing on Christmas" sob story/article from last December helped get the ball rolling on this.

[keith]

Hey Steve, Bush is done, ya gotta stop blaming him for everything now, and maybe actually do some real thinking about our problems today and the real solutions to them. Your sweet liberal friends at the CRA dreamed this up, gosh, reality - it really sucks doesn't it?

waaaaaaaaaah!

[cew]

What you guys don't seem to know is that these programs
have been in place for years in some places. The organization that runs a similar program in the city I live in says that they have never had a foreclosure. I am a staff scientist at a local university and am so poorly paid that I have not been able to buy my own home. I am going to be using city and government help to buy when prices are right. Oh, btw- my credit score is over 800 and I am required to have a down-payment-not as much as you might like but it will be 20-40% of my annual income.

[Sherman tank]

Boyle Heights. Gee. Los Angeles Mayor's old stomping ground. No coincidence there.

[E]

If you could qualify for a 30 year fixed mortgage 10 years ago, you can qualify for one now.

All this talk about lending being "too tight" is hogwash. It's still too loose.

Equilibrium will be reached when houses are at affordable prices, not when toxic lending standards return.

To think otherwise makes you either an uneducated house or mortgage peddler, or one of their former customers,