From the Washington Post:
"The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure by helping them refinance into more affordable mortgages backed by public funds, government officials said.
The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth because of plummeting prices, an issue at the heart of the nation's housing crisis. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government.
. . .
The initiative now being crafted could provide relief to a select group of homeowners who are "under water" on their mortgages, a term that describes the situation when falling home prices leave borrowers with negative equity. These homeowners would have to agree to stay in their homes after refinancing, be able to afford the new monthly payments and have lenders who are willing to go along with the plan, officials said.
Administration officials have yet to iron out other details, such as how big the new mortgage should be relative to the home's value".
9 comments:
Yet another bad idea. I see no reason for the government to step in and rescue speculators from their own risky deals. If the banks want to right down some of the principle on the loans they made, then fine. Government intervention, however, is uncalled for.
I agree, not good on the surface. For what about those that are looking to buy right now? What if our home values fall?
Would they apply the same to me if the condo I am looking at falls even further in value?
This is just a classic case of trying to treat the problem without solving the problem.
The basic issue is that people bought houses they couldn't afford.
The solution is what? To have the government pay banks to cut the loan balance?
Sorry but I just don't see that as a proper use of the government's money.
If a bank decides that reducing a loan's balance as part of a deal to keep someone in a house makes sense, then they can of course do that, but why get the government involved?
The problem here is the bubble. The solution is the end of the bubble.
i dont get why we have to 'buy' homes anymore. cant we just be given a house by the government depending on our income level?
let's say i make 100k, the government can say, ok you can have this house a, b, or c.
that'd be a cool job to get too. maybe i can become a government realtor.
got wtf?
The devil is in the details. But Leroy is correct: the underlying problem is that housing prices departed from intrinsic value, and those who failed to recognize this have exposed themselves. Their numbers are so large, however, that the "losers" of the housing bubble, which include the banks, form a potent political constituency. Hence, the bailout proposals.
I'd like to see the Fed and Treasury do the following: (1) refuse any bailout of foolish buyers as a matter of principle; (2) acknowledge that housing prices are inflated; (3) explain why it is best for all that prices fall to equilibrium ASAP so we don't suffer Japan's fate; and (4) make it easier for troubled homeowners to get out from under mortgages they can't afford so that they can get on with their lives. Examples of policies advancing item (4) would include: a temporary and limited tax deduction for personal residence real estate losses; expedited bankruptcy procedures that would encourage renegotiated mortgages in lieu of bankruptcy; and direct aid to localities or charities to allow them to convert abandoned homes into habitable housing. The answer is NOT to keep people in houses that they cannot afford, nor is it to keep insolvent financial institutions afloat.
my dad just returned from china . . . maybe we are starting to import their ideas not just their goods.
It seems that in china you don't buy a house. You buy a 80-100 year lease (can't remember exactly) from the government. At the end of the lease the property reverts back to the government.
As stated in his business class:
China=mostly socialist mixed with capitalism.
US=mostly capitalist mixed with socialism.
300 billion idea is full of ifs and it will be as good as HOPE plan.I think bubble is much much bigger than plan.The dot com bubble worth 6 trilions and think this ne is much much bigger than that.
Jeez, the state of JOURNALISM today--the term isn't "under water"--the term is "upside-down."
Terminator-X - well stated.
Post a Comment