What you should know about the "Mortgage Bailout"

[footdr]

Why is Mainstream News avoiding reporting the "Incentives" that Mortgage Lenders and Mortgage Loan Servicing Companies will get on EACH Mortgage they modify/refinance and possibly reduce the original loan amount on?

I believe that those Americans who say they support the Presidents "Mortgage Bail-out" might not support it if they knew that their Taxes were going be used to :

1. Reduce the original loan loan amount/principle balance.
2. Provide recurring incentive to the Lender, Servicer and Borrower.
3. Provide a Cash Incentive to the Borrower if they comply with their Mortgage Agreement for a set period of time; by paying on time and abiding with all provisions of the Loan Agreement.
4. Eligible Homeowner/Borrowers include those that are current on their payments but would rather be paying less interest and have U.S. Tax funds help to pay-off their Principle balance.
5. Homeowners with Mortgages that do not qualify get no help and will contribute to refinancing and modifying the Mortgages that do qualify. Often the cost will be in excess of $20,000 for one Mortgage. Incentives may be paid periodically throughout the life of the loan which could be 30 years.
6. The Plan does not help any of those that are behind on payments other then providing them some assistance in Bankruptcy Courts by providing the Court with the ability to restructure the loan and prohibit the Borrowers credit from being impacted by the Bankruptcy action.
7. Taxpayers/Homeowners that do not qualify get no tax deduction or credit to compensate them for the loss in value of their homes. Yet, their Tax dollars are assisting others in that do qualify only due to the price of their home.
8. In the 80s, reverse Mortgages caused Homeowners to owe more than their Homes were worth as did Negative Amoritization Loans. Owners could either refinance when interest rates dropped or "weather the storm" until values went up. This is a normal occurence and does not require Government intervention in the form of using Tax Dollars to assist the refinancing of a loan in good standing simply to adjust the home value to loan ratio.

The funds for helping Homeowners with their Mortgages should be used to help those that have lost their jobs and cannot afford to make their current payment. These Homeowners should only include those that would be able to afford their Mortgage Payment throughout the term of their loan if their payment was lower. Period!

Information about how our taxes will be used and Homeowner Affordability and Stability Plan can be found on the White House Website. We should help those that can afford a lower mortgage payment but not by paying off the amount they orginally borrowed. The Presidents plan to help borrowers refinance DOES NOT help those that have missed one or more payments due to job loss. These are the very people it should help in an effort to keep their homes from foreclosing. Naturally, it should only assist them for a short period of time if all of the families wage earners are unemployed or help to make the payment affordable by refinance if the family has income and at the very least allow a lengthened period of time to make back payments prior to forclosure to allow the homeowner to seek a new employment.

 

[littlebit]

3. Provide a Cash Incentive to the Borrower if they comply with their Mortgage Agreement for a set period of time; by paying on time and abiding with all provisions of the Loan Agreement.

That clause stunned me when I first read about it a week or two ago. If the person keeps up with their mortgage payments after the bailout, for a period of three years, $5,000.00 will be removed annually from the remainder of their mortgage . Wouldn't everyone love to have their mortgage reduced by $15,000.00 in a three year period merely by doing what they should do in the first place---paying their house note.

I had to sell my paid for home a few years ago because the property taxes and insurance rates were increased so drastically I couldn't afford them. There was a housing glut so I took a huge loss. That's how it goes. Although it broke my heart to lose the home I had spent so many years paying for and maintaining , never once did I feel "entitled" to have other taxpayers foot my bills.

 

[Mousey]

"Incentives" that Mortgage Lenders and Mortgage Loan Servicing Companies will get on EACH Mortgage they modify/refinance

Let's see... we're paying the banks (who made stupid loans and got themselves into this mess to people who shouldn't have a loan) to try to correct what they did in the first place??

That's the ticket... whatever the problem is, throw more money at it, common sense be damned.

 

[slotplayer]

Barney Frank and Cris Dodd aside

just google

Phil Gramm Glass-Steagall

 

[NASHVEGAS]

Barney Frankand Cris Dodd aside

just google

Phil Gramm Glass-Steagall

Since you brought him up:

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In actuality, the blame is truly widespread and ftr I am well aware TIME listed Phil Gramm #2 after Countrywide's former CEO in TIME'S top 25 that are responsible. Buffet's letter to shareholder's last week had some interesting comments about deregulation and/or regulation (some specifically to Fannie and Freddie). I will find my letter and possibly post an excerpt.

I'm not even getting into subsidized housing, healthcare, etc. Even if it were not flawed from the start, does the money ever end up where it was intended??

For giggles and deja vu, Wiki (a verb??) Sarbanes-Oxley which of course is not housing related.

 

[gerilege]

FYI This probably might be interesting for non-US people as well, I mean for people who do not visit the America... section regularly.

It is a heavily discussed issue here in Hungary, Central Europe. The government helps people who have a mortgage and lost their job since last September, and it is perceived negatively by people who pay their mortgage without problems or lost their job but found a way through the problematic period, etc.

 

[littlebit]

You guys won't believe what the mayor Houston, Bill White, tried to sneak through on the citizens. He was going to take $500 million tax dollars that was for the replacement of roofs from Hurricane Ike and use it to pay off the credit cards, etc. of a minority neighborhood. He and a bank the city does business with, Amegy, decided that if these targeted people had their past due bills paid off, cars,student loans etc. , it would immediately raise their credit scores. THEN, Amergy, would write them out home mortgage loans.

Can you believe it ? There was a group of us who formed a tar and feather committee so fast it was surprising even to us. Amazing how a politician trying to gather votes for his future Senate run through pandering to certain groups doesn't like a light shined on them. We got the news wires to pick up on this insane plan, blogs, then emailed and phoned every city council member to let them know there would be a revolt like they never dreamed.

Within 12 hours, the mayor sticks his head out and apologizes for such a bad idea. You think ? This is just the kind of idiocy that got this country into this mess.

Now we're waiting for his Senate race to begin. Nobody will be allowed to forget how he tried to use the money intended to help hardworking people replace the tarps on their house when the insurance companies used "loopholes" not to honor the policies the people had paid for years.

 

[slotplayer]

Since you brought him up:

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In actuality, the blame is truly widespread and ftr I am well aware TIME listed Phil Gramm #2 after Countrywide's former CEO in TIME'S top 25 that are responsible. Buffet's letter to shareholder's last week had some interesting comments about deregulation and/or regulation (some specifically to Fannie and Freddie). I will find my letter and possibly post an excerpt.

I'm not even getting into subsidized housing, healthcare, etc. Even if it were not flawed from the start, does the money ever end up where it was intended??

For giggles and deja vu, Wiki (a verb??) Sarbanes-Oxley which of course is not housing related.

Actually I live about 10 miles from Boston so no need to tell me about the clowns running this state. I just came back from paying my excise tax.

However, I wasn't aware of the Time list, thanks for point it out.
Phil Gramm has been voted #1 now.

none of this new to me, I predicted this in 2004 in my blog

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[suzecat]

And then the TV lawyers advertising that you need their help NOW to save your home .............. ya right .............. who else will jump on the bailout bandwagon for their piece of American pie??????????

 

[vinylweatherman]

Here in the UK, interest rates have been dropped, and money pumped in, specificaly so that banks can bring some liquidity back into the markets, and thus the economy. It just isn't happening. Bailout number 3, and interest rates for borrowers are INCREASING, and lines of credit being PULLED. Small businessess are folding at an unsustainable speed, leading to job losses (and more expense for the government). Savers however, are getting next to nothing on their savings, and now there is talk of going back to the days of PAYING the bank to have them hold our money - but I bet the banks will conveniently forget that back in those days, although we paid account fees, there were NONE of these extra and extortionate charges, and interest was paid at the prevailing rate when we were in credit, helping to cut the effect of the charges.

Ros Altman (a "high flyer" in finance), has predicted disaster in 1 to 2 years because of this policy of near zero interest rates, piles of taxpayers' money going into what could be a "black hole", and the modern equivalent of printing banknotes, called "quantitative easing", presumably a term dreamed up to avoid the emotive reaction to hearing the country was "printing money". Didn't work, the press explained it to us all. (on the radio this morning, reporting on yesterday's cut to 0.5% base rate).
Property prices have collapsed from their inflated highs.
As administrator for my late father's estate, I have seen the expected market price of his house collapse by about one third between last August, and now, the time it has taken to get a substantive offer. For those still alive, and struggling, and also had the misfortune to buy recently, they are likely to have "negative equity", a term used in the UK to describe the situation where the sum owed exceeds the market value of the property it is secured against. Repossessions have soared, and property auctions have never had it so good. Pawnbrokers are doing a roaring trade too - these are a few of the types of businessess that do well in a recession, and not so well during the good times.

Irrelevant in a casino forum?

Well no, there will be a reduction in spending on "luxury", because all the money has been spent on essentials. The ONLY kinds of customers that will keep pumping money into casinos are the wealthy, and the compulsive.
At the same time, there seems to have been a tidal wave of new casinos coming on stream, fighting over a shrinking pot of money already severely shrunk by the US pull out. Their strategy at the time was to expand elsewhere, such as Europe and Asia - this may not happen now.
Some of us have already remarked upon signs that some casinos are struggling with their cashflow (naturally, it would be corporate suicide for them to ever admit this), and are sharply reducing the extras on offer (usually bonuses, but sometimes other things).

I have concerns myself about the safety of ewallets, as many are NOT protected by compensation schemes, and if they fold, all the emoney within may simply evaporate into the ether. I include Neteller, a big player, but nevertheless NOT covered by the FSA 50,000 compensation scheme, and nearly brought to it's knees by the US situation, mainly because of the large sum (or "ransom") that was extorted from it by the DoJ at a time when it had lost much of it's capacity to generate revenue.
Neteller say that they have money "in trust" to protect customers, but where, an Icelandic bank perhaps - we can no longer assume that any money a company puts aside in a bank to protect customers funds is going to remain safe if they have chosen a bank that subsequently folds, a situation a couple of years ago that no-one would have considered at all likely.

 

[cynthial]

You guys won't believe what the mayor Houston, Bill White, tried to sneak through on the citizens. He was going to take $500 million tax dollars that was for the replacement of roofs from Hurricane Ike and use it to pay off the credit cards, etc. of a minority neighborhood. He and a bank the city does business with, Amegy, decided that if these targeted people had their past due bills paid off, cars,student loans etc. , it would immediately raise their credit scores. THEN, Amergy, would write them out home mortgage loans.

I read about this earlier in the week. He and a few other boobs had figured out that reducing the amount of credit card debt that his "constituents" held by $3000 per they would then each have substantially improved their debt/ceiling ratio enough to raise their fico scores to just above 600 thus allowing them to qualify for the plethora of government backed loans coming available. And I don't think your Mayor is the only one trying to pull something like this. I know I read of others trying to steer some of the bailout money towards the very same venture.

I think I taste my own spleen.

 

[jetset]

It is disgraceful, but it is happening all over the world as the crafty and greedy take advantage as governments take these giant leaps into uncharted territory, putting the taxpayer's money at risk.

If there was ever a time for a strict and effective supervisory body on how this largesse is being used by the recipients it is now imo.

The billions and trillions being deployed are scarey, because at some stage when the dust settles there will have to be an accounting....and I'm sure the banks and politicians will have all sorts of reasons to delay "repaying" the taxpayer or to avoid explaining some of the clearly questionable uses to which these billions are undoubtedly being deployed.

Who can you trust?

Having been mainly responsible for the chaos, the banks are in this sort of position:

1) They're not lending money if they can help it - either to each other or the public

2) They're absorbing the vast amounts of cash being thrown at them.

3) They're not paying fair and realistic interest rates to savers, but when they do lend they're charging growing interest rates.

4) As we saw with Merrill Lynch, and a couple of golden parachutes recently for UK "retiring" execs, the generous bonus culture and rewarding execs for non-performance continues, sometimes through stealth and BS.

5) They're still lobbying the governments to underwrite the "toxic debt" they were all stupid enough and greedy enough to incur.

All the traditional values of having a healthy saving base and keeping an eye on inflation....and, importantly not printing too much paper money....appear to have been abandoned.

I was, however, pleased to see that Barney Frank is considering investigations to hold responsible those who were the main movers and shakers in bringing this debacle about. But how far he will get with that one is anyone's guess.

The gilt auctions in the UK have not gone well and now there is talk of the Bank of England trying to buy up to GBP 150 billion in gilts back, using the extra printed money WTF?

Buying your own debt back with additionally printed money doesn't sound like the best of ideas to me, but then I'm not in the same league as the financial wizards who got us all into this mess.

It's a crazy and very worrying situation that may see us all reverting to a primitive bartering economy LOL.

I don't think the UK property market has bottomed yet, and going forward that may be a place to look for returns for those with savings currently earning a pathetic half-a-percent. Risky, and perhaps longer term than one would like, but then just about everything out there seems to fall into that category.

Buying bank equities carries the risk of future developments when all this dosh has to somehow find its way back to the taxpayer (don't hold your breath on that one either!)

Finally, regarding the speculative comments on Neteller earlier in this thread, I have not thought of keeping large sums in that facility ever since the clash with the US Department of Justice - I was totally unimpressed with the lack of respect for the customer that they exhibited there.

 

[jod5413]

Littlebit,

Your story proves that the "little people" can make a difference if they band together to solve a problem. I am afraid that too many people have forgotten that, unfortunately.

VWM,

Your post was quite enlightening, thank you for posting that. I don't think too many Americans realize that they aren't alone with this financial mess!

Jetset,

Also a very informative, well said post. I am afraid that we need more than just "one" Barney Frank to have an impact. I am starting to wish I had done nothing but buy gold years ago when it was "cheap". I believe that if things don't somehow straighten out, the printed dollar will have no value at all!

 

[jetset]

The decline of the British pound against currencies like the US dollar and the Euro has been truly alarming - about 25 percent or more last I heard. You certainly get a helluva lot more GBPs for your dollar now than was previously the case, and one can only hope it rebounds.

Yesterday the Brit government agreed to underwrite the Lloyds-HBOS bank toxic debt for something like GBP 217 billion - if that goes wrong the taxpayer is going to lose bigtime.

In return the bank agrees to lend GBP 28 billion over the next two years - for which it will be charging interest, having already received billions in government (taxpayer)aid. The combined Lloyds-HBOS banks are now pretty much owned by the government!

 

[littlebit]

Yes, Cynthia, I'd put money on the bet this is happening more than people know. What really tipped it over the top for taxpayers is that the $3,000 grants and accompanying down-payment assistance, which can be as high as $37,500.00 would have been available only to those who agreed to buy a home in a Houston Hope area. Applicants cannot earn more than 80 percent of the areas median income. That 80% rule is sheer baloney. You can take it to the bank the $3,000.00 "grants" would not be used as the mayor stated. Even Mayor White backtracked and said later that it was a dumb idea because the money could have been used to pay off charge cards . Citizens had already figured that one out based on the other give away programs by this mayor. LOL.

Most of the houses are dumps that aren't even worth the $37,500.00 which would have accompanied the $3,000.00, much less qualifying those grants as a "down payment". Those grants aren't down payments despite how they're portrayed. They're buying the houses for people who basically don't work. The city of Houston has given away 892 of these "grants" since 2005. Enough people were paying attention and said "enough is enough".

Even two police officers riding together won't enter those areas at night because they're so dangerous. If you want to get murdered, assaulted, raped ,robbed or killed in drive by shootings, then those areas are just where you want to move your family. Despite the flowery picture painted, these areas are taxpayer subsidized slums that need to be bulldozed and aren't populated by people who are trying to better themselves. It's just another batch of toxic paper printed as mortgages by a bank the city is in bed with.

It's truly amazing what a newspaper forum in the city and people working together can do when they put the spotlight on the rats hiding in the corners. While there might be baby steps at first, taking only a few steps to speak up and be heard is the only way we can take this country back. As the saying goes, "A journey of a thousand miles begins with the first step". I honestly believe more and more people will soon be putting on their shoes to begin that journey, too. .

 

[littlebit]

And then the TV lawyers advertising that you need their help NOW to save your home .............. ya right .............. who else will jump on the bailout bandwagon for their piece of American pie??????????

Suzecat, if you're like me, when I first heard about this on the news, I was foaming at the mouth. We all know the story about Countrywide and their massive contribution to subprime mortgages. In case you haven't heard, they're back--just under a new name---PennyMac. They're going to help people save their homes. Yuk, yuk. This is unbelievable but legal.

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[jetset]

It's outrageous that these charlatans can continue to profit bigtime from the misfortune they played such a large role in creating.

But I suspect this is happening everywhere as smartass financial people take advantage of a lack of oversight and all those trillions washing about the economy.

Damn, but it lights my fuse!

 

[jetset]

A light-hearted perspective:

The banking financial crisis explained in simple terms ..............................

Heidi is the proprietor of a bar in New York. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of needy customers flood into Heidi's bar.

Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager of the 0Abank (subsequently of course fired due to his negativity), decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy; her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

 

[jod5413]

Good One, Jetset!!!