The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.
· Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.
· Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.
· Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.
The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:
1. Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affordable
2. A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac
1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices
· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:
o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
· Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:
· No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.
· Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.
· Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.
· Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:
§ A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.
§ “Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.
§ Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
§ Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.
§ Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration -- together with the FDIC -- has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.
· Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture.
· Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
§ Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance
§ Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options
§ Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds
§ Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers
· Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.
o Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.
o Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.
· Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.
· Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.
· Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.
· No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.
27 comments:
It's punishment for the responsible. Thanks Barry. What a monumental failure of a presidency already. We're taking economics tips from the largest team of assembled crooks and tax cheats in presidential history. Get ready for shared misery. It's the progressive way.
"Retired ASD Teacher" is Bernie O'Hare.
So is "The Banker"
"Politically Neutral"
"KathyD"
"Jonah"
and countless anonymous (wink wink) commenters.
All are Bernie O'Hare.
You are being duped by a master liar.
I am such a jerk! I bought a house well within my means after having scrimped for years for a good down payment, I set aside money for emergency, I read the small print, I had a lawyer look over the paper work, and I didn't run up my credit cards, just like I was told, we didn't go on vacations or buy things we could not afford. Had I only known that the government would pay my mortgage and renegotiate my loans, well I could been living the good life too!
Everybody's an economist these days. It must be the number one major in college. I hear FOX News is giving out the diplomas.
Republicans suffer from short-term memory loss. They forget that for the last 8 years the Bush/Cheney regime ran the show...right into the ground.
Want to point out something in the stimulus:
President Obama signed into law a bill that gave Tax cuts of approximately $300 Billion to Americans who make between $30,000 and $75,000 a year. Dick Polman of the Inquirer has great details on his American debate blog about this.
Every single Republican voted against tax cuts for the working class. Every one of them.
The Same Republicans who while in control of Congress during the Bush years gave $175 billion in tax cuts to those making more than $250,000 a year.
Those same Republicans who spent like drunken sailors to get us in this mess, were willing to give the greedy bankers $700 Billion before the election to try and save their jobs, but $800 Billion to save OURS? Nope, sorry!
Obama inherited a sorry ass mess, and Republicans only hope for returning to power is to make their fellow Americans suffer more.
Great strategy guys.
And Villa, please go drop dead.
Dent is an elitist snob.
Bonie, stop trying to be a nice guy on this mortgage foreclosure stuff. When you had a chance to be a nice guy, you sold your clients out. Like the time you had a client who had a discrimination case against Bethlehem Steel and you sold him out for sixty bucks. And to add insult to injury, you didn't tell your client about the settlement and then forged his name to the document. Which is a crime.
We could probably save some overhead and simply assign each person who is about to get a foreclosure to a person who is paying his mortgage. Move right in. What's the difference? none. Barry takes honestly earned money and gives it to those poor people; I say, bypass the government and hook em up
Barney Fife is clearly uncomfortable defending the indefensible. Keep fighting the last war. It beats hell out the one you're currently afraid of.
not so casual observer, another heartless self centered post. You have the maturity of a toddler.
"MINE!"
As for the newest Villa work of fiction. I doubt O'Hare would settle for $60 and forge a signature. Every good member of the Bar knows never forge a signature for less than a grand.
Just more bullshit, from a asshole!
Anonymous 8:52pm,
This administration is trying to clean up the mess from the 'last war.' You're still pretending the last 8 years are not the reason the country is in this crisis. The current problems are a result of the past, they didn't happen the moment Obama took office. It seems it's you who's afraid.
Barney, what's going on now is not a partisan thing. For everything you point out on the R side, there's something on the D side just as bad. This is a cluster of epic proportions, and there is more than enough blame to go around.
Instead of pointing fingers, tell us why you think this package is good legislation?
The Banker
Not at all heartless, I just believe in and practice personal responsibilty...it is what made this a great nation...lose that and we lose the nation.
"The democracy will cease to exist when you take away from those who are
willing to work and give to those who would not."
Thomas Jefferson
"what's going on now is not a partisan thing"
Not partisan??? How can you make such a statement after what the country witnessed the last two weeks? Only three Republican Senators, Maine’s Susan Collins and Olympia Snow, and Pennsylvania’s Arlen Specter voted for the stimulus package. That's partisanship??? The others, like Dent, refused to vote in favor mainly because there was no tax cuts for the wealthy. Of course, they said on FOX News, when interviewed, that it was because of the pork but most Americans know that was bull.
Foreclosure is the major cause of our financial crisis. Government should really prioritize this issue.We should really keep ourselves updated.Thanks for sharing your thoughts.Good Day!
Bernard P. Fife said...
"Not partisan??? How can you make such a statement after what the country witnessed the last two weeks? Only three Republican Senators, Maine’s Susan Collins and Olympia Snow, and Pennsylvania’s Arlen Specter voted for the stimulus package."
The stimulus plan had more Democrats voting against the plan than Republicans voting for it.
That would mean the most BIPARTISAN thing about the bill was the OPPOSITION to it.
Common sense blogger said...
"Those same Republicans who spent like drunken sailors to get us in this mess, were willing to give the greedy bankers $700 Billion before the election..."
Yes, and I certainly remember how the Democrats - who held a MAJORITY in Congress over the last two years - tried to cut spending every chance they could (LOL).
Please name the spending that Obama tried so hard to stop while he was a member of the Senate. And please remember that candidate Obama was a major player in what the bank bailout looked like.
He didn't just arrive in Washington last month - he's been part of the problem.
Wow, another "plan" that calls for massive government spending as the solution.
Who would have seen that coming?
By the way, I recently purchased a Mercedes but knew I could only afford a Hyundai. Now I'm having some trouble making my payments.
Could anyone out there volunteer a few bucks to help me out - or do I need to call Washington to steal it from you?
Barney Fife said:
"The current problems are a result of the past, they didn't happen the moment Obama took office."
Indeed, Barn. Check out Raines, Garelick, Johnson, and all of the Clinton administration crooks who stole all our money - with the tacit approval of Barney Frank and Chris Dodd (who still hasn't come clean on his shady mortgage deal). The problem predated Obama alright.
The issue, however, is the current proposal, which you seem unwilling to defend on its lack of merits. We may discuss how the aforementioned crooks got us here. Or we can discuss the current crooks' proposal to "fix" what Freddie and Fannie and their trough sloppers broke.
As long as we’re going back in history, let’s venture a little further. The first signs of impending trouble are the exploding budget deficits. They began, of course, under the economic stewardship of Ronald Reagan. Reagan cut the marginal tax rate on the wealthiest of Americans from 70% to 38%. He promised it would spur an orgy of investment and rocket the economy to new levels of production and prosperity. Instead, his “supply side economics” did the exact opposite. It produced the deepest recession since the Great Depression.
Output fell 2.2% in 1982 while budget deficits soared. When Reagan took office in 1981, the national debt stood at $995 billion. Twelve years later, by the end of George H.W. Bush’s presidency, it had exploded to $4 trillion. Reagan was a probably clinically senile president, but he was a sheer genius at rewarding his friends by saddling other people with debts.
Bill Clinton reversed Reagan’s course, raising taxes on the wealthy, and lowering them for the working and middle classes. This produced the longest sustained economic expansion in American history. Importantly, it also produced budgetary surpluses allowing the government to begin paying down the crippling debt begun under Reagan. In 2000, Clinton’s last year, the surplus amounted to $236 billion. The forecast ten year surplus stood at $5.6 trillion. It was the last black ink America would see for decades, perhaps forever.
George W. Bush immediately reversed Clinton’s policy in order to revive Reagan’s, once again showering riches on the already most rich, his “base” as he calls them. He gave out some $630 billion in tax cuts to the top 1% of income earners. In true Republican fashion, they returned the favor by investing over $200 million to ensure Bush’s re-election. Do the math. A $630 billion return on a $200 million investment: $3,160 for $1. I’ll give you $3,160. All I ask is that you give me $1 back so I can keep the goodness flowing. Do we have a deal? Republicans know return on investment.
I think Barney got a Dodd-like loan he's busy defaulting on like the legions of others with their hands out. A half dozen responses and he still won't touch defending the current gang's Ponzi scheme. Telling.
Barney, we can spend all day spouting stuff like you did in your 727am post, but the simple truth is that if you think the Ds are innocent and all that is wrong with the world is the Rs fault, then you are nothing but a partisan hack.
One thing I've learned is not to bother with partisan hacks - they're not willing to discuss reality, they only want to blame, and that's a waste of time.
The Banker
Why don't we actually put the focus back on Obama's plan for a moment?
I was just playing around with the numbers being thrown about in Obama’s housing plan. According to news reports, the plan will “help” about 5 million Americans at a cost of 75 BILLION dollars. Using those figures, you can come up with the following scenarios:
Least likely: The numbers are accurately stated and the cost of the scheme will only average $15,000 per American helped. If the figures are correct, one has to question the wisdom of helping people who only need an average of $15,000 of assistance. While I am sympathetic to the plight of those facing foreclosure, if they are unable to come up with an additional $15,000 – either through loans or WORK - perhaps they are not financially qualified to own a home in the first place. There is a solution for those in this category, and it is called renting.
More likely: The number of people benefitting from the program is being purposely overstated in order to further grow the size of government.
Most likely: The cost of the program is being deliberately overstated. In short time we will learn that still more of our money is needed, resulting in more damage to the economy and more debt to our children and grandchildren.
The sad part of this past election is that voters failed to learn from the previous administration. Voters replaced a Republican who too often sided with those who favor big government with a Democrat who is a truly believes that government is the answer to everything. Digging a deeper hole - faster - will not help us get out of the hole.
Until voters realize that there is no such thing as a free lunch, our economic problems will not improve.
There is definitely a free lunch at Obama's school. He is proving it over and over again. Free lunch for all American kiddies from now on. He won.
Stimulus:
(1) Unemployment benefits extension.
(2) Anti-hunger provisions
School meals - provides a 15% increase in funding for breakfast and school lunch programs.
(3) Medicaid payments to states.
(4) LIHEAP assistance to provide low-income Americans relief from higher energy costs.
(5) Job creation via down payment on rebuilding America's infrastructure and schools, starting with massive investment in commercialization of green technologies and related job training that promote environmental protection and energy independence.
(6) Prevailing wage to be paid for jobs created and upholding of Davis-Bacon Act
Mortgage Relief Plan:
(1) helps 3 to 4 million homeowners modify their loans.
(2) helps 4-5 million homeowners refinance into more affordable mortgages.
(3) if a homeowner remains current on his payments, the principal will be reduced by up to $1,000 a year for five years. In addition to this, the mortgage servicing company will get up to $1,000 a year for three years, provided the borrower remains current on payments.
(4) allows judges to modify the terms of the loan in bankruptcy proceedings.
(5) only helps homeowners living in their homes. It does not cover vacation homes, or homes bought as "investments."
(5) helps reduce the number of "preventable foreclosures."
Dear The Banker,
You're unable to respond to my 7:27AM post so you revert to calling me a name. The correct term is "political hack" not "partisan hack."
(Political Hack - noun - a politician who belongs to a small clique that controls a political party for private rather than public ends [syn: machine politician]
I am not in politics.
Obama's foreclosure plan is immoral and mean spirited. It punishes the 95% of responsible mortgage payers and places a cruelly unfair burden on the 32% of residences that are rented. Bankers and 5% of defaulting bums get paid. Middle and lower-middle classes get the bill.
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