The Obama administration on Tuesday will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.
Officials say between 500,000 and 1.5 million so-called underwater loans could be modified through the program, the first initiative to target homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes. Some experts are warning, however, that the same knots that tied up prior initiatives could do so again.
Under the new "short refinance" program, banks and other creditors that write down mortgages to less than the value of the property can essentially hand off the reduced loan to the government. The process involves refinancing borrowers into loans backed by the Federal Housing Administration.
While the program puts taxpayers at risk—officials estimate one in five loans in the program could default—the government has set aside $14 billion previously earmarked for housing aid from the Troubled Asset Relief Program to cover losses.
This idiocy makes my blood boil! When we sat down at the kitchen table to figure out how much house we could afford, we decided that our mortgage payment and other bills should be covered by ONE paycheck, even though we were both working. We also stashed six months worth of expenses in a bank account, our "emergency" money in case things went south. Why should we now be bent over a barrel to pay for a neighbor who made an unwise and irresponsible investment? Hell no!
Another question I have: what happens (after a huge chunk of principle is "written off" of these mortgages) if the housing market rebounds, and the home regains its previous value? Who reaps the windfall? The subsidized homeowner or the taxpayers?
lady red - that last question was exactly what I was wondering!
ReplyDeleteThat is a very good question. But there is also the question, to which Lady Red alluded: why are responsible people again being forced to bail out people who were careless and/or non-realistic?
ReplyDeleteYes, it is possible that some people got caught in a bind through no real fault of there own -- a reasonable mortgage but having both people laid off. And there is the fact that many values have gone down because of the crunch caused by the reckless loand forced on banks by the fedearl government.
The government should just stay out of the way. All it does is make things worse.
A home is an investment, pure and simple. It's not something that you buy, use up, and discard. It's a purchase that you hope will go up in value, knowing there is NO GUARANTEE that it will do so.
ReplyDeleteI feel sorry for the people who were prudent, but yet still can't make their mortgage payments. That's the breaks. I lost a business through no fault of my own, and had to start over. So what? Millions have! These people will have to start over too. It's what we do. We're Americans, fer cryin' out loud! Dusting ourselves off and jumping right back in the game is in our very genes!
If we've lost that, the American dream is finished.
"...Dusting ourselves off and jumping right back in the game is in our very genes!"
ReplyDeleteNot so much, any more. We're on our third generation of entitlement mentality being taught as all children's 'major' in the schools (what else is a 'class' where self-esteem is more important than knowledge?) Which is why so many vote on what's in it for them, rather than for the country, without enough FACTUAL knowledge of our nation's history, or any instruction in ethics from either the schools or parents who were themselves raised to the same supposed standards. People who have had this drummed into them from early childhood are exactly those Sam Adams was talking about in our sidebar comment.
"If we've lost that, the American dream is finished. "
Which is exactly what I am beginning to think has happened. Yes, we might slow the decline with the next two elections, but unless the newly-elected are willing to make themselves extremely unpopular by taking away the 'things that are American's 'RIGHTS'' now (easy credit, easy grades, easy everything) then it will be impossible to actually turn the nation around.
Which of course, ties into the prior paragraph. That is exactly why schoolchildren are being taught all about their rights, and nothing of duties.
Sorry Lady Red, It seems I am overcome by pessimism, this morning.