More than 100,000 struggling homeowners could get help from a $2-billion program that California is launching, including about 25,000 borrowers who owe more than their properties are worth and could see their mortgages shrink.
The Keep Your Home California program, which uses federal funds reserved for the 2008 rescue of the financial system, has the potential to make a sizable dent in California's foreclosure crisis and help the general housing market. State officials hope to fend off foreclosure for about 95,000 borrowers and provide moving assistance to about 6,500 people who do lose their homes.
They've been sitting on these funds since 2008? Really? I wonder who benefits from this massive cash infusion?
The program is aimed at helping low- and moderate-income people who own only one property. To qualify in Los Angeles County, for instance, a family couldn't earn more than $75,600 a year. The maximum benefit for any household participating in the program is $50,000. Homeowners who refinanced their homes to take cash out of their properties won't be allowed to participate.
Ah! I'm remembering the strawberry-picker who bought that multimillion dollar mansion. I'm sure he could use an extra $50,000 of our tax dollars. The fatcat bankers seem to be interested in covering their bad loans at taxpayer expense, but not so interested in reducing the principle balance of solid loans. Go figure.
The principal-reduction component would pay lenders $1 for every dollar of mortgage debt forgiven. Many experts have said reducing principal on such underwater loans would go far toward reducing foreclosures because home values have fallen so steeply that homeowners are tempted to walk away from their obligations.
But banks have been reluctant to significantly reduce principal on loans other than on certain kinds of risky mortgages that are now seen as having been highly imprudent.
What about those cute little cuddlebears known as Fannie and Freddie? Are they on board?
The nation's largest mortgage investors, Fannie Mae and Freddie Mac, also aren't taking part in the principal-reduction program. That's not surprising, Cecala said, because the two are in government conservatorship and billions of taxpayer dollars already have been spent rescuing them.
Oops. I guess not. Now is the time for all good Americans to go out there and get a third job. We can't let unwise investors in California lose their homes, now can we?
So, I'm torn. I hate the fact that people who make stupid decisions get a "get out of debt free" card while I pay extra on my mortgage every month to get my house paid off more quickly (and also that I refinanced for a super-awesome interest rate and put money IN my house rather than taking money out).
ReplyDeleteOn the other hand, these houses and neighborhoods stay kept up if we figure out a way for homeowners to stay in them. My neighborhood was absolutely devastated by the foreclosures, and the only reason we've rebounded so much is that (a) AFG and I bought at the absolute bottom of the market in our area, and (b) the government isn't getting any smaller and we're in just the right place for it.
I can say that this year is the first year since 2008 our HOA is actually paying attention to violations and starting to clean up from the housing Katrina that hit here.
I do appreciate the idea of short sales when necessary. It works for everyone involved. It's not the best case scenario, but the truth is that when done correctly it's probably the best that can be done. Foreclosures are worse for the bank and for the neighborhood. And for potential buyers, as people being foreclosed on absolutely shitify their houses so often. Then they sit on the market while people buy up properties that have lost value, but the homeowners managed to hold on.
I'm kind of wondering why, rather than unfairly lowering mortgages for people who bought houses they couldn't afford - banks aren't simply extending the lengths of the mortgages to lower the payments to something that can be afforded. Tough shit if the market isn't worth what it was previously and a homeowner is under water - the choice was made. My sympathy level is low, especially since AFG and I deliberately didn't buy prior to this because we KNEW we couldn't afford the payment "no matter what happened."
If we stem the foreclosures (even if it is by giving someone more time to pay with a caveat that the mortgage is re-evaluated every 5 years or so until prices have regained their former level and a 30 year fixed rate can be negotiated), housing prices begin to recover more quickly. And by "recover", I mean - head to an appropriate price, not the crazy shit that was going on previously.
As you can see, I stayed at a Holiday Inn last night. Express, even.
I feel like we bailed out the lenders and AND the borrowers. How that makes for a stable economy is beyond me.
ReplyDeleteIf I were a banker holding the paper on an underwater mortgage, I would sit down with the homeowner and renegotiate the payment plan. In severely hit areas, it may be prudent to suspend payments for one year, then look at the situation again. Foreclosing on this scale would be idiotic.
However, forcing the taxpayers eat big bites of the principle is NOT the answer to anything. It makes people who invested wisely in their home very, very angry. YOU bought it, YOU pay for it.
Who's going to bail out the bailer-outers?
ReplyDeleteAnd GM and ChryCo (collectively, "Taxpayer Motors") today announced massive salaried-sector bonuses. Yes, you read that correctly- "bonuses".
ReplyDeleteIt all just beggars belief...
Who's going to bail out the bailer-outers?
ReplyDeleteThe whole world will.
It's called inflation, and it is the most regressive tax there is.
And it's being generated by a "progressive" political elite who are lying to our faces about the causes and the consequences - not to mention the inflation data itself.