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Hard Rain
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 Posted: Wed Jul 01, 2009 6:22 pm GMT Post subject: Fannie, Freddie to expand refinance program |
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WASHINGTON (Reuters) – Fannie Mae (FNM.N) and Freddie Mac (FRE.N) will expand their foreclosure-prevention efforts and refinance homeowners whose loan-to-value ratio is 125 percent, an administration source said on Wednesday.
Under current rules, the mortgage finance companies may refinance only borrowers whose mortgage loan-to-value ratio is 105 percent. The new policy is intended to aid more struggling borrowers who have seen their property lose value in the recent years of a housing crisis.
Oh My... |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Wed Jul 01, 2009 6:26 pm GMT Post subject: are they serious? |
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i just posted a link to this in the News forum. it seems that Obama wants the US to be Japan all over again.
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Hard Rain
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| Posted: Wed Jul 01, 2009 7:37 pm GMT Post subject: Re: are they serious? |
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| melonrightcoast wrote: | | i just posted a link to this in the News forum. it seems that Obama wants the US to be Japan all over again. |
I don't totally disagree with the reasoning, they need to do everything possible to keep people paying on properties that will never again be worth what they paid. Will it succeed? I am doubtful.... |
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john p
Joined: 10 Mar 2006
Posts: 1820
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| Posted: Wed Jul 01, 2009 7:57 pm GMT Post subject: |
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Think of it this way, if someone has more than a 20% equity share in their home, they most likely didn't buy during the bubble and most likely aren't injured directly by the subprime mess, adjustable rate mortgage (unless it was a refi), or housing bubble. I mean if they were to administer any medicine, shouldn't it be on the affected areas?
My wife and I tried to refinance with these recent low rates and were caught in a loan to value issue because we bought in 2006. I was frustrated because people who bought prior got the opportunity to refinance and they weren't harmed by the real estate bubble, and we didn't qualify for one of those government refinances, so it was like, we'd be better off if the government did nothing and by them trying to do good, they make it worse for us. |
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john p
Joined: 10 Mar 2006
Posts: 1820
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| Posted: Wed Jul 01, 2009 8:28 pm GMT Post subject: |
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Further, if you live in southern California, Florida or Las Vegas, you could have put 10% down back in 05 and still not have the LTV of 125%
My issue about refinancing is that if others can refinance, it is like they get a raise in income because a smaller mortgage due to refinance is essentially a jump in buying power. I wanted to refinance because the other people in the same market will have more buying power otherwise. As it stands, the people who bought prior to the bubble had an opportunity to refinance in the 4's recently as did the people in a complete financial mess. So basically the people who drove the speed limit are penalized for doing so. |
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melonrightcoast
Joined: 22 Feb 2009
Posts: 236
Location: metrowest
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| Posted: Thu Jul 02, 2009 1:43 pm GMT Post subject: japan vs. us |
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| Quote: | | I don't totally disagree with the reasoning, they need to do everything possible to keep people paying on properties that will never again be worth what they paid. Will it succeed? I am doubtful.... |
I believe this was Japan's rationale when their real estate bubble burst: they made sure the banks were paid, at the expense of their economy. I think most people would agree that it hasn't worked out so well for them. However, I don't think the US consumer will go down this route. There is much less stigma attached to financial hardship and irresponsibility (bankruptcy and "walking away"), compared to the much more honor-bound Japanese culture.
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Fri Jul 03, 2009 3:11 am GMT Post subject: Re: are they serious? |
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| Hard Rain wrote: |
I don't totally disagree with the reasoning, they need to do everything possible to keep people paying on properties that will never again be worth what they paid. Will it succeed? I am doubtful.... |
Lowering the rate is not equivalent to keep people paying on properties. It is equivalent to letting them pay less and since low rates are being funded by federal debt, it is equivalent to a bailout of all underwater homeowners. I would prefer something like a redo. You can convert your ARM into a 30-year equivalent from the time you bought it. Some people will still be in houses they can't afford but it avoids the moral hazard and maintains fairness while making up for the people who simply bought the wrong kind of loan. I suppose they get to keep the discount they got on their alternative loan and those who couldn't afford their houses in the first place got to live above their reach for a while but that's water under the bridge. |
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balor123
Joined: 08 Mar 2008
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| Posted: Fri Jul 03, 2009 3:13 am GMT Post subject: |
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| john p wrote: | | So basically the people who drove the speed limit are penalized for doing so. |
As are the people didn't even drive. |
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WestCoastXPlant
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| Posted: Fri Jul 03, 2009 3:57 am GMT Post subject: |
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| Quote: | | You can convert your ARM into a 30-year equivalent from the time you bought it. |
Wait, why would you have bought the house with an ARM to begin with? I suppose in this scenrio you'd get people who are
1. Greedy because they could afford the fixed payment but didn't choose to
2. Still employed
3. Want to stay in the home for a long long time
I'm guessing that's not a ton of people... |
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balor123
Joined: 08 Mar 2008
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| Posted: Fri Jul 03, 2009 4:48 am GMT Post subject: |
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| People took ARMs because that was the only way they could afford the house. I think the government should help people get into homes I just don't see why we have to keep them in the homes they are currently in! The only fair solution, which isn't always the best, is to let the free market work it out. That will result in a lot of people having to find new homes and that's where government support should come in. Reiterating from a previous post, I think the interest rate deduction should also only apply to cost of building to avoid enriching high cost of living parts of the country at the expense of federal taxpayers. |
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WestCoastXPlant
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| Posted: Fri Jul 03, 2009 1:48 pm GMT Post subject: |
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| Quote: |
People took ARMs because that was the only way they could afford the house. |
This was my point -- my impression is that unless the 30year fixed is so low that it matches whatever teaser rate they had, they won't be able to afford the house anyway. Actually from what I've read plenty of folks can afford the teaser rate...And herein lies the problem...If they were already squeezed on the teaser payment, what savings do they have left in case heat is more expensive this winter or gas goes up to $3-$4/gallon?
I agree about the interest deduction -- there was perverse push towards homeownership and it will take a long long time to undo...I have lots of Canadian and European friends who simply cannot believe that people ever allowed that deduction to pass -- esp since, if you think of it it's basically a penalty on people who are prudent and/or really poor |
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JCK
Joined: 15 Feb 2007
Posts: 559
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| Posted: Fri Jul 03, 2009 8:43 pm GMT Post subject: |
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| WestCoastXPlant wrote: | | Quote: | | You can convert your ARM into a 30-year equivalent from the time you bought it. |
Wait, why would you have bought the house with an ARM to begin with? I suppose in this scenrio you'd get people who are
1. Greedy because they could afford the fixed payment but didn't choose to
2. Still employed
3. Want to stay in the home for a long long time
I'm guessing that's not a ton of people... |
I don't think you're quite understanding the market dynamics a few years back. Lots of people, myself included (who is fairly financial conservative; I think my wife calls it "cheap"), took out ARMs. The idea being that you'd refinance into a fixed rate loan before the 5 year term was up. The ARMs were being heavily pushed by the mortgage folks at that time, and the reasoning didn't seem crazy to me. If you end up refinancing anyway (because rates drop), you're better off taking the savings now. This obviously ignored the risk of price declines.
We've since refinanced into a shorter-term fixed loan, as most of my other financially responsible friends.
I agree that 5 year and shorter ARMs are not a great idea for most people (myself included), but these things were so popular during the boom, and their popularity was definitely not limited to financially irresponsible folks. |
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mpr
Joined: 06 Jun 2009
Posts: 344
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| Posted: Sat Jul 04, 2009 4:00 am GMT Post subject: |
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| balor123 wrote: | | I think the government should help people get into homes I just don't see why we have to keep them in the homes they are currently in! The only fair solution, which isn't always the best, is to let the free market work it out. |
Dont you think the juxtaposition of the first and last statement is a little
ironic ? I dont have strong feelings about the extent to which government
should be promoting home ownership - there are legitimate social policy
arguments, but it seems like a strange priority to me, compared to say
healthcare.
Anyway, I dont think most Americans realize that the extent to which the
mortgage market in the US is nationalized and run as a government program
is unheard of in other industrialized countries, including "socialist Europeans".
The irony is that many who accuse Obama of being a "socialist" because
of his positions on health care are surely quite happy to let the
government help them refinance or borrow at low interest rates. |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Sat Jul 04, 2009 11:01 pm GMT Post subject: |
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| mpr wrote: | I dont have strong feelings about the extent to which government
should be promoting home ownership - there are legitimate social policy
arguments, but it seems like a strange priority to me, compared to say
healthcare. |
Yeah I didn't make any statements about priorities but I would like to see significant healthcare reform as well and am shocked that housing gets so much more subsidy. The problem with the ways the government provides support is it's really inefficient. I don't know the numbers but it seems like they're not 100% efficient because the costs rise in conjunction with the support. Not subsidizing the land price for housing would solve this problem. I'm not sure what the equivalent would be for healthcare.
The reason I like government support for housing isn't so much about the claimed benefits but rather it's just a luxury that it provides. I don't think at the moment it provides anywhere near the benefits that are claimed, even if they existed. Plus, given that the tax rates are higher for wealthier people, I think it mostly helps the rich.
| mpr wrote: |
Anyway, I dont think most Americans realize that the extent to which the
mortgage market in the US is nationalized and run as a government program
is unheard of in other industrialized countries, including "socialist Europeans". |
Interest rates would be insanely high right now if it weren't for government support. I'd guess at least 7-8% or perhaps even as high as 10% to account for the high default rate.
| mpr wrote: |
The irony is that many who accuse Obama of being a "socialist" because
of his positions on health care are surely quite happy to let the
government help them refinance or borrow at low interest rates. |
That's the point that I've been trying to make. I suppose it makes to complain that some are getting the benefit and others aren't but we should really be complaining that anyone is getting the low interest rates. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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