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Hannibal
PostPosted: Mon Oct 24, 2011 10:46 am 
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President Obama to Announce Major Revamp of Home Lending Program, HARP

http://www.foxnews.com/politics/2011/10 ... z1biKEC3jK

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Las Vegas – Seeking to breathe new life into a sagging economy, President Obama will attempt an executive branch rescue of homeowners trying to refinance underwater mortgages, with a new initiative that lets people with little or no equity get a better interest rate at a reduced cost.

The initiative, the first in a series of announcements expected this week by the president, applies to homeowners with federally guaranteed mortgages who are current on their payments.

The revamped Home Affordable Refinance Program, which aims to avert foreclosures, is expected "to encourage new, lower-cost loans" to more homeowners who are paying more than the value of their properties, a senior administration official said ahead of Obama's Monday announcement.

The three-year-old Home Affordable Refinance Program was supposed to allow refinancing for up to 125 percent of a home's value on mortgages owned or guaranteed by Fannie Mae or Freddie Mac, but has been stuck on tight eligibility rules, including excluding people with high credit scores or other attractive risk offers.

The change is not a mass refinancing of everyone in America, but a targeted fix to open up the program to more people who are underwater.

Obama will announce the initiative Monday in Las Vegas, where an estimated 60 percent of homes are underwater. But it could also help borrowers in other states, including Arizona, Florida, California and elsewhere where the underwater mortgage rate is high and borrowers are stuck without options to lower their payments.

The changes to the loan programs are specifically intended to bypass Congress, which is stalled on agreeing to new plans to increase jobs and jump-start the economy. Obama is trying on a new catchphrase, "We can't wait," to goad Republicans for inaction, even as the Democratic-led Senate votes against the president's other proposals.

The housing program Obama will announce Monday will be implemented by the independent Federal Housing Finance Agency. The administration official had no estimate for how many homeowners could be helped by relaxed rules.

While on a West Coast swing this week, Obama will also announce policy changes to ease college graduates' repayment of federal loans.

After a drop-in to Las Vegas, for high-money fundraising for his reelection campaign, the president will travel to Los Angeles for three more fundraisers, including one at the home of movie stars Melanie Griffith and Antonio Banderas. Obama will also make stops this week in San Francisco and Denver.



A couple of things that stood out to me-

The three-year-old Home Affordable Refinance Program was supposed to allow refinancing for up to 125 percent of a home's value on mortgages owned or guaranteed by Fannie Mae or Freddie Mac, but has been stuck on tight eligibility rules, including excluding people with high credit scores or other attractive risk offers.

Allowing people who are unable to afford their homes to refinance up to 125% of the homes estimated value is about as dumb as it gets in my book. What bank would ever write such a deal unless the bank was told that it was a low risk thing to do? So my next question is- Who would assume the risk? Well it's going to be the taxpayer. In addition, like the article stated- Obamas express intention is to bypass Congress. Again. I mean seriously, are we allowed to just call it like we see it anymore?

And as always, if a republican did it, it would be on the CNN/MSNBC ticker on perma-loop.

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Mookhow
PostPosted: Mon Oct 24, 2011 10:57 am 
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Isn't this what started the housing bubble in the first place?

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Arathain Kelvar
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PostPosted: Mon Oct 24, 2011 11:23 am 
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Oy. I've been thinking about refinancing because I bought in 2007 with a 6.5% interest rate. I'd like one of those shiny new 3.5s. I could drop my loan from 30 to 15 and barely pay more.

Anyway, so I put 20% down, in 2007, and now... yeah. I'm not underwater but I don't have 20% in it anymore, for sure. So, it sounds like I can't get a loan because my credit's good (810)? That's lame.
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Xequecal
PostPosted: Mon Oct 24, 2011 11:43 am 
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*shrug* It's better than a whole new wave of strategic defaults.
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Hannibal
PostPosted: Mon Oct 24, 2011 11:54 am 
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Xequecal wrote:
*shrug* It's better than a whole new wave of strategic defaults.



I disagree. Wasn't the idea behind the bailouts to manage "toxic assets" so companies didn't collapse all at once, and destroy "the system"? These debts are still owed, they still exsist even if they are moved to a different balance sheet. Now we are going to allow people who are already heavily in debt, to refinance and go into MORE debt?

I really think the system has tipped past the point of treatments being applied to fix it. The idea behind the bailouts needs to be honored and the companies that have written these loans need to begin to eat their losses. Of course that means Fannie and Freddie would tank, but I'm ok with that. The housing market needs to actually correct, not be propped up until they can get other suckers into the scheme to take the losses.

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Arathain Kelvar
PostPosted: Mon Oct 24, 2011 12:20 pm 
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Hannibal wrote:
I disagree. Wasn't the idea behind the bailouts to manage "toxic assets" so companies didn't collapse all at once, and destroy "the system"? These debts are still owed, they still exsist even if they are moved to a different balance sheet. Now we are going to allow people who are already heavily in debt, to refinance and go into MORE debt?


It sounds to me like you are missing the point here. Why would they be in more debt?

Let's say I purchased a house in 2007 for $164,000, at 7% interest, and put my 20% down. That means on day 1 I owe $123k. I paid all my payments on time, and can afford my mortgage, which is now worth say $115k.

The economy explodes, and now my house is worth $100k. I can still afford my payments, but now I owe more than the house is worth.

Meanwhile, mortgage rates have dropped to 3.5%. I'd like to refinance, but who would give me a loan?

The point of this program, if I understand it correctly, is to allow me to refinance the $115k I owe at 3.5%. So, my debt has not increased. Considering the total value of the interest over the course of the loan, my debt has now decreased.

Xeq is right from one perspective. You always have a choice to walk away from a loan and allow foreclosure. Allowing me to refinance may be much more attractive than a strategic default. Obviously, it's much better than the current situation. I'll still owe more than the house is worth, but at a lower interest rate.
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Hannibal
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PostPosted: Mon Oct 24, 2011 12:27 pm 
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So if the value of your home rose during the time of the loan, can the bank reasses the deal and make you pay more? No, they agreed to a set price and payment.

*edit*
I went through a lot of this last year as I was looking to buy a house. After going through all the paperwork, they offered me a prequalified amount that in my opinion was far more then I would be able to responsibily afford. In the end, I wasn't confident that the housing market had bottomed out, so I decided taking on this debt would be a bad move. Now there are predictions of price declines as much as 35% in some areas.

If people can't afford their homes, they realisticly should be selling them, not attempting to squeeze more blood out of the stone. It reminds me of a gambler who keeps thinking his luck is going to turn around on the next card, so thats how he justifies spending the rent money.

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Arathain Kelvar
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PostPosted: Mon Oct 24, 2011 12:52 pm 
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Hannibal wrote:
So if the value of your home rose during the time of the loan, can the bank reasses the deal and make you pay more? No, they agreed to a set price and payment.


What does this have to do with anything? If the value rose, you could refinance easily.

Quote:
*edit*
I went through a lot of this last year as I was looking to buy a house. After going through all the paperwork, they offered me a prequalified amount that in my opinion was far more then I would be able to responsibily afford. In the end, I wasn't confident that the housing market had bottomed out, so I decided taking on this debt would be a bad move. Now there are predictions of price declines as much as 35% in some areas.

If people can't afford their homes, they realisticly should be selling them, not attempting to squeeze more blood out of the stone. It reminds me of a gambler who keeps thinking his luck is going to turn around on the next card, so thats how he justifies spending the rent money.


You're still completely and totally missing the point. Nobody's talking about borrowing more money. We're not even talking about people that can't afford their homes, necessarily, unless you include those that can't afford them at 7%, but could at 4%. In which case, why does it matter?
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Hopwin
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PostPosted: Mon Oct 24, 2011 1:16 pm 
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Maybe it would help if we made this more like a math problem?

Home value = x
Mortgaged amount = y
Current interest rate = a
New interest rate = b

if y <= 1.25x

Then
a = b
Else
cout << "Haha you suck!"

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Arathain Kelvar
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PostPosted: Mon Oct 24, 2011 1:55 pm 
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Heh.

Back when I was inquiring about refinancing, the following conversation took place (paraphrased):

A: I purchased a house in 2007 for X and put Y% down. It subsequently took a hit in value.
Bank: You don't say.
A: Yes, well, my loan to value is now higher than 80%. I'd like to refinance, but I know you guys typically require 80% or less LtoV.
Bank: Yes.
A: Do you have anything that I might fit into?
Bank: Sure, we just need to adjust your closing costs.
A: Really? Great, what's the adjustment?
Bank: Standard closing costs plus the amount necessary to set your LtoV at 80% or less.
A: OMG you suck.
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Lonedar
PostPosted: Mon Oct 24, 2011 2:46 pm 
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To add another data point. I just refied last month. I am at about 103% LTV and was able to go from 6% down to 4.5% on a 30 year fixed. I could have shaved another half point off if I was at 80% LTV, or added another half point if I was in the 105-1??% LTV range. 4.5 looks real good to me...might be worth keeping as a rental when I upgrade in the next 4-6 years.
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Wwen
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PostPosted: Mon Oct 24, 2011 4:40 pm 
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I guess we're really into homeopathy in the US.

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Corolinth
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PostPosted: Mon Oct 24, 2011 4:54 pm 
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Good one.

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Hannibal
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PostPosted: Mon Oct 24, 2011 5:06 pm 
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Wwen wrote:
I guess we're really into homeopathy in the US.


I guess so. Well more of the same can't hurt anything. Right?

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Arathain Kelvar
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PostPosted: Mon Oct 24, 2011 5:34 pm 
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Hannibal wrote:
Wwen wrote:
I guess we're really into homeopathy in the US.


I guess so. Well more of the same can't hurt anything. Right?


While yes, the "homeopathy" approach definitely is much beloved in this country, you're STILL missing the point.

This is about refinancing existing debt, not creating or encouraging more. If someone can afford their payments at 7%, what about it is "more of the same" to allow them to restructure the same amount of debt at a lower interest rate? In what way is this a high-risk transaction? It was a dumb bet to start with, sure - since the house tanked in value, but why is it high risk to give them the same debt at a lower rate?

What is more of the same?

Now, I definitely agree with Wwen, this is not a solution to the problem, just another small insignificant tweak. I don't see it costing anything, really, and can see how it could encourage some folks to pay off debts they incurred that exist over their house values.
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Hannibal
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PostPosted: Mon Oct 24, 2011 5:51 pm 
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Arathain Kelvar wrote:
Hannibal wrote:
Wwen wrote:
I guess we're really into homeopathy in the US.


I guess so. Well more of the same can't hurt anything. Right?


While yes, the "homeopathy" approach definitely is much beloved in this country, you're STILL missing the point.

This is about refinancing existing debt, not creating or encouraging more. If someone can afford their payments at 7%, what about it is "more of the same" to allow them to restructure the same amount of debt at a lower interest rate? In what way is this a high-risk transaction? It was a dumb bet to start with, sure - since the house tanked in value, but why is it high risk to give them the same debt at a lower rate?

What is more of the same?


Now, I definitely agree with Wwen, this is not a solution to the problem, just another small insignificant tweak. I don't see it costing anything, really, and can see how it could encourage some folks to pay off debts they incurred that exist over their house values.


Well this is what I see.
The revamped Home Affordable Refinance Program, which aims to avert foreclosures,is expected "to encourage new, lower-cost loans" to more homeowners who are paying more than the value of their properties, a senior administration official said ahead of Obama's Monday announcement.

The three-year-old Home Affordable Refinance Program was supposed to allow refinancing for up to 125 percent of a home's value on mortgages owned or guaranteed by Fannie Mae or Freddie Mac, but has been stuck on tight eligibility rules, including excluding people with high credit scores or other attractive risk offers.

The change is not a mass refinancing of everyone in America, but a targeted fix to open up the program to more people who are underwater.

The bold is mine. If the program is aimed to avert foreclosures, then doesn't that mean the person is UNable to afford their payments? Second, if their home is worth so less vs what they paid for it- why is that? We've all read stories of people taking out two loans to pay for a place during the boom times. Third- it's an awful narrow scope for a program with it's target. Plus those who qualify need to have less than optimal credit.

As for the lower cost- I'm assuming it means lower cost to the homeowner. So who is going to eat the difference between their original loan and the new one?

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Xequecal
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PostPosted: Mon Oct 24, 2011 6:01 pm 
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Hannibal wrote:
The bold is mine. If the program is aimed to avert foreclosures, then doesn't that mean the person is UNable to afford their payments?


Not necessarily. A strategic default still results in a foreclosure.

Also, it is not reasonable to expect the average person to have predicted the mortgage meltdown, or in fact to make any other prediction than that prices would keep rising. The mortgage-backed securities were still AAA rated at the eleventh hour, meaning the ratings agencies were pretty much promising that prices would almost surely keep going up.


Last edited by Xequecal on Mon Oct 24, 2011 6:04 pm, edited 1 time in total.

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Kaffis Mark V
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This is bailing out Freddie and Fannie, so it doesn't get revealed (more obviously) that they are bad ideas and encourage malinvestment when they actually collapse.

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RangerDave
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PostPosted: Mon Oct 24, 2011 6:07 pm 
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You guys are over-thinking this. It isn't about preventing defaults or bailing out Fannie and Freddie. It's really nothing more than a way to get at least some stimulus out there - without having to go through Congress - and scoring political points in the process.
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Diamondeye
PostPosted: Mon Oct 24, 2011 6:28 pm 
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We don't need any more "stimulation".

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Müs
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PostPosted: Mon Oct 24, 2011 6:34 pm 
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I do.

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Vindicarre
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PostPosted: Mon Oct 24, 2011 6:51 pm 
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RangerDave wrote:
You guys are over-thinking this. It isn't about preventing defaults or bailing out Fannie and Freddie. It's really nothing more than a way to get at least some stimulus out there - without having to go through Congress - and scoring political points in the process.


I'm curious, what kind of "stimulus" would that be?

IMHO, this is about buying votes.

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Kaffis Mark V
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PostPosted: Mon Oct 24, 2011 7:48 pm 
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Müs wrote:
I do.

The bouncing pony under this phrase really sells it.

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Stathol
PostPosted: Mon Oct 24, 2011 9:06 pm 
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I really don't want to think about stimulating that.

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Rorinthas
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PostPosted: Mon Oct 24, 2011 10:16 pm 
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If it is a good idea to refinance these people private businesses will do it on their own. The government has no money. It can't do it good idea or not.

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