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Another bailout plan?

By Judy Martel · Bankrate.com
Wednesday, August 31, 2011
Posted: 3 pm ET

With the housing market in an unrelenting national depression, the Obama Administration is seeking solutions and Federal Housing Finance Agency acting director Edward DeMarco is feeling the heat.

One proposal put forth by President Barack Obama will make it easier for homeowners to refinance, and since the FHFA controls Fannie Mae and Freddie Mac, the burden falls on its shoulders to implement a plan.

In an article in the Wall Street Journal, DeMarco said his mission is to conserve assets of the two agencies (which guarantee about half of the nation's $11 trillion in mortgages) and not spend on expensive new initiatives that may or may not jumpstart the housing market. The Administration calls his thinking shortsighted.

In any case, there already are initiatives to refinance: the Home Affordable Refinance Program, or HARP, is probably the best-known, but according to CNBC, that program has refinanced fewer than a million loans. Will another costly program make a difference?

Mortgage rates are at historic lows and home prices have dropped significantly, yet the market remains stalled. The fact is that many homeowners simply are blocked from refinancing because they are underwater and don't have the equity, or the banks are making it too difficult for them to qualify. Many borrowers are walking away. The lack of confidence consumers have in the housing market is threatening to turn into fatalism: Underwater borrowers often can't even get their mortgage servicer on the phone.

The Obama administration is arguing that by refinancing at lower rates, homeowners will have more money to spend, which will, in turn, boost the economy. True enough, but that doesn't take into account the massive cost of implementing another refinance program that could be as unsuccessful as the others.

What are your thoughts on Obama's proposal?

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9 Comments
KCloantips.com
September 12, 2011 at 1:04 pm

I agree stephanie

Mortgage rates are at the lowest point in history- I cannot remember when it has ever been like this. I see home prices dropping significantly across the nation, The market remains stalled because the banks are making it way to difficult for homeowners to refinance. I agree that the biggest issue is are:
a. Homeowners are underwater and don't have the equity
b. Banks are making it to difficult for homeowners to qualify

This needs to change.

KCloantips.com
September 12, 2011 at 12:58 pm

Agree with Stephanie!

Mortgage rates are at the lowest point in history- I cannot remember when it has ever been like this. Home prices are dropping significantly across the nation, but the market remains stalled. It is frustrating to me that homeowners are being blocked from refinancing. I agree that the biggest issue is:
a. Homeowners are underwater and don't have the equity
b. Banks are making it to difficult for homeowners to qualify- banks to help with this issue!

This needs to change.

Alan de Jardin
September 03, 2011 at 1:08 am

The President or the Senate & House should declare that any homeowner who pays 1/2 of his monthly payments for two years would not be evicted. This would allow the market to cool, and not self-destruct, while at least temporarily sharing the cost among home owners, the banks, and the taxpayer. It would put a floor under the housing market, free up monies to generate the economy, and anticipate the start of new construction. Year three would not be risk free, but it would be more stable and rational, without the frenzy of todays market.

J. Smith
September 03, 2011 at 12:14 am

I agree with Stephanie, Ken and Andy.
The banks are offering very low rates. But with the debt to ratio problem, nobody is getting these rates.
The problem is, that our homes value has fallen so far down, that the mortgage we now hold is beyond a reasonable amount of our debt.
Obama has to force the banks to reduce our mortgage balances to reflect the new lower values. They can afford it, After all...we did bail them out.
This way...most of us will be lots more willing to stay where we are & pay those mortgages, instead of defaulting and walking away.

A lot of us have good credit ratings and are paying our mortgage payments. But the banks won't give us the great refinance rates they're advertising so we might have more money to spend in the economy.
I would love to work on my house, or replace my 12 year old car, but can't afford to because I feel like I'm throwing good money after bad. This must change & we need help !!

My credit score is almost 800 and I can't get a refinance from my bank. It isn't my fault that the value of my home has dropped down to the balance I owe on it.
That means I lost over $100K that I used as my down payment, only back in the beginning of 2008 and I'll never see it again. How depressing is that ?
Well I'll tell you & it's extremely depressing.

Even my 401k is at risk again, so where else do I go ?
Do I sit and wait for all of it to bottom out and go on the welfare rolls ?
I sure feel like I'm headed that way.

As I travel thru my neighborhood, all I see are For Sale signs & foreclosures. It's horrible because I have wonderful neighbors that I don't want to lose. I am so depressed over all of this, I don't know what my next step should be.

I'm far too old to start over again. It's taken me the better part of the last 30+ years of my life to get to where I am now. I don't have that much time left.
Is somebody going to help people like me out ? And soon ?

Stephanie
September 01, 2011 at 7:43 pm

Homeowners should not be the only ones penalized for the drop in value of their homes. Investors and mortgage companies are the most at fault, though that is only one side of the arguement. Wouldn't it be fair that the homeowner should be able to refinance at the new lower value or at least split the difference and let the rich elitist at the top of the food change eat the difference. Homes would then be realisticly valued once again, and no one will be upside-down

Ken
September 01, 2011 at 1:25 pm

Banks should have rewritten the loans for the current rates. They are making money on the mortgages they are writing at the current rates so why not change the rate on the old mortgages to reflect the current rate? This will be reason for many to stay in their homes and free up more money for the general economy. The reason they have not done this is the GREED factor. I now hate banks as much as I do lawyers.

Andy
September 01, 2011 at 9:23 am

It's very simple...keep HARP, but get rid of the LTV max or waive appraisals on all properties. Force the PMI companies to re-write the policies at the same levels if need be, but don't tell me the max loan I can get on my 100k home is 125k when I owe 160k! And how does HARP, or any other refi initiative actually cost any money to the Administration? Unlike the HAMP Program, HARP doesn't offer money to lenders or doing any principle reduction.

Tammy Laundre
September 01, 2011 at 6:59 am

What bank do you work for that you don't agree to give homeowner's the opportunity to refinance at a lower rate to free up some of their money ?

gary henry
August 31, 2011 at 9:47 pm

Underwater? How aboout those of us who have endured and have can refinance with positive equity - just less than 20%?