DEL.ICIO.USMortgage aid program begins
Lenders can take loss on loan to help borrowers make payments
The Associated Press
Thursday, October 02, 2008
WASHINGTON — The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.
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The Associated Press
About 400,000 homeowners are eligible for a program that aims to refinance troubled mortgages.
Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.
To qualify, borrowers must be spending more than 31 percent of their income on mortgage payments. Loans made this year are excluded, except for those completed on Jan 1. Borrowers must have made six months of payments on their loans.
“For homeowners in trouble, this may be the help that they need,” Housing and Urban Development Secretary Steve Preston said Wednesday. Officials did not have an updated estimate of how many homeowners were likely to qualify, beyond the Congressional Budget Office’s projection from earlier this year that 400,000 borrowers would participate.
The program, dubbed ‘Hope for Homeowners,’ was passed by Congress this summer as part of a massive housing bill. It is one of several government efforts to stem the mortgage crisis.
Critics, however, call the government’s actions sluggish and inadequate. Earlier action to modify loans, they say, might have prevented a $700 billion financial industry bailout now being debated in Washington.
Executives from Citigroup, JPMorgan Chase, Bank of America and Wells Fargo told lawmakers last month they have been hiring additional workers to put the new program in place.
Still, it is unclear whether the industry will embrace the plan fully. One concern is that investors in mortgage securities must take an immediate loss and can’t recoup their lost money if home prices turn upward again.
Investors would rather modify loans in ways that maintain the ability to “share in future appreciation,” JPMorgan Chase executive Marguerite Sheehan said in written testimony submitted to House lawmakers last month.
On Monday, a group of state banking and law enforcement officials released a report that said nearly 80 percent of borrowers with subprime loans were not on track for assistance to avoid foreclosure as of May.
The report by the State Foreclosure Prevention Working Group criticized the lending industry for making only small changes to loan terms and noted that about one in five loans that were modified over the past year became delinquent again.
“While banks and Wall Street firms continue to report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications,” Iowa Attorney General Tom Miller, a founder of the state effort, said in a statement.
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Comments
By Rebecca Callahan
Oct 3, 2008 8:08 AM | Link to this
After reading the terms for the $300 billion Mortgage Swap or "Hope for Homeowners" program that our Government put into place October 1,2008 to keep homeowners in their homes and slow down foreclosures and home price declines I WAS SHOCKED.
The terms of this bill does nothing to assist Homeowners who are in need of refinacning their homes at a secure, reasonable interest rate, at current appraised values.I am talking about those homeowners who qualify under standards that were in place 10 years ago and longer, not relaxed standards that have been allowed the past several years that has gotten us into this mess.
The bill, that our elected officals passed only helps those financial institutions who hope to handle these new loans. I doubt that there will be many. PLEASE TAKE THE TIME TO READ THE TERMS FOR THESE LOANS AND YOU WILL UNDERSTAND.
WE NEED A BILL PASSED THAT WILL HELP QUALIFIED HOMEOWNERS REFINANCE AND SLOW FORECLOSURES DOWN TODAY. We are going to have foreclosures regardless, but we can stopped thousands if we have a practical
immediate plan. It is not the "Hope for Homeowners" Plan.
Home prices will continue to fall as forclosures continue without a solid solution to our problem in place. Those homeowners who are not in need of refinancing, need to make this issue part of their problem unless they want to continue to see their home values decline.
People, we need to start paying attention to what our Government is doing. Do not listen to what you are being told, but start looking into what they put in writing, THERE IS A BIG DIFFERANCE! Then you will realize why we are in a financial crisis and why we are not going to get out of it soon. It is going to be up to us to get involved, contact our elected official and start
demanding that change be made.
By Mhale
Oct 2, 2008 8:25 PM | Link to this
I agree that people should take responsibiity. But my husband and I were taken advantage of by a large mortgage lender. The lender was stating that our interest rate would remain the same for 3 yrs, but it was too late after we signed the papers to go back. Now we are stuck with owing way more on our home than it is worth and are scared about refinancing next month when the loan term is up. We may not be able to afford what the payment is going to be. We aren't behind on payments and have decent credit. We can't qualify for any help. We make too much money. But to us we just get by. Sometimes it seems hopeless.
By TRILLTALK
Oct 2, 2008 6:59 PM | Link to this
AMERICA NEED JOBS.PEOPLE WHO ARE WORKING CAN PAY THERE BILLS.AMERICA LOST 2 MILLION JOBS IN THE LAST 12 MONTHS.CAN YOU SEE THE CORELATION..SIMPLE..PEOPLE KEEP LOSING THERE INCOME THE ECONOMY WILL FALL.IT WILL NOT MATTER WHAT THE GOVERNMENT DOES.
By larry why
Oct 2, 2008 5:01 PM | Link to this
Absolutely on the tax refund issue CJ. The other fair option is that any of the loan forgiveness should and is supposed to be declared taxable income. The only problem is these people never should have qualified for a loan in the first place and when you add say $60,000 in income, that works out to about $20,000 in income tax. How is someone who can't pay their mortgage going to come up with $20,000 more in tax payments? Therefore going back to your original idea, if they were short on the tax $$, their refunds would be held to pay that money off. The problem is refunds can be manipulate by withholding adjustments.
By CJ
Oct 2, 2008 4:04 PM | Link to this
The government should retain future tax refunds of every person who participates in this program. This will help pay for the program.
By Come Bail Me Out
Oct 2, 2008 3:45 PM | Link to this
Government interference is what is causing the problem to begin with! My investments have tanked recently and I'm close to retirement, why doesn't the gov't come bail me out? The Free Market will always fix itself! It always has! The only time it didn't was because of GOV'T INTERVENTION! While well intentioned, it only makes it worse in the long run!!!!!!!
If banks didn't want to give the loans, they shouldn't have. If borrowers couldn't afford the loans, the lenders either shouldn't have given the loans or the person shouldn't have taken the loan. Personal responsibility is the problem and our gov't has proven time and time again that they'd prefer to reward irresponibility over fiscally sound people.
By Nadean
Oct 2, 2008 3:42 PM | Link to this
I have called my lender several times asking to lower my mortgage but only to be told that I will have to wait untill I am 2 to 3 months past due before they can even try to look at my situation. I am loosing another home to (foreclousure/shortsale) and i have tried working with that bank. These banks/mortgage companies are not working with home owners.
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