From the HW:
Bank analysts expect little change from Fannie Mae and Freddie Mac’s stance against reducing loan balances on underwater mortgages despite a news report that the Obama administration is urging them to do so.
The Wall Street Journal reported that the GSEs are being pressured to participate in the Federal Housing Administration’s short refinance program.
Participation so far has been weak, with only 61 applications in the first three months and only three processed, according to the WSJ.
The GSEs have been reluctant to reduce loan balances, especially for borrowers who are current on their payments, according to the Journal. “We believe this behavior is unlikely to change significantly for a number of reasons,” the Royal Bank of Scotland said in a commentary note:
“The basic underlying trust and pooling agreements for … pass-throughs dictate that current loans can’t be pulled out of the pool (except in rare cases where a current loan is considered to be in danger of imminent default.) This is one reason why GSE participation in the FHA short refinance program (which requires loans to be current) has been very low.”
The government-sponsored enterprises would take loans that are delinquent, process them through the Home Affordable Modification Program, and then when they are current, the GSEs would have the option of donig an FHA short refinance.
Analysts say that programs that “promote principal forgiveness could pose a moral hazard, which would be widely unpopular and thus met with strong resistance from many lawmakers.” RBS also said the GSEs will likely remain reluctant to approve principal modifications in cases where there is a second lien. In those cases, banks who hold the second liens must first take losses.
There are a lot of people out there paying their bills but cant refinance due to neg equity.I wish there was some leadership that would help these people.Instead they keep rewarding people for not paying their bills.
robosigner-I think that’s exactly what this program is trying to do.
In any case, banks require collateral to refinance something. If you are underwater, your collateral is simply not worth enough. It is possible to refinance, if you cover the difference between loan balance and value of the home in cash-then there would be sufficient collateral. Of course, basically nobody does this.
Didn’t homeowners that are paying their mortgage get their “reward” for paying bills on time with a lower interest rate when they first bought the house?
We can’t ALL be victims.
I love the invoking of “Moral Hazard” as a reason not to help the typical underwater homeowner. Man, oh man, that ship sailed a long time ago, but only if you are a large financial institution. By the way, I am not in favor of principal reduction on shakey loans. I want a thorough cleansing of the system, flushing out the bad loans through the default/forclosure process and allowing good money buyers to lead the price discovery process. But that would require lenders to recognize losses which would further strain their balance sheets, which would require them to get more gov’t aid . . . sigh.
shadash
You sound like a grumpy old man all the time.Chill out my friend, your time will come.
Some people who bought did not get a reward with a low interest rate when they bought.I am just saying there a lot of people paying their mortgage with 6-7% rates.It would be a big stimulous to the economy if they were able to refinance.they cant because they are underwater.They continue to be good americans and pay their mortgage even though the house is worth less than they paid.Stimulate the good people for once.
Live feed of bomb factory being set on fire – delayed now to be between 10-11AM:
http://www.nctimes.com/special-reports/escondido-bomb-factory/
Arson officers opened windows and doors while holes were drilled in the roof to ensure adequate ventilation for the fire. Authorities were given protective breathing masks in case they must enter the house if the blaze got out of control.
Before torching the home, officials were awaiting wind conditions that would allow the smoke to go straight up in the air.
“It will burn very hotly, very quickly,” said Jan Caldwell, a spokeswoman for the San Diego County Sheriff’s Department. “We want everybody to do this job safely and go home to their family.”
Tim Latulippe, whose backyard borders Jakubec’s property, said he was sure the burn would go off without a hitch. He hoped to watch it live on the Internet with his automotive students at Escondido High School. His wife planned to watch from the family camper, parked at a friend’s house across town.
“They’re going to burn a house down, it’s going to be cool, and we get to go back to our normal lives,” Latulippe said as the family prepared to evacuate.
“Stimulate the good people for once”
You meant those people who bought and live within their means, right?
The people who didn’t lie on their loan applications?
The people who bought a house to live in rather than an investment vehicle or a retirement plan?
Those are the people we are talking about, right?
The cycle begins anew.
http://www.latimes.com/business/realestate/la-fi-lending-complaint-20101209,0,2790593.story
Isn’t this how we got in trouble?
Robosigner,
So you’re saying just because you bought when interest rates were 5-6% that you currently deserve a 3% loan because that’s what interest rates are now?
Being underwater sucks but it’s not the taxpayers responsibility to fix your problems.
Bomb factory on fire:
http://www.cbs8.com/global/story.asp?s=13358922
shadash
why don’t you call him a “deadbeat”. you use your favorite word in 90% of your posts. I agree with Robosigner – you sound like a grumpy old man. It’s wrong to paint the 2-3 million people who lost their homes with the same broad brush of being “deadbeats”. There are many hard working, bill paying Americans among them with another 4-6 million about to join the group. Back off! There is too much negativity without you adding to it!
shadash
In a way I think the people who pay their bills do deserve a break here.
You have to agree that thousands of people are underwater still paying their bills.the govt seems to be helping the people who arent paying.I’m just saying if you really want to stimulate the economy help the people that have shown responsibility.Give an incentive to pay your bills.
Would you like to continue the path of bailing out people that quit paying?This gives no incentive to encourage people to pay their bills.
Not wanting to get thrown out of your house should be enough incentive to pay your bills.
From what I understood from this post is that very few people who quit paying their bills are getting ‘bailed out’ anyway. At least as far as GSE/FHA goes.
AFAIC shadash isn’t the whiner here.
Whatever happened to people taking responsibility for the choices they’ve made? Did the people caught underwater from the last RE cycle get special treatment???
TJ, the former owner of my house had originally bought right before the housing crash here in Cali in the early 90’s. She held on to the house for another 10 years while it recovered its value and eventually sold to me in 2002 for about what she had paid for it in 1989.
She didn’t make any money off the house, but waiting that 10 years allowed her to sell without incurring a loss. During the 10 years, she saved diligently so that she already had her down payment for the next house.
That’s kind of the way it goes with real estate. You need to be in it for the long haul.
That LA Times article really chaps me. Every time this subject comes up it drags the same old set of racist assumptions around the room. Credit score requirements harm black and latinos…. What a crock of racist BS. The assumption is that blacks and latinos don’t pay their bills, that they’re financially irresponsible. Anyone spouting that garbage is more racist than any banker. Plenty of blacks and latinos pay their bills on time just fine.
Being able to borrow large sums of money isn’t a crackerjack prize. It isn’t an entitlement. Pay your damn bills on time and this isn’t a problem, no matter what color or gender you are.