Lawmaker unveils mortgage modification bill

[jtuck004]

This would go a long way toward removing some of the debt load that is crushing this country, it seems...

The homeowner pays new lower payments. They might even go buy some of that stuff they have been putting off, and it's less money for the financial sector.

What's the downside?

By Corbett B. Daly Corbett B. Daly – Tue Sep 28, 4:50 pm ET

WASHINGTON (Reuters) – As many as 30 million U.S. homeowners would be able to refinance their mortgage at record low interest rates regardless of their credit situation under a plan unveiled on Tuesday by a Democratic lawmaker.

The legislation would allow for blanket 30-year, fixed-rate mortgages at the prevailing market rate, now around 4.3 percent, for anyone seeking to refinance a government-backed loan, Representative Dennis Cardoza told Reuters on Tuesday.

Homeowners could refinance irrespective of their income, credit history or loan-to-value ratio.

The plan, which faces an uphill battle in Congress, would help a wide swath of borrowers and is more comprehensive than the narrowly targeted efforts President Barack Obama has tried to date...The administration opposed a 2009 effort by Cardoza to allow homeowners to refinance at what was then a below-market fixed 4.0 percent rate, the lawmaker said.

Read more here...

[pokercat999]

1. This is insanity. How in the world can you refinance a house

that is 20-30 or even 50% or more underwater? Who would make such a loan other than the federal gov't? This would ONLY help the big banks and leave the underwater "owner" and the gov't holding the bag.

The banks made the bad loans and killed the real estate market now they should suffer the consequences. That a lot of "homeowners" are going down with them is horrible and in a lot of cases maybe criminal, but none the less, trying to support the current system is doomed to fail and the losses are mounting.

The economy can fail now or we can dump trillions more into it only to have a bigger failure in a few years.

[jtuck004]

2. "The Banks" is too broad, and just because a bank and a family

made a loan in good faith, then were dragged down by the $100+ trillion in toxic assets that went bad after the careless and reckless behavior of what is now the 6 largest banks doesn't mean the family shouldn't have a chance to save their home. There are millions and millions of these loans which are being paid on homes that are NOT underwater, or very close to loan value, with loans at 8% or 9%, and the owners have had their credit screwed up by the actions of credit card companies, job loss, or other factors which may or may not have been within their control. They would not be bad risks, and are paying banks much more money in interest than they should have to be paying.

This would allow them to get their payments into a range where they stand much less chance of losing their home, and maybe give them some spending money, increasing demand in other places. It would LOWER the amount of money going to the bank. It would make the loans more likely to be paid.

I can see your point, especially where homes are that much underwater, but the alternative is that these people are thrown out in the street (assuming we get the title mess resolved), so going that way millions of these folks lose their homes. I can't for the life of me see how that is good for anyone, other than the general idea of the market prices getting a little better adjusted. But the homeowner pays the price, because they lose their home, and anything they buy in the next 10 years is likely to be at a higher interest rate because of their now "bad" credit. The bank (most of which weren't involved in the run up of the toxic assets) forecloses and has to put the property up for sale. If enough of those are on the books all the people in the bank lose their jobs, such as they are. The homes in the neighborhood lose more value. And the owners of the bank go on down the road with very likely enough money to be comfortable for the rest of their life.

[pokercat999]

3. From the article:

"The plan would not subsidize writedowns of principal balance for homeowners who owe more than their home is worth. But it would allow those "underwater" borrowers to refinance homes and get the benefit of a lower monthly payment."

And this is EXACTLY what we need, principal forgiveness, at least in underwater cases. The big question is how do we make that fair to all taxpayers, the short answer.....we can't. But unfairness in the tax code or in law in general is not news here or anywhere in the world for that matter.

So, what we could do with great effect without "refinancing" is simply mandate all loans above 4.0% to be rolled back to 4% or less, no refinancing needed, no involvement of gov't approved or issued credit simply a 4% cap on any and all mortgages......fair to all taxpayers. The banks would still receive a fair interest rate and any losses would be because of their bad decisions in making stupid loans based on market speculation (values of houses always rise). Would it solve the problem, which is that housing is still in a bubble and a growing number of our homes are not worth what we paid, not really, but it would serve to keep a majority of those with income to stay in their home. Our housing problem is becoming a result not only of the "bubble" but now foreclosures and delinquencies are occurring because of un and under employment, unfortunately for those folks only a good job at decent wages will help.

Another idea I've heard about is debt forgiveness (I'm assuming across the board) but I have no idea how that works or what it does to the economy in general.

[jtuck004]

4. I like the idea of dropping all the loans to 4%. That would free a lot of capital. n/t