An August Surprise from Obama?... Fannie & Freddie to forgive underwater mortgages

[bik0]

An August Surprise from Obama?
AUG 5, 2010 00:26 EDT
2010 | FANNIE MAE | FREDD | GSES | HOUSING POLICY | OBAMANOMICS

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:

1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.

http://blogs.reuters.com/james-pethokoukis/2010/08/05/an-august-surprise-from-obama/

[Demeter]

1. It Will NEVER Happen

Don't build up a sweat. The laws of physics and the laws of economics will not permit such largess. Not to mention the laws of politics and crony capitalism.

Besides, it's far too late for such a gesture to have any positive benefit. About two years.

[LynneSin]

4. Isn't it better to forgive part of these debts to keep people in their homes

than to throw everyone out on the streets and no money being collected whatsoever?

If we continue the way we are going everyone loses. If people continue losing their homes then those are just more losses to the bank and people out on the streets suffering. And with the backlog of foreclosed homes, the banks have a long way to go to get all those homes back on the market and sold.

If we can keep families in their home and help make it so their hosues are affordable then everyone wins. The banks will continue to receive some money from the house and the family keeps a head over their heads.

I'd like to have a few things clarified though if this were to happen

#1 - I'd like this to backtrack to those who have already lost their homes. If the homes are vacant and a deal can be worked out - let the family move back into their houses.

#2 - I'd like some condition put on who is receiving this money. There are some people out there that spent way over their means. There should be a limit to how much help we give and if the ends cannot be met then perhaps there is another home out there more affordable that the family could obtain instead.

[NoNothing]

8. People who lose their homes because they can't make the payments

Will not end up on the streets. They will rent, like I do, or move to a smaller home. I fail to see why this would be such a catastrophe. Home prices still need to come back to reality.

[LynneSin]

16. It's more than just that

I did not overspend what I could afford but now my home is losing value because 2 people lost their homes on my street.

I realize it's easier to say "Tough Shit you can rent just like me" but honestly, it's just going to leave alot of empty homes everywhere that will only start to devalue the neighborhood and put even more people out on the streets.

I do recognize that some people went way over their means but some people, with a bit of help, might be able to maintain their homes. I fail to see how being the 'tough shit' mentality will help us out of this situation.

[uncommon]

17. Just because a house is underwater doesn't mean you have to leave.

People are underwater on all sorts of loans all the time.

[NoNothing]

18. There are already programs for people on the bubble

Why haven't they been effective? I'm not the one with the "tough shit" attitude, I'm asking how it's fair for people to be saying "tough shit" to me because I don't own a home.

[LynneSin]

25. Those programs are so fricking complicatated most have not benefitted from them

perhaps this is a better system that is easier to use.

[laughingliberal]

29. Not different than saying 'tough shit' to people who paid increased FICA all these years who...

are about to be robbed.

[dkf]

35. Why does it matter if your house falls in value if you can afford it and

You want to stay there? Homes in Hawaii were underwater for a decade in the '80s to the '90s. We survived just fine. It is only if you fudged your numbers or couldn't have bought that place under normal standards that you are messed up.

[zipplewrath]

6. I can't even begin to imagine

How one would do this with out as much whining as winning is hard to imagine. How do we figure out who gets how much forgiven? Is there an upper limit on home value/size? Does one have to apply? Will the windfall get taxed?

Sounds good on paper, I just don't know how one actually executes it.

[ArcticFox]

2. How about student loans?

Mine's not really paying off like I was let to believe it would.

I think we should shave off about $60,000 from the $100,000 principal. Then maybe I could afford one of those houses whose value the government keeps propping up (and which are still overpriced, at least here in the Los Angeles area).

Where's my handout?

[hedgehog]

5. While it's possible that breaks for student laons are somewhere

down the pike, if they aren't, you have two choices,


Directly help people who are underwater on their mortgages in order to boost the entire economy

or

we all sit in the gutter together.

Personally, I have no problem with taking care of people victimized by the financial sector, especially if it keeps me employed in the long run.

[JoeyT]

36. False dichotomy.

There are a bunch of other options. The best of which is to use the money for a huge jobs program that will rebuild our crumbling infrastructure. That way people can get a job and have income. They can use some of it to pay for their house, and the rest to buy groceries and pay bills with. If you just forgive their loan they're still not going to have any income.

[teenagebambam]

12. I second that

I've already lost my house. Help me out on the student loans and I might be able to buy another one in a couple of decades.

[SwampG8r]

38. not only do you get no break

but future loan user will be directly paying ther govt
i see garnishments aplenty for the next generation of students

[midnight]

3. What an impressive rumor. K&R to see where it goes.

I would love to see the working people, who's tax dollars have already payed off these bad mortgages to the banks via tarp money, get relief.

[WinkyDink]

7. I shoulda bought a bigger house.

[NoNothing]

9. Lesson for the future: be more irresponsible

Somebody's bound to bail you out sooner or later.

[crazyjoe]

13. +1

[laughingliberal]

30. Worked for the banksters. Then they got $75 billion more to prevent foreclosures and didn't do it. n

[KansDem]

10. I hear you!

We have been behind in our payments for years now. We make payments regularly but due to a medical emergency, I missed two paychecks and we got behind. Anyway, we have been "on time" for years but just two months behind.

I called my mortgagor and asked if they could simply put those two payments on the end of our mortgage so we could be "current." That would clear up some credit score problems.

But, "no"...we had to fill out a shitload of paperwork--in essence, "refinance."

We only have about five years left on the loan, but it looks like we're going to be "two months" late all the way till the final payment...and two months after that. :(

[unblock]

27. but not TOO much bigger --

i've got a seriously underwater house with a jumbo mortgage -- not owned by fnma or fhlmc, so i wouldn't benefit from this at all.

[flvegan]

11. Could this then become a huge tax write off?

If so, bad idea. Obama, dear dear Obama, rather than some stupid uphill push like this, just get with Congress and write a bill that would mandate ALL mortgages to be capped, nunc pro tunc back 20 years, to 3 or 4% interest rate. Banks? Making money. Folks? Keeping their homes, paying their taxes and fees, freeing up SO much spending capital. How hunky fucking dory would that be?

It's not that hard people.

[Ozymanithrax]

15. lol

:rofl:

[Chan790]

19. That makes too much sense for them to ever contemplate it.

If you had not noticed, government prefers to do easy stuff the hard way.

[MilesColtrane]

14. I don't have a mortgage.

Could I get the government to pay my rent for awhile?

[David Zephyr]

20. Jerry Brown has long contended that renters should get breaks like "owners" do.

I think he's the only politician I ever heard say that back in 1992.

It's obviously the fair thing in my mind.

[backwoodsbob]

21. sorry but this won't happen.

If the fed is going to eat this cost you are talking about pushing the one year deficit to over two TRILLION dollars.this isn't politically possible.

[laughingliberal]

31. I'm not sure it is going to be the Feds picking up the tab. nt

[JoePhilly]

22. This thread is a great example of how they pit us against each other ...

How come no one bailed me out!!!!??

Main Street wants its "bailout", but "main street" is not one thing.

Extend unemployment ... well ... you only bailed out the unemployed.

Revise some mortgages ... well ... you didn't help me.

Cash for clunkers ... well ... my car does not meet the requirement / I can't afford to do it.

... no one action will help all of main street.

[MilesColtrane]

28. i'm not against couples getting tax credits for children and those in trouble with their mortgage...

getting a break.

As a childless renter, I'd just like the same consideration.

[JoePhilly]

33. I hear you ...

My first insight into this was when Reagan (the GOP God of tax cuts) removed the tax break on the interest from student loans (and interest on credit cards).

That action specifically targeted people who needed loans to go to college. It made it more expensive for them. The families of rich kids used home equity loans because those loans still had the tax break.

A renter, with college kids, was screwed over and over. No break for rent, no break for the student loan, and no break if you used a credit card to buy books or supplies.

Clinton renewed the break for student loan interest.

[laughingliberal]

32. +1000 nt

[JoeyT]

37. There are a lot of one actions that would benefit everyone.

The problem is no one is willing to do any of them.
A massive jobs program to rebuild our infrastructure, etc etc.
The money spreads out fast when it's going to a bunch of people that haven't had any free spending money in a while.

[Poboy]

23. Pure fantasy that goes against every thing and every action this Admin. has taken.

Pure fantasy.

[onenote]

24. the guy who wrote this is a hack whose "sources" are more wrong than right

For months back in 2008, this guy was reporting that his sources were assuring him that McCain was going to pick Huckabee. Until a couple of months later when his sources assured him it would be Romney. Until it turned out to be Palin.

And just to drive home the point as to what a hack this guy is (he's not a reporter, he's an "opinion" writer), check out his report, from a week before the 2008 election, that sources were telling him McCain was going to win the electoral vote

http://money.usnews.com/money/blogs/capital-commerce/2008/10/29/what-mccains-polls-are-telling-him.html

[Subdivisions]

26. '100 days before a midterm election in which Democrats are currently expected to suffer

massive, if not historic losses'



If that's true, then this is one goddamned stupid fucking country.

[BrightKnight]

34. .