Mortgage Relief

The U.S. is bailing out the people who can’t afford their mortgages and banks. It’s funny as I write this, I just remembered that as I was watching the congressional hearing on the credit crisis. Someone spoke of the “government bailout.” Then whoever he was talking to said, “who is the government?” Then there was a long pause, and then the response was “The taxpayers.”

Most people, I know I did until a minute ago, when they hear that the government is doing this and that, like going to war, they think of the U.S. as a total different entity then them. But it’s really us. I am at war, I enforced the cell phone law, etc...

We should think of ourselves as a partner in our government and nation.

Ok, so I got way off topic.

Another thing interesting at the congressional hearing is that all of these people are coming out now that the economy is bad and asking how this could happen. My question is where were they when the market was hot? Everybody was enjoying their wealth and a prosperous economy. I can admit that I was one of them.

In my generation, since I have been out of college, we have experienced the tech boom and fall, the housing boom and fall, now the oil boom for some which coincides with a fall in the economy from way too high gas prices.

I remember a highly intelligent person who made a fortune in housing tell me that it is inevitable and cyclical that the bubble would burst in the housing market. It was hard to believe then because the market was so hot. But moving on now, I say that as individuals it is silly to not to have a “stop loss” like we do when we own a stock. Not get greedy, but have incremental growth with a safety net.

Back to the mortgage relief, it’s too soon to know how this will help, but we will be following it along the way. But I am not sure if it will help the people who are in trouble now, because with anything that the government does, it is not a quick fix. It takes time to incorporate..

From USA today….

We're not getting enough for our money," says John Vogel, an adjunct professor at Tuck School of Business at Dartmouth. "Sure, some number of families — 100,000 or 200,000 — will be helped, and that's not insignificant. But it will not address the problem as fully as we have liked."
Vogel notes that those in danger of foreclosure won't benefit unless their lender agrees to reduce the balance on their mortgage; for the lenders, it's purely voluntary.

The bill pledges $300 billion in federally insured mortgages to help an estimated 400,000 homeowners avoid foreclosure by refinancing into lower-cost mortgages insured by the Federal Housing Administration. People can benefit if their lenders agree to reduce their mortgage principal. The borrowers must meet certain income caps and share any profit with the government on a sale of the home.

This is interesting for first time home buyers….
First-time buyers are already able to take advantage of low housing prices. Now, if they qualify, they can also receive a tax benefit of $7,500 or 10% of the home's purchase price, whichever is less. (The income caps for the full benefit are adjusted gross income of $75,000 for single people and $150,000 for couples who file taxes jointly.)

Congress approved mortgage relief for 400,000 struggling homeowners Saturday as part of an election-year housing plan that also aims to calm jittery financial markets and bolster the sagging economy. President Bush said he would sign it promptly, despite reservations.

….lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes.

Bush had withdrawn his veto threat earlier in the week over $3.9 billion in neighborhood grants. He contended the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.

Because of the Democratic Congress' delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve," said Tony Fratto, deputy White House press secretary.

Still, Republicans weren't eager to celebrate. Bush was not expected to hold a White House signing ceremony, and Senate GOP leaders didn't mention it at a news conference following the vote. In the House, more than three-quarters of Republicans voted against the bill.

It aims to spare an estimated 400,000 debt-strapped homeowners, many of whom owe more than their houses are worth, from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration.

The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. Banks would first have to agree to take a large loss on the existing loans in exchange for avoiding an often-costly foreclosure.
Conservative Republicans were vehemently opposed to the bill, particularly the help for Fannie Mae and Freddie Mac. Critics charge the companies enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.




You can find the complete article here and here