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Who gets help from the mortgage plan?

A sign is seen outside a foreclosed home in North Las Vegas, Nev.

TEXT OF STORY

Kai Ryssdal: There are, plus or minus, 50 million mortgage holders in this country. The plan the Treasury Department took the wraps off today should help, again, plus or minus, about 9 million of them. Fannie Mae and Freddie Mac will refinance about half that total -- homeowners who owe more than their houses are worth. And the government will pay billions to help the rest -- those who can't make their payments. From Washington, Marketplace's Steve Henn has more.


STEVE HENN: No one likes the idea of bailing out people who bought houses they couldn't afford. And after President Obama unveiled the outlines of his plan two weeks ago people got angry. So today White House Press Secretary Robert Gibbs had a simple message.

ROBERT GIBBS: This is not going to save every person's home.

Gibbs said people who bought homes they clearly could never afford won't get help. But...

GIBBS: The president laid out a plan that for the very first time offers help for those that have played by the rules and acted responsibly.

The first part of the plan will help some homeowners who have seen equity in their homes evaporate and now can't refinance.

The second part pays lenders and loans servicers thousands of dollars to reduce interest rates and even principal on loans that are in danger of defaulting. But only if working out these loan ends up saving the banks money.

JOHN TAYLOR: I'm really seeing the meat on the bone finally of something that I think is going to have massive impact on these foreclosures.

John Taylor is president of the National Community Reinvestment Coalition.

Susan Wachter teaches real estate at Wharton. She also sees a lot in these proposals that she likes in these proposals, but...

SUSAN WACHTER: We can not rely on this alone to bring us recovery in the housing market.

The trouble is one in five home owners now owe more than their homes are worth. And in Nevada, Florida and California tens of thousands of homeowners are too far underwater to qualify for the refinancing plan unveiled today.

In Washington, I'm Steve Henn for Marketplace.

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Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.
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I read a breif article in the paper that was discussing the gap between the interest rate banks are able to borrow money from the central bank and the interest rate they are charging for home loans / refinancing. It sounded as though historically there has been a 2% diffence and noe banks are upwards of 4%. Is this true? Is this just banks being greedy and wanting to pay themselves back quicker to cover allof the toxic assets and deals they made? Can the feds mandate a maximum of 2% diffrence? Given the federal reserve has reduced it rate to rock bottom and Fed provided bailout $ to the banks. Should thisbe regulated. Could you look into this more?

But Mr. Fact Checker CALVIN WOODWARD have said Obama's words on home aid ring hollow and that "THE FACTS: If the administration has come up with a way to ensure money only goes to those who got in honest trouble, it hasn't said so." Yet Mr. Gibbs said "The president laid out a plan that for the very first time offers help for those that have played by the rules and acted responsibly. " I guess Calvin can use his journalism degree line his bird cage. http://news.yahoo.com/s/ap/20090225/ap_on_go_pr_wh/fact_check_obama

Many issues were missed. The subprime borrwers were inexperienced: If a loan broker told them it could work, they wanted to believe it.They wanted a nice home. Who benefits from the "bad loans" being made? Well the borowers of course, but loan brokers get commissions, realtors get commissions, title companies get premiums, surveyors and appraisers get fees, builder developers get just plain bookoos o' bucks. from the perspective of the housing industry, "If the lenders are foolish (or savvy) enough to fund undocumented and overappraised loans, why not jump on the band wagon? I've not heard one commentator mention fact of homeowners who made home equity loans to buy that Hummer, boat or Escalade. Guess how much they now owe on their "home?" Now we are worried because the loan balance exceeds appraised value? The Recovery Act left this consideration out of the formula. If you recall, during the last de-regulation experiment in the 1980's we put savings and loan officers, appraisers and loan brokers in jail. We also had the RTC handle all of the "so called" toxic assets.

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