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Will the housing plan work?
A foreclosure sign hangs in front of a home in Miami.
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TEXT OF STORY
Bob Moon: So the question now is: Is Tim Geithner right? Will this new plan work? Remember, the federal government has actually been in the business of foreclosure prevention for some time now, but the problem seems to keep getting worse. So we sent our Steve Henn in search of an answer.
STEVE HENN: Marianne Joyce is the kind of person the Obama plan is supposed to help. She's a divorced mother of three -- struggling to keep herself and her kids in their house. Joyce has two jobs and is taking in boarders.
MARIANNE JOYCE: I've become a good cook - laughs. That's become my new hobby since I've got a couple of boarders. So my kids like that.
Right now Joyce laughs of the work but strain of making her monthly mortgage payments will get bigger soon -- when her interest rate adjusts.
JOYCE: So I'm going to keep going as long as I can.
But it's unclear if the proposals unveiled today will offer Joyce any relief. Her original loan wasn't guaranteed by Fannie Mae or Freddie Mac, so she doesn't qualify for those companies refinancing programs.
The other big piece of Obama plan pays loan servicers to sweeteners to renegotiate loans. But John Taylor at the National Community Reinvestment Coalition isn't convinced that's going to help borrowers like Joyce either.
JOHN TAYLOR: I don't think it will work to the extent that everyone is predicting. We'll know, we'll see, and I hope that I'm wrong by the way.
Taylor says imagine if you were an investor who bought up Joyce's loan. You've already taken a big hit on your investment as markets realized how risky loans like hers are in this economy.
TAYLOR: And now you are being asked you are being asked to devalue these even more in exchange for a $1500 fee.
He thinks that's unlikely. Tom LaMalfa an independent housing analysts, says to truly help home owners like Joyce you need to slash the total amount they owe.
TOM LAMALFA: That would require write downs on a per loan basis of several hundred thousand dollars.
Forcing banks to swallow losses on millions of mortgages would help families like Joyce stay above water -- but it also might just drown the banks.
I'm Steve Henn for Marketplace.
The problem is that the market price for housing sank. The Government can not control the market price: competative buying/selling does according to supply and demand. So, the so-called housing bail-out is just a very expensive feel-good program to explain in the future, that the administration did all it could. Adel Antado
Until the Feds force the banks to mark those loans to market nothing is going to change for the homeowner in trouble or the housing market in general.
Plus, don't kid yourself. Banks and the financial markets have already discounted or written down a large part of the value of the securities so those millions in losses will become millions in profit when the whole thing turns around and the values begin to rise, because thanks to our tax money, the banks can afford to wait, the homeowner can't.
Conclusion? The homeowner will see zero relief from the bailout, the Feds will continue to throw money at the problem, and the banks will continue to take our tax money and smile.
