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Obama plan to help homeowners spur housing recovery
U.S. President Barack Obama holds up a mortgage application and delivers remarks on the economy Feb. 1, 2012 at the James Lee Community Center in Falls Church, Va. Obama spoke on the mortgage principle reduction plan he had mentioned in his State of the Union address.
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Kai Ryssdal: Today the president filled in the details of his most recent mortgage relief plan. He gave a thumbnail sketch back at the State of The Union. We now know he wants to spend as much as $10 billion to help homeowners refinance their mortgages into cheaper interest rates. Even families whose homes are underwater -- that is, not worth the mortgage they owe -- would, for the first time, be eligible.
And the White House says that would help more than just the housing market. Marketplace's John Dimsdale reports.
John Dimsdale: Underwater homeowners can’t take advantage of record-low interest rates because lenders won’t refinance when a home’s value is less than the loan. The president is proposing to expand government backing for underwater refinancings, paid for with an extra fee on big banks. He says the average family’s savings of $3,000 a year will ripple through the entire economy.
Barack Obama: You’ll be able to save hundreds of dollars a month that you can put back in your pocket. Or you can choose those savings to rebuild equity in your homes which will help most underwater homeowners come back for air more quickly.
The White House says homeowners who don’t have access to cheaper mortgages are less likely to spend and become a drag on the economy. But while the government incentives for refinancing saves money for homeowners, it won’t be a total win for the economy.
Mike Moran at Daiwa Securities America says there will be a corresponding loss for lenders.
Mike Moran: Because there’s some investor somewhere in the economy that’s earning the interest on that mortgage and they’re going to be getting less interest income than they were before.
Between those investors and struggling homeowners, who’s more likely to spend that income right away? For Housing Secretary Shaun Donovan, that’s a no-brainer.
Shaun Donovan: For the average family, $3,000 more a year in their pocket every year they pay their mortgage, is like a significant tax cut and would boost consumer spending.
And, he says, makes it more likely that family can afford their monthly mortgage payments, avoiding more foreclosures in the future.
In Washington, I'm John Dimsdale for Marketplace.
While this proposal sounds reasonable, in that it is limited to homeowners whose home is their place of primary residence, it is still conceived with the same securitization model that has weighed down Fannie Mae and Freddie Mac with some $2 trillion of toxic (mortgage) assets. First reports of this plan mentioned Freddie Mac as the primary vehicle for refinancing. Well, mortgage backed securities at Freddie Mac were always explicitly guaranteed by U.S. taxpayers, while Fannie Mae’s has only been implicitly guaranteed. I would rather hear a public announcement that Fannie Mae’s assets were going to be written down, sending investors packing, instead of one talking about a new plan to re-inflate the bubble in order to “protect homeowner assets.” Wages are going down and rents up in this economy. Why should we want to make things more expensive yet? Instead of constantly tweaking the market to meet with homeowner (Wall Street) expectations, how about concentrating on Main Street realities? To SB’s comment (thank you for that read), bankruptcy may not be an option anyway; laws were changed on the way up (2004) to make it more difficult for homeowners and consumers to write off their debts. With corporations tripping over themselves to skip off to bankruptcy court as a means of breaking union contracts and voiding pension obligations, this “bankruptcy reform” law was a blatant act of – yes – class warfare—of the pro-high finance variety—and the process continues without regard to party affiliation.
This is all wrong. People with underwater mortgages DO have access to cheaper mortgages. But they have to do what I did: Bring money to the refinance to bring the mortgage back into a positive equity position. It drives me crazy to hear politicians speak as if savings are something that don't exist. At they same time they're punishing everyone doing the right thing and saving to provide for themselves by payng them interest rates at a fraction of a percent. They won't be satisfied until we're all on some program or another and utterly dependant on them for our survival.
This is just treating the symptoms, not the underlying illness. It isn't worth trying.
It's pandering for votes of people that took the biggest risks at the expense, and in a less obvious way, the rest of the people that didn't take those risks.
Why does govt keep rewarding the people who made mistakes and were irresponsible? People bought homes they cant afford and now Obama wants to buy their votes. Who bears the cost of re-election? I keep saving money and rent apartment. Yield on my savings is nothing thanks to govt monetary policies and people like me end up funding the irresponsible people.
What lesson do we learn here. Is it even worth to save money and contribute to 401k anymore? I read that most people arent saving for retirement. When time comes who do you think get the handouts from the govt? Is it the people who saved or the ones who were irresponsible? Time to rewrite "ant and grasshopper" story.
You have got to be kidding me! Rewarding BAD behavior?? I'll tell you about BAD behavior. A cabal of Government Politicians, speculators, and bankers have conspired to perform the following:
1. Tank my home value (mind you, I took NO action in this occurrence),
2. Lower my credit rating when the depleted home value skewed my Credit/Equity ratio, causing my mortgage company to
3. Raise my interest rate (or call my mortgage note) to an unheard of 10%. Given the crushed real estate market, I took the 10% realizing that as my house could not be sold in the time allotment they gave me to accept/decline the deal, bankruptcy would be an option. Or NOT as I am a business owner and a bankruptcy would severely damage, if not destroy, my business.
4. In the meantime, my mortgage company was one of those who took my tax dollars (again) in TARP money. So, I got fiscally "bent over" twice. Frankly, there should have been NO TARP money. The mortgage company should have been allowed to FAIL. Conversely, if the government was going to let them take my tax money (while I have no say), then it should have required them to give me the benefit of a low-interest mortgage.
5. Upon learning that the same cabal (involving the quasi-gov entity Fanny Mae and Freddi Mac) is actually "betting against me" and profiting off my being held in a high-interest rate (from an earlier Market Place report), it has become apparent to me that my government is now attacking my family financially. And from this latest effort and from news reports, I am apparently not alone. This is particularly painful, speaking as a Vet who took an oath to defend this constitution, and as a Conservative Republican who (up to now) believed that I actually had opportunity.
Well, I have learned (at the old age of 50) how wrong I am. You strike me a a young and inexperienced person who is unable to see beyond yourself. Trust me, watch your back.
Now, I'm not just sitting idly by and letting this debacle just happen. We pick ourselves up and move on. My wife (we both posses upper degrees, Masters-levels. In fact, my wife has two - she also has an MBA with HR and PMP specialties) moved to FL to accept a high-paying executive position. I remain in OH with our teenage son. I have plans to expand my business and sell our house - ALL TO HANDLE THIS SITUATION. So, we live apart but are willing to do what's necessary to move forward.
But, mark my words, this is the first damn thing that my government has proposed to help us (my family). If the Republicans block this, I swear I'll go down to my Board of Elections and immediately register Democrat and then volunteer for every bleeding heart lib who runs against these" power-grubbing tools". Don't mistake what I mean; I consider *every* federal politician to be a "power-grubbing tool". Its just that this is the first sign of an attempt to throw a bone to us "little people" ("fuel" in the worst of a "Glenn-Beck'ian-sense") and this time its very personal.
So, (you "Nancy"), the next time you want to open your mouth (or your internet browser), grow up a little and consider Mark Twain's sage advice: It is better to keep your mouth closed (or your keyboard untouched) and let people think you are a fool than to open it (or type) and remove all doubt.
I expect the resounding failure of the: HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program) to be echoed here.
I hear they’re proposing to offer to pay the closing costs for refinancing into a shorter term. Does that mean, since I just finished a long painful 101 day process of legitimately refinancing into a shorter term – lower interest rate, that the government will refund my closing costs?
