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Two Sides of The Same Coin Mean Different Things

09 Mar

There’s a reason that states like California passed Non Recourse Loan laws – It was to protect homeowners from speculative lending which could strip their communities of their homes with exotic, over inflated and predatory lending practices – remember them?  Seems like no one is talking about them anymore – and this article from CNN money is no exception -

Here’s the best quote from the whole piece I think:

The head of Citigroup’s mortgage division recently told CNNMoney.com that principal reductions were not under consideration because it raises the risk of moral hazard, meaning those who don’t deserve it would try to take advantage of the program.

Really??? Who might that be, who might ‘take advantage’ of the opportunity to not be over-encumbered in useless unsupportable debt?  Seems it was not an issue when JP Morgan Chase wanted to give back those suddenly not so nice office buildings in San Francisco…

That being said, why should any homeowner who is willing to stay and pay the mortgage not be provided an equally fair finding? Particularly when that homeowner has lost their job, had a massive change in income, and or is simply unclear as to why they should pay for an inflated value mortgage on a property that is not worth the note.

What is to say a homeowner should continue to carry a burden that has no rational relevance other than that the banks got everyone to pay way too much for way too little for a little while before they pulled the rug out?

Since when do we owe lenders who supposedly believed housing prices would always go up just because they say they believed this nonsense? Since when do historical patterns of boom and bust suddenly transform into magical golden ages of never ending expansion and not go from boom to KAboom?

Who the hell are we trying to kid here?

So CNN tells us the banks would rather take longer terms and lower interest than reduce principal – NO KIDDING! Really? Me TOO if I were the CREDITOR!

This has become a fast moving game of strip naked and the ones being stripped are the people if you have not yet figured that out – and it is not showing any signs of stopping.

Loan modifications with front end requirements of 7, 8, 10 12, 18 20 thousand dollars cash or MORE – not to GET the loan mod – but to ‘be considered’ for one -

Short sales ONLY if the homeowner cannot AFFORD the payments! What if the homeowner has figured out he doesn’t want to OWN that liability? If the lenders can GIVE THEIRS BACK why can’t the homeowner sell his for what it will bring and let the lender who was so financially astute as to be the professional at the table making the loan PAY for his GREED?

That is how the REAL world works.

But we don’t live in the real world anymore.

Sure we need to help those who need it – and in that regard this article is right – but in regards to what needs to be done really, and how to do it – the associate law professor has it right – force them to take the principal write downs; but not just for the insolvent – FOR EVERYONE WHO IS UPSIDE DOWN due to the banks predatory lending practices of bubble inducement.

They created this mess – let them eat it – it was their profit bubble and now they have to pay for it. What? The banks have a better idea? They say  instead we just keep handing them all the rest of our hard earned assets like a bunch of sheep. Makes no more sense than working hard all week and then burning your own paycheck. But then if the debtor gets his advice and instruction from the creditor, what else do you expect?

Insanity.


Housing help for unemployed, underwater borrowers

NEW YORK (CNNMoney.com) — Under pressure to do more for troubled homeowners, President Obama announced Friday a $1.5 billion program to help borrowers in the five states hit hardest by the housing crisis.

The initiative calls for pumping money into state housing agencies in California, Arizona, Nevada, Florida and Michigan to fund programs to prevent foreclosure for people who are unemployed or who owe more than their homes are worth.
Also, the agencies can assist homeowners having trouble securing loan modifications because of second liens, as well as promote affordable housing opportunities.

Obama unveiled the initiative, which will be funded with money from the TARP bank bailout, at events in Nevada, which has the highest number of underwater homeowners at 65% and the nation’s second-highest unemployment rate at 13%.

How the effort will help people, however, remains to be seen. The administration did not provide many details on the agencies’ programs, saying it was leaving it to them to come up with the solutions. At least three of the agencies, in Florida, Arizona and Michigan, were surprised by the announcement and are still assessing how they will utilize the money.

The move is the administration’s latest attempt to fix its signature foreclosure-prevention effort, the Home Affordable Modification Program, which has been widely panned for not doing enough.

The year-old initiative, which lowers qualified borrowers’ monthly payments to no more than 31% of pre-tax income, has placed more than one million people in trial modifications. But it has given lasting help to only 116,000 homeowners, mainly by lowering their interest rates.
Denied! No long-term mortgage help

Consumer advocates and housing experts for months have called on Obama to expand the program to help the jobless and those suffering steep declines in their home value, two sectors that have received relatively little assistance from the modification effort.

Also, many homeowners with second liens have had difficulty getting into the loan modification program. In April the administration had announced a program that provided incentives for these lenders to work with borrowers, but only Bank of America signed up — and it did so only last month.

A senior Obama official cautioned that the new program is just another tool in the White House arsenal, not a full solution to the housing woes facing the unemployed and underwater.

“As important as $1.5 billion will be to these five states, it’s not going to solve what is a catastrophically large problem,” said the official, speaking to reporters on a conference call. “It’s going to help, as many of the other programs do.”

Reaction to the announcement was mixed, with some housing experts praising the administration for addressing these issues and others saying it’s still not enough.
State housing agencies

Traditionally, state housing agencies — which are state chartered but mostly operate independently — focus on affordable housing, providing assistance to first-time homebuyers and those with low incomes.

Several, however, also administer programs that cater to those facing foreclosure. For instance, Pennsylvania’s housing agency lends money to the jobless and those suffering temporary financial hardships to help them cover their mortgage payments. Created in 1983, it currently provides loans of up to $60,000 for as long as 36 months. The program, which sends money directly to the lenders, can cover both arrears and monthly payments.

Since its inception, it has distributed a total of $450 million and helped more than 43,000 people. Last year, it received about 14,000 applications — about twice the average — and assisted 3,250 people. The average loan is $10,500 and is paid back with 5.25% interest once the homeowner gets reestablished.

Close to 80% of those helped by the program have avoided foreclosure, said Mark Schwartz, a board member of the finance agency.

“The program shows that giving short-term temporary assistance can be successful in helping people retain their homes,” he said.

The senior administration official was vague about how these agencies would help the target audiences, saying mainly that these groups are intimately involved in their local housing markets.

They could develop programs that assist the unemployed until they find jobs, help the underwater negotiate principal reductions with their loan servicers and pay incentives to second-lien holders to get them to agree to loan modifications, according to the White House. The official pointed to the Pennsylvania program, as well as those in Connecticut and Massachusetts, as examples of promising initiatives.

“We want this to be a fund that amplifies the things that are working well and gives license for more innovation,” the official said.
Walking away

Some housing experts say that homeowners who owe more than their homes are worth are more likely to walk away from the properties. Still, loan servicers have been reluctant to reduce borrowers’ principal balances, preferring to lower interest rates or lengthen the term of the loan.

The head of Citigroup’s mortgage division recently told CNNMoney.com that principal reductions were not under consideration because it raises the risk of moral hazard, meaning those who don’t deserve it would try to take advantage of the program.

The majority of underwater mortgages are heavily concentrated in five states being targeted by the president: Nevada, at 65%; Arizona, at 48%; Florida, at 45%; Michigan, at 37%; and California, at 35%, according to the research firm First American CoreLogic.

These states also have among the highest unemployment levels as well, with Michigan at 14.6%, Nevada at 13%, California at 12.4%, Florida at 11.8%. Arizona has a jobless rate of 9.1%, which is better than the national 9.7% rate for January, according to the Bureau of Labor Statistics.

Housing experts were divided in their view as to whether the president’s new initiative would make a significant dent in these troubled sectors.

Brent White, an associate law professor at University of Arizona, does not think it will. “$1.5 billion is just not going to address the problem,” said White, an expert in underwater mortgages who advocates forcing banks to write down principal.

But others were more hopeful. Paul Willen, a senior economist with the Federal Reserve Bank of Boston who has studied the impact of unemployment on foreclosures, said the state agencies can do more to help.

He was not troubled by the fact it may take time for the efforts to get off the ground since he said the foreclosure crisis will continue for a while. “The HFAs have the flexibility to construct a program that will help the people who really need it,” Willen said.

 
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