Federal Housing Adminstration to help refi at-risk loans
If this is not a bailout what is it?
I will say with the risk of bank failures it is not a bad idea. It will help the homeowners who have some equity and adjust payments to what people can afford. This is not ideal but considering lawmakers were asleep at the wheel it is a good idea. This will help soften the landing but we will still have problems.
USATODAY-Some homeowners with risky “subprime” adjustable-rate mortgages will be able to refinance before they lose their home to foreclosure, with the help of steps President Bush will announce Friday, senior administration officials said Thursday night.
The move marks a historic expansion of the role of the FHA, a Depression-era agency that has traditionally served low- and moderate-income families and first-time buyers, but not delinquent borrowers. Nearly 16% of subprime borrowers are behind on their ARMs, and an estimated 2 million subprime ARMs totaling about $600 billion will reset to higher rates through the end of next year.
To qualify for the new benefit, homeowners would have to prove they paid their loan on time before it reset to a higher rate and must have at least 3% equity in the home.
The program, which doesn’t need congressional approval, should take effect early next year.
Under current rules, the maximum loan the FHA can guarantee is $202,000 in most states and up to $362,000 in high-cost states such as California and New York.
Bush also wants the FHA to be able to help other risky borrowers, beyond the 80,000, by broadening its lending criteria. To compensate for the added risk that the borrowers might default, the FHA would charge them higher premiums on the loans. Also, he wants to eliminate the 3% down payment requirement, though borrowers would have to pay at least some of the closing costs to secure the loan.
The senior officials avoided using the word “bailout,” but the plan is sure to incite critics.
“If you’re going to help someone to refinance, you’re going to bail out the person who financed him in the first place,” Peter Wallison of the American Enterprise Institute said Thursday night. “This will only cause the problem to arise again.”
August 31st, 2007 at 6:10 am
FYI
Bush to unveil first steps on mortgage crisis
POLITICO-President Bush is set to unveil his first detailed steps to intervene in the subprime mortgage crisis that threatens to throw hundreds of thousands of people out of their homes and send financial markets into a tailspin.
He plans to announce a variety of measures in the Rose Garden on Friday morning that are designed to help struggling homeowners with subprime mortgages avoid foreclosure and will declare that lending practices need to be tightened, according to administration aides.
READ MORE
http://www.politico.com/news/stories/0807/5581.html
August 31st, 2007 at 10:45 am
Instead of bailing out these jackass financial institutions for setting up loans to people who probably had no idea what their payments would go to why don’t they force them to lower the interest?
August 31st, 2007 at 12:35 pm
So people who chose risky ARMs in order to save money knowing someday the piper may call now get bailed out when the piper calls. What a joke.
I guess this is what Bush meant by ‘compassionate conservatism’ — a euphemism for big nanny liberal.
August 31st, 2007 at 3:31 pm
Bart
Isakson sounds like what I said over two years ago. Would you call isakson a liberal or conservative?
Isakson wants to tighten lending practices
By Shannon McCaffrey
Associated Press Writer
ALPHARETTA - U.S. Sen. Johnny Isakson warned business leaders on Thursday that unless the mortgage and banking industry tightens lending practices Congress is likely to do it for them.
The Georgia Republican told the North Fulton Chamber of Commerce that he believes “a few bad actors” are to blame for the nation’s subprime mortgage woes, but that the Democratic-led Congress is poised to step in unless the industry volunteers more transparency.
“Government’s responsibility is to regulate when an industry fails to regulate itself,” Isakson, of Marietta, said.
“It would be a shame because of a few bad actors to overregulate an entire industry that is otherwise doing well.”
Isakson said that already a pair of Democratic presidential contenders - Sens. Hillary Rodham Clinton of New York and Christopher Dodd of Connecticut - have floated proposals aimed at reining in the industry.
He called Clinton’s plan to provide a pool of funds to help at-risk homeowners dodge foreclosures “the worst thing you could do.”
The only way for the industry to avoid government meddling is to be proactive, Isakson said.
“They have to say ‘we need transparency, here are the standards we are going to impose,”‘ said Isakson, who made his fortune in a family-owned real estate business.
The U.S. economy has been reeling from subprime mortgages, loans given to people with imperfect credit or low incomes. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments; delinquencies and foreclosures are sharply rising.
Isakson declined to comment Thursday on the men’s room sex scandal that has engulfed fellow Senate Republican Larry Craig, of Idaho. Isakson is one of the six U.S. senators on the Select Committee on Ethics that will hear a complaint filed against Craig.
“As a good jurist, I have to hear all the facts and it would be inappropriate for me to make a comment without hearing all the facts,” Isakson said.
Georgia’s other U.S. senator, Saxby Chambliss, was in Southeast Asia on a congressional trip and unavailable for comment. Chambliss is up for re-election next year.
A growing list of GOP lawmakers have called for Craig to step down after learning of his guilty plea in an airport men’s room on a disorderly conduct charge. Among them is Republican presidential contender, Sen. John McCain, of Arizona.
September 1st, 2007 at 11:25 am
John,
You still haven’t shown any evidence that you said or wrote anything about the mortgage industry. Thus I will continue waiting until you prove your assertion before giving credit.
September 1st, 2007 at 4:06 pm
I bought a new home 2 years ago.
Although I respect the mortgage company I went through (USAA) I was completely shocked to discover that they approved my loan before they confirmed that I would be receiving rental income from the condo that I was going to keep.
In essence they approved a second mortgage based on just my employment income (which wouldn’t have covered the two mortgages).
I was stunned, I can remember telling people in my office that what the mortgage company did should be a crime. It really sets people up for failure. I think most people assume that creditors behave in a prudent manner when authorizing loans.
September 1st, 2007 at 9:25 pm
Well, why not blame it on the Chinese?
After all, their purchase of Dubious T-bills (no longer in limited edition, thanks to besotted seaman-like spending habits) prevented US interest rates from hitting double digits . . . mid-double digits!
Can we blame it on the Chinese? Please?