Obama's housing fix: help banks modify loans — or allow judges to

[Pirate Smile]

Source: McClatchy

By Kevin G. Hall | McClatchy Newspapers

WASHINGTON — President Barack Obama is expected Wednesday to take a carrot-and-stick approach with banks and other lenders when he unveils his new plan to stop the soaring nationwide home-foreclosure rate.
He's expected to announce in Phoenix a plan to use at least $50 billion in Wall Street rescue money authorized last year to provide subsidies when banks reduce interest rates for troubled homeowners to lower the monthly payments many Americans are now struggling to pay.

That subsidy plan, details of which have yet to be formally announced, would serve as the carrot for banks to help homeowners stay in their homes and halt foreclosures, which not only result in losses for individuals and the banks, but also drag down the values of nearby homes.

-snip-
Now they'll have a stick waved at them if they don't comply with the subsidy plan. It'll come in the form of Obama's support for legislation pending in Congress that would allow bankruptcy court judges to modify the terms of a mortgage.
That's forbidden right now, and banks and other lending institutions fiercely oppose what they call "cram down" legislation, warning that it'll bring uncertainty for lenders, who'll respond by restricting mortgage lending.

Banks may soon have to choose between the lesser of two evils. They could either modify loans — with a subsidy — to provide lower lending rates, and lose what they might've made from the higher lending rate over the life of the loan. Or they can do nothing and run the risk that a homeowner could file for bankruptcy and then have a judge order new loan terms that allow the borrower to stay in the home — and pay the lender less money.



Read more: http://www.mcclatchydc.com/politics/story/62372.html

[femmedem]

1. Oh please please please let it be so. K & R n/t

[rocktivity]

2. That's pretty much what Randi Rhodes has been saying

Let the homeowners renegotiate their mortgages!

:headbang:
rocktivity

[customerserviceguy]

3. This actually does seem like a sensible plan

but the only thing that is wrong with it is that I can see a lot of the really asshole lenders doing just enough subsidy taking to keep above the radar, yet hoping enough of their competitors will jump on board with both feet, shoring up the housing market to their benefit.

At least it's a plan.

[msongs]

4. Banks have a 3rd choice - foreclose and eat EVERY thing nt

[The Hope Mobile]

5. Long overdue! nt

[flvegan]

6. This is the proper route. BUT, careful on the judges modfying mortgages.

Judges should NOT adjust anything more than rates and length of term. Don't touch the balance.

[w4rma]

9. I don't see why judges shouldn't be able to modify that, also. (nt)

[flvegan]

12. Because they can unwillingly cause a novation to the mortgage.

Which can alter the priority of the lien. That mortgage takes a lien priority behind a smaller lien that has NO regulation from this stimulus, you'll see foreclosures like you've never seen. Knowing that, lenders aren't as likely to write mortgages.

[Phoenix-Risen]

7. Were do I NOT send my payments to so I can get

a bailout too?

So I should make my mortgage payments and pay my taxes to bail out my neighbor.

Thank you Sir! May I have another.

[w4rma]

10. You file for bankruptcy, *then* you get to go to the judge. (nt)

[Phoenix-Risen]

13. Wonderful, I should hose my credit because

someone else screwed up?

[w4rma]

15. If you want to get a better rate on *your* mortgate, then you should file.

But, I fail to see how someone else's mortgage affects your credit.

[Still Sensible]

8. I hope this is an outline of what they actually put in place. n/t

[w4rma]

11. That awful bankruptcy bill that makes it harder for people to file needs to be rescinded for this

to work properly.

[PSPS]

14. This won't help much, thank goodness

I can see where this might help someone who bought barely within their means and, becuause of job loss or illness, isn't quite making the payment. I'm OK with such a scenario.

But that describes well under half of where the real problem is -- NINJA loans taken out by people who had no business buying a house in the first place. A person making $30K/year figured they could take one of those no-doc liar's loans so they could buy the $750K house figuring they'd make the negative-amort payment option (many loans also had a "skip this payment" option) and then either "flip" the house or refinance it before it recast with yet another no-doc liar's loan. This proposed plan, as described, would be of no help for these people, thankfully, because they'd never qualify for any real mortgage whet you have to prove income and make a down payment with non-borrowed cash.

I'll be screaming mad if any effort is expended to "save" this latter group at all. I don't wany my taxes rewarding liars and buying their homes for them.

[annabanana]

16. re lowering tthe interest rates . .

Would these be primarily the balloon type rates that people saw on their ARMs?
Because, IIRC, the rates on standard mortgage loans weren't all that high to start with.