Housing Rescue Bill - Your thoughts

Mooseman

Isengar Tussle
OK. By now most of you should have heard or read about the housing rescue bill, but I'll highlight the major points.

1) Lenders to make major concessions, writing down the value of the loan to 90% of the home's current value
I like this, since it says to lenders..... you were idiots for lending that much for this property, you are going to lose money......
2) Loans have to be issued between January 2005 and June 2007
3) Borrowers must be spending at least 31% of their gross monthly income on mortgage debt.
4) Borrowers must prove that they will not be able to keep paying their existing mortgage.
5) If the original lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage. As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal
Wow, this is tough on the lenders........ Good
6) Borrowers pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.
7) Borrowers share a percentage of the profits with the FHA when they sell the property (ranges from 90% in year 1, to 50% for all years 5+)
8) All loans are FIXED-RATE loans....


OK, this seems like a good idea, what am I missing? Where do the tax payers get screwed?
 

Mooseman

Isengar Tussle
Spiderman said:
From the above, I'm guessing #6 and #7...
How does that screw the taxpayers? That just keeps the borrowers from reaping the rewards if the market goes up.....
 

Spiderman

Administrator
Staff member
Oops, I was keeping the "borrowers" and "taxpayers" the same - which they are, but i see you meant the non-borrower taxpayers.

Maybe it's in one of the minor points you didn't highlight :)
 

Ferret

Moderator
Staff member
I have a question: Will these new rules affect only those that feel like they're being hit by this current "crisis" or is it going to be ALL homeowners (specifically, 6 &7)?

I'm not too hip on giving more money to big government. I guess the part that annoys me the most is that they're trying to bail out people that shouldn't have gotten those home loans in the first place. This is the single largest investment a person is going to make. Interest rates were at their lowest and somehow these folks still felt it necessary to get variable interest rate loans?

In all honesty, I say that if these people were that stupid to get a loan that they couldn't afford to pay back and didn't do proper research on how interest rates work in this situation, they don't deserve to own their own homes. I also think that if these lenders enjoyed preying on these people by giving these horrible loans to them, they deserved to get raked over the coals as well.

-Ferret

...what ever happened to basic responsibility?...
 

Spiderman

Administrator
Staff member
Well, it sounds like if you fall under #2-4, you can qualify, so whether you feel that's all homeowners or just those hit by the crisis is up to you...

However, I read an article in my newspaper last week about a lender who changed the terms of the loan at settlement... and this was late in the day when lawyers couldn't be called, so the borrower figured that they'd sign the papers and get the stuff fixed the next business day when the office re-opened... however, it turned out the lenders dragged their feet and wouldn't admit to the changes and stuff... I think there's some sort of lawsuit in general about changing loan terms against some lenders in the works already...

So the point is that there are responsible borrowers out there who got caught up and are over their heads with little fault of their own...
 

Mooseman

Isengar Tussle
I agree, somewhat with Ferret, that people (lenders and boroowers) need to take responsibility for their situation.... if there was fraud or the like, that is different. Being dumb is not an excuse.

All this (above) only applies to those borrowers that apply for these government secured loans, not to anyone else.
This plan,as far as I can tell, doesn't spend taxpayer dollars for borrowers or lenders to bail them out......
The thing I like about it, is that lenders have to agree to rework the loan at a more reasonable value and the borrower has to agree to pay back the government if the house sells at a profit....
 
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EricBess

Guest
This doesn't help me one bit. I was uber careful and didn't fall into one of the lender's traps, didn't borrow more than I could afford, and ended up with a house a significant distance from work.

Now, I can afford my house payments, and my load was issued before 2005, so I don't qualify, but the value of my house is still about $100K less than I originally paid for it. Due to my health issues, commuting has become more difficult for me and I basically am not in a position that I can sell my house.

My credit is good enough that the one out I might have is if I can qualify for another loan, I can buy a second house and rent this one out until housing prices come back up. That will cost me around $1K extra per month that I can only hope to get a return on eventually if housing prices come back up. Unfortunately, there is no way I can just sell my property because I cannot afford the and no way the bank will agree to a short sale. If I just allow forclosure, my credit rating is decimated.

Anyone have any ideas or know anything that might be of benefit to me?
 

Mooseman

Isengar Tussle
Sorry to hear that. Unfortunately, this is another side effect of the unrealistic housing boom..... over-valued properties.
Renting the house out is a good idea, as long as you can get enough in rent to cover the morgage and upkeep on the place..... just make sure to get a good sized security deposit and update your homeowners insurance to cover damage from the renter.....
Also, I highly doubt that your buddy Bush has anything to help you with.....
 
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EricBess

Guest
Mooseman - No, rent wouldn't cover morgage. That's why I say it would cost me an additional $1K per month. I don't even want to think what would happen on months where we didn't have a renter...
 
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mythosx

Guest
EricBess said:
Mooseman - No, rent wouldn't cover morgage. That's why I say it would cost me an additional $1K per month. I don't even want to think what would happen on months where we didn't have a renter...
Don't bother about thinking how to make a quick buck with this mess. It's how we got into this mess in the first place. As for how the tax payers get screwed, I noticed in that long list at the top, you failed to list how much the government was going to give to the large financial institutions in order to keep them solvent. That's how the tax payers get screwed. Instead of fixing bridges, we are fixing large banks and financial insitutions credit ratings.
 

Mooseman

Isengar Tussle
mythosx said:
As for how the tax payers get screwed, I noticed in that long list at the top, you failed to list how much the government was going to give to the large financial institutions in order to keep them solvent. That's how the tax payers get screwed. Instead of fixing bridges, we are fixing large banks and financial insitutions credit ratings.
Is that in this bill or another? I didn't see it, but it does suck, I hope they put restrictions on those companies that get government money and can recoup it later.......
 
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EricBess

Guest
mythosx said:
Don't bother about thinking how to make a quick buck with this mess. It's how we got into this mess in the first place.
How did having to spend an extra $1K a month with effectively no return to myself translate to trying to make a quick buck?
 

Mooseman

Isengar Tussle
EricBess said:
How did having to spend an extra $1K a month with effectively no return to myself translate to trying to make a quick buck?
I think he was referring to the escalating housing prices as a function of the flippers and lenders. You got caught in the middle of their greedy feeding at the trough.
 
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mythosx

Guest
EricBess said:
How did having to spend an extra $1K a month with effectively no return to myself translate to trying to make a quick buck?
Sorry Eric. I didn't mean you. It was as mooseman said. I was referring to the system.
 
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EricBess

Guest
mythosx said:
Sorry Eric. I didn't mean you. It was as mooseman said. I was referring to the system.
Got it. I actually figured that's what you were referring to, but my confusion was just that you quoted. :D

For some reason, I always manage to end up with very poor investments. I had a 401K about 7-10 years ago with a different company. Everything was very good back then and everyone was making money, and yet some how, every portfolio offered by the 401K was tanking. I had money in their most concervative fund and I was losing money.

So, I buy a house because that's always a good long-term investment, right? I'm almost to the point where I think you need cash-down on a house just to avoid getting messed up...

Next time I invest in anything, I'll be sure to let everyone here know so they can pull out of it first :D
 
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DarthFerret

Guest
Eric, 401k's are tricky. Like a house, if you plan on having your 401k for retirement, then you need to just keep it aside, and wait about 20-30 years then see where it is at. As an alternative, when 401k's (as well as stocks) start dipping, that is when it is a good time to start looking at the bond market. Generally speaking, when bonds are high, stocks are low and vice versa. Remeber that is "Generally" speaking. Nothing is a guarantee. You also have several roll-over options for your 401k provided you are fullly vested. Most (not all) have some type of tax-advantage to them. Your best bet is to go to whichever bank you use for everyday banking, and ask one of thier specialists for some advice. It is usually free, and they usually know what they are doing.
 

Mooseman

Isengar Tussle
401K's should not be tweaked very much during the year. Once every 6 months you should look at what you have and maybe realign your positions.... When stocks are low is the time to buy stocks..... Also, don't try to time the market, just buy and hold stocks.... long term, unless you are speculating. Stocks will give you a decent return (through price and dividends)
I buy stocks every month through sharebuilder.com

Most day traders make bupkis..... they may not lose much, but they do not make enough to pay for their time and effort.....
 
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mythosx

Guest
Investing is tricky. I recommend using a professional for help if you have a sizeable account. If you only have a few thousand. Do it yourself. I worked as a commodities trader for a few months and I don't think normal people can do it with out a broker for help.
 
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