Hope for Homeowners?
by JennaOne of our regular readers, Matt, left this comment:
I’m curious if either of you saw the news release today where the federal government, Citigroup, Fannie & Freddie, and possibly a few other mortgage lenders are willing to negotiate with homeowners to restructure their current mortgage to prevent foreclosure.
We hadn’t really talked about the new “Hope Now” program that our government is rolling out, and I’d love to have your opinion on it!
Here’s the skinny:
- The goal is to put delinquent homeowners into new, “Long term sustainable mortgages” that they can actually afford.
- It will go into effect December 15th, 2008
- In order to qualify borrowers have to be at lest three months behind on their mortgages and still owe more than 90% of the total value of the mortgage itself.
- For borrowers who qualify, it will reduce your housing expenses to the point that it will not take up more than 38% of your total income.
- You could also have the option to extend your mortgage from a 30 year loan to a 40 year loan and make some of the principle mount owed interest free instead.
*facts from MSN money’s article “US Expands Program to Modify Troubled Mortgages“.
I would really love to know what you guys think about this plan? Is it a good one? It is undoubtedly helping the people who need it most (those going into foreclosure).
Here’s the rub, (for me at least). My husband and I are three years our of bankruptcy. We have been diligently working to recover our credit, and save enough for a reasonable down payment on a house. Before all of this mess started we considered getting a home, but we did not want to get locked into an adjustable rate mortgage – we were afraid of what would happen if our interest rates shot up and we couldn’t make our payments. So we rent….and we rent…and now thanks to the credit crunch, we will likely be renting for several years more.
So, it’s a little hard for me to watch our government bail out all of these people when we chose to be responsible, and avoid a mortgage we couldn’t afford. They get to keep their homes, while we will have to continue renting.
Is that jealousy? I’m sure that it must be. We went bankrupt. We’ve already played our bailout card, thank you very much. And, after all, we chose not to get into a mortgage before this mess, so why cry that we don’t have one now? In my heart I am very glad that people…families….will have an easier time of things. It’s not in me to want to see children put out into the streets because their parents made bad choices.
I just have to wonder…how far will these handouts go? Now I am hearing talk of the government bailing out the large auto manufacturers. Those companies have been in trouble for years. Yet right now everyone has their hand out, so why shouldn’t they do it too? After all…they do provide a lot of jobs here in America.
Has America truly become a welfare nation? Why are we turning to Uncle Sam to fix this problem? What happened to American ingenuity? What happened to the force and the spirit that our immigrant ancestors built this country on? Have we lost the American Dream because we felt like it was a God-given right instead of something to be sacrificed for?
What do you think?
Keep Reading:
- The Return of Sanity
- Declare Bankruptcy, or Tough It Out?
- Home Owners Association Fees and Bankruptcy
November 13th, 2008 at 14:44
So you will be in debt longer but save your home? For how long? Is this just a way to keep homeowners from filing Bankruptcy and save the banks some money? Tomorrow isn’t looking to promising, do not let the government or the banks protect your rear. Protect your own! As far as the American Dream is concerned, America is a nation that was built on the now broken backs of our fore fathers and has risen to laziness and sloth. Viva le Welfare!
Please if you do nothing else protect your family and not with the help of the government, they will NOT be our support forever. The well will dry up.
November 13th, 2008 at 15:23
Thank you for your comment Jack!
Though that wasn’t *quite* what I intended to say with the article, so maybe I just did a bad job of it.
These, bailouts, they pose both a moral, and political delimma for me.
On the moral side, I am feeling very hypocritical and two-faced when I say that all of these bailouts are a bad idea. Even though I have repaired my financial situation and found stability, I cannot forget that in a way, it is thanks to the government.
I used our laws to declare bankruptcy and give myself a fresh start. It was my family’s bailout. Yes, we have handled things very well since that time – that is due to our hard work. But I would not be here today if I had not received help.
So who am I to say that no one else should get help because they mismanaged things?
On the political side, I grew up among staunchly middle class, conservative family. They believed that anyone who is a democrat is both 1) poor and 2) looking for a handout. (I do not agree with those statements by the way, it’s just what my family did their best to teach me). So in a way it is very entertaining for me now to watch wealthy, conservative people run to the government looking for a handout in times of trouble. Guess that theory was wrong, eh?
It’s a mixed issue, and mainly I just wanted your opinion – all that read this – what do you think? At what point should these handouts stop? re they good for our country, or bad for it? What will happen as a result?
November 14th, 2008 at 03:24
It’s political suicide to NOT bailout home owners at this point. So I’m afraid that OUR tax dollars will be doing the bailing out… which is an often overlooked fact.
So to infuriate you more Jenna, the taxes you have paid while renting are going to someone who lived foolishly and got a No Doc, Interest Only loan while you penny pinched and used your brain before writing another big check.
With Paulson continually changing the rules in mid-game like he did today, I’m not exactly sure how the TARP will be administered.
November 14th, 2008 at 21:26
Well, you can look at it as a bailout, but I think it’s more accurate to see it as a safety net. It won’t realistically be available to the worst or dumbest abusers of the housing boom — the NINA/NINJA crowd, or the overnight housing investor crowd. It will be available to people who needed a house AT THAT TIME and had to purchase at the peak of a bubble.
Of course we can still look at people who did that, but many times — like the Mountain House, CA case — they were looking for any house in a “storm” of obscenely high housing prices. Most people only buy a house once or twice in their lifetimes, so they can’t be considered experts on home price trends or mortgage choices. The actual housing experts were all riding a job/commission boom themselves and were in no position to counsel anyone “maybe you should rent for a while”.
There was actually a billboard in my city that read roughly “FACT: Housing prices appreciate an average of X% annually. Your house is your safest investment. Call your Realtor today.” It only came down a few months ago. (That may yet be true in the long run, but it certainly was silly to have that sign up while prices are tumbling and people are making short sales.) The professionals in the industry bear the majority of the responsibility for pushing the housing bubble.
I had a friend in the legal business and she often prepared closings. The interesting thing about closings is that there are a bunch of people there, but there is rarely someone managing the entire process on behalf of the buyer. There are people there to do their ONE PART of the process. But the buyer is ultimately on their own. It might make sense to organize things better from now on so that the buyers are getting better advice about what they’re getting into.
All that said, I think HOPE NOW is a thin safety net that isn’t spread nearly far enough. It’s not necessarily a good thing for someone underwater to stretch their mortgage, because now not only is the house expensive, the financing is more expensive in the long run, and they’ll build equity more slowly. It’s better than foreclosure, though. I think it’s possible it will tide people over the next few years of stagnant housing prices, and maybe they can sell or refinance in a better and saner market. In the short term, though, it’s definitely necessary, unless you really think empty homes across the country owned by nearly-insolvent banks is a great idea.