U.S. unveils mortgage "rescue" plan

[tsetsefly]

NEW YORK (CNNMoney.com) -- The Bush administration on Tuesday unveiled a new program to modify mortgages and stabilize the battered real estate market, but the plan stops short of providing direct government financial help to at-risk homeowners.
The plan centers on Fannie Mae and Freddie Mac, which between them own or back about $5 trillion in loans. The federal government took over the firms in September due to mounting losses on their portfolios of mortgages.
Homeowners who are 90 days or more late in their mortgage payments, who live in the home on which the mortgage was taken and have not filed for bankruptcy are eligible - assuming that loan is owned by Fannie or Mac.
Their mortgage payments would be adjusted through lower interest rates or longer repayment schedules with the goal of bringing payments below 38% of monthly household income.

http://money.cnn.com/2008/11/11/news...ion=2008111112
So fannie and freddie will take in even bigger losses now...

[SeanO]

Re: U.S. unveils mortgage "rescue" plan

So fannie and freddie will take in even bigger losses now...

I think you mean taxpayers.

To be fair this probably just delays the losses. Could even lower the nominal losses if the delays are sufficient in length to allow inflation to bring prices back up above debt levels. They do have a stated goal of giving homeowners affordable payments for up to 40 years. Most of us here expect significant inflation well before then.

I fear that we are on a slippery slope toward socialized home financing with attempts to leverage taxpayers and the full faith and credit of the US to keep housing prices artificially inflated. Though I understand that many want to see immediate declines in foreclosure - which plans like this may accomplish near term - I struggle to see how this helps in the long run.

[c1ue]

Re: U.S. unveils mortgage "rescue" plan

The really interesting part is that there is STILL no debt forgiveness.

The terms in question are still merely playing with the 'profits': interest rates and repayment terms.

The fact that the mortgage amounts are greater than the value of the homes - still being ignored.

Even assuming large numbers of people are stupid enough to stick with their underwater loans (Poor people pay their bills), this 'freeze' of an entire segment of the home buyer ecosystem does not bode well for the future.

For though many of these debtors had no place buying a home to start with, equally many of these are the first and 2nd time home buyers who would become the buyers in the next tier of homes in the future.

What happens to the overall housing market when only the long timers and the nouveau riche are able to buy mid and high level homes?

And the next relatively small generation which is under drinking age now - and facing a major recession?

Clearly the bankers are still in charge...

[phirang]

Re: U.S. unveils mortgage "rescue" plan

The really interesting part is that there is STILL no debt forgiveness.

The terms in question are still merely playing with the 'profits': interest rates and repayment terms.

The fact that the mortgage amounts are greater than the value of the homes - still being ignored.

Even assuming large numbers of people are stupid enough to stick with their underwater loans (Poor people pay their bills), this 'freeze' of an entire segment of the home buyer ecosystem does not bode well for the future.

For though many of these debtors had no place buying a home to start with, equally many of these are the first and 2nd time home buyers who would become the buyers in the next tier of homes in the future.

What happens to the overall housing market when only the long timers and the nouveau riche are able to buy mid and high level homes?

And the next relatively small generation which is under drinking age now - and facing a major recession?

Clearly the bankers are still in charge...

and it's still not inflationary!!!! lol

[c1ue]

Re: U.S. unveils mortgage "rescue" plan

Sorry, but perhaps you must have gone to the 'Goomba School of Economics'.

Inflation doesn't start on a dime, nor does it stop on one.

Economics has its own time scale - and it operates in quarters and years.

Your belief that Fed action 'A' equals market reaction 'B' in 1 month just shows how naive and inexperienced you really are.

[phirang]

Re: U.S. unveils mortgage "rescue" plan

Sorry, but perhaps you must have gone to the 'Goomba School of Economics'.

Inflation doesn't start on a dime, nor does it stop on one.

Economics has its own time scale - and it operates in quarters and years.

Your belief that Fed action 'A' equals market reaction 'B' in 1 month just shows how naive and inexperienced you really are.

Yea, I must be really dumb, unlike those geniuses who bought oil at $100 and gold at $900...

[c1ue]

Re: U.S. unveils mortgage "rescue" plan

Vacuuming nickels in front of the steamroller.

Maybe you'll get to learn what that means firsthand.

[phirang]

Re: U.S. unveils mortgage "rescue" plan

Vacuuming nickels in front of the steamroller.

Maybe you'll get to learn what that means firsthand.

More like robbing the dead, but not close enuf

[grapejelly]

Re: U.S. unveils mortgage "rescue" plan

there isn't going to be debt forgiveness per se. Nada. Not for the homeowner. There will be de facto debt forgiveness. Let someone pay a reduced payment for a number of years and then see what happens. They are paying interest on only part of their debt. The value of the debt has diminished accordingly. Without actually reducing principal.

Principal reductions would cause too much moral hazard. Trillions would be written off instantly and nobody has enough money to do anything about that. So they'll do it in the back door way.