The Washington Independent - Latest Comments in Mortgage Crisis Solution Excluded From Bailout Plan

Re: Mortgage Crisis Solution Excluded From Bailout Plan

shubhinetwork — Thu, 05 Nov 2009 07:34:07 -0000

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A British man has constructed the world's smallest car out of a Postman Pat children's ride.

Perry Watkins transformed the previously stationary ride into a vehicle that is taxed and legal to drive on the road.

The 47-year-old yesterday received confirmation that his creation - only 39in high and 26in wide - is the smallest car ever built

Read more: http://www.dailymail.co.uk/news/article-1180737...
Debt management plan--Debt management plan

Re: Mortgage Crisis Solution Excluded From Bailout Plan

Michael Harrington — Mon, 02 Feb 2009 18:04:26 -0000

This idea I’m proposing would be better suited to fall on ears of some one who has been in the lending industry for some time in order to understand all of its nuisances’. There are other details and variables that can be tweaked to improve this program. I’m not proposing that this is a catch all solution to all of the troubled mortgages that are recession is facing. I am however confident that this could help stop a percentage of the bleeding foreclosures and quickly reduce the standing resale inventory. My hope is at least this will stimulate some creative ideas that can be opened up for more discussion and improvement. The basis for this premise is that we who are the best in this industry (bankers/brokers) should have the ingenuity to come up with the best solution in getting us out of this housing crisis. God knows that these new loan modifications (that are failing) aren’t the answer! I think the creative/risky loan products that got us into this situation may offer some creative ideas that will help us get out of it. With monitoring and accountability from the individual lenders within reason! I am proposing a two step loan program (10-30) the first 10 years deals w/ paying off the negative equity and establishing a 20% equity position so that private mortgage insurance is eliminated when the loan is triggered into its second step. The second step is a thirty year fixed loan at a pre-determined rate at initial loan signing.

NOTE: The individual mortgage lenders must have access (twice a year) to a person’s credit report (soft hit) during the step one process to insure that the borrowers charging/credit habits don’t exceed safe income to debt ratios. Major purchases while under step one would have to be approved or justified thru hardship by these note holders (lenders). . We can not let these new proposed loan products to be sold to regular servicing houses that do not monitor the 1st step of this program. When the trigger is pulled and step two begins these credit reviews will cease.

The primary problem is addressing the negative housing equity this recession is producing and restoring consumer confidence. A major problem has been principle reduction hurdles that lenders are not willing to forgive, while homeowners feel trapped and hopeless in a home whose values are declining in a downward spiral. Building wealth thru hope in your HOMES EQUITY, has been replaced with Increasing debt thru fear of the declining value of your most valuable asset. People are getting buried alive!!! This solution proposes a way in which that negative equity can be paid to the lender w/ a small profit margin, while the major bulk of the current 80% housing value is put on hold at a predetermined lower fixed rate until the second step is triggered when the 80% equity positioned is reached by either the reduction in principle, the increase in value, or the combination of both. This can only be achieved with the co-operation of our government, appraisers, banks holding these notes, and the actual borrowers. The solution I'm proposing is for existing mortgages (refis) and standing inventory (re-sales/foreclosures).The Great thing about this proposal is that our government does not have to shell out billions of dollars to get this idea to work! They can just modify existing balances into a new loan modification agreement w/ specialized underwriting. Ok, first in the case of refi's calculate the difference between what is owed & the current market value. Calculate on a 1% interest rate payment the amount of negative equity plus an additional 20% below the new appraised value (that 20% eliminates PMI private mortgage insurance). Also include taxes, insurance and a service fee to monitor/regulate the performance of the borrowers borrowing habits during the 1st step of a two step loan. Calculate the # of months it would take to pay off this negativity equity loss. Yes, the banks would only break even in getting there money back on that portion that was negative equity by allowing 1% interest rate payments (this could also be done at 0 % w/ larger servicing fees). Lets say 10 years for are scenario.

SCENARIO
240,000 existing mortgage balance
180,000 existing market value 60,000.00 negative equity
144,000 existing market value minus 20% 36,000.00 eliminate future PMI
TOTAL 96,000.00 new 1st step loan

96k at 10 yrs. @ 1% would be 841.00 plus taxes, INS, and servicing fee
96k at 10 yrs. @ 0% would be 800.00 plus taxes, INS, and servicing fee

240k at 30 yrs. @ 6% if they were in this good of a position would yield a P& I payment of 1438.92 a month plus taxes and insurance

This would net around a 600.00 a month reduction in their monthly payments while economy is stabilizing.

Also their new loan if we could lock the trigger fixed 2nd step in at 5.5 % at 144k for 30 years would yield them a P& I payment of 817.62 (No Payment Shock)

Remember this is worse case scenario if market values level off and don’t increase over the next 10 years. This 20% equity position could occur at 160k if the house appraises for 200k in 5 years and then it would trigger into the 30year fixed product 5 years earlier and curb the banks loss of revenue!

Can you imagine the breathe of air this would give to troubled home owners, not to mention the extra money that would be allowed to circulate into our economy while the housing market re-stabilizes. This would be the only payment that would be made, that’s right no P&I payments below 80% LTV on the true value market balance while these payments are being made! Remember if nothing stops this housing spiral that negativity will increase! Set up a 40 year 2 step negative equity trigger loan. The first ten years would be just to address the negative equity while the housing market is stabilizing. The last 30 years could be on the 80% existing value triggered when the borrower’s payments on the 1% interest loan meets the true market value minus 20%. This new 30 year fixed rate simple interest loan must be at a pre-determined rate that will benefit the borrower’s interest for avoiding foreclosure and the government must pass on some incentives to the banks for their loss in interest revenue. This interest rate could be a fixed rate on a sliding scale, by this I mean if the targeted interest only period is ten years and the market returns the value to the projected principle in five years & the trigger occurs quicker than anticipated then maybe that borrower gets a better fixed rate on that sliding scale!

There are several things that can happen in that time. 1) Market values could increase (quicker trigger) 2) Market values could decrease (extend 1st step period) 3) House could still go into foreclosure. 4) House could be sold after loan has been triggered, but lender should share in revenue stream based on % and years/months since loan was initially triggered. 5) Some borrowers will pay poorly on this program as well.

Ok, second standing inventory (re-sales/foreclosures) also a trigger loan (in lei of down payment) that would have a sliding interest rate/interest only payment based on a 3-5-7-10 year term. A large % of that payment going towards principle until or as long as thresholds are being made 5% within first 3 years, 10% within first 5 years, 15% within first 7 years, & or 20% within the first 10 years. Lenders could benefit if they are allowed to share in the triggered value. For example, house sold for 180,000.00 in "09" with a trigger loan DPA program. 75% of the 1st step payment payment is applied to the principle balance of the current market value, while the other 25% of the payment goes to the mortgage co. until an equity position is reached that a private mortgage insurance co. feels comfortable in insuring. As the principle balance decreases and the market value increase there can be different trigger values/equity points that would present themselves to trigger the 30 year fixed rate loan in a favorable loan to value position for both parties.

Since the banks have shown that they not been willing to bend on principle balances except going thru the mortgage foreclosure process, there has to be some write off/tax incentives thru this process that are government can pass on to the banks for trying to resolve this issue in this manner. The banks have received the additional liquidity from our Government (which may have hurt us rather than helped us by giving the banks extra liquidity to help those (major banks) balance their assets rather then help out the consumer to ride out this recession

Thanks Mike Harrington Call me (702) 845-5626

These loans could also include consolidating consumer debts in the 1st step to help insure that a good start is given to help the borrower to maintain during their monitored/probation period. They could required to take a once a year continuing education course during this 1st step and review their current status of how close they are to the trigger date. These products could even be rolled into investment properties w/ a 15-20% down payment an additional 20% step 1 program.

Re: Mortgage Crisis Solution Excluded From Bailout Plan

Dorothy Carlos — Tue, 30 Sep 2008 16:21:24 -0000

I am a retired Physician Assistant who is now struggling to keep my home. The government's bailout bill is strictly for Wall street and not the little man. I am able to make my mortgage and pay my bills every month but it is a struggle. I have attempted to get a bill consolidation loan so that instead of paying $1,780.00 mtg and bills of $1,300 I would perhaps have one for approximately $1,800.00 a month but because I recently lost my job I am not qualified even though I pay my bills. I receive a pension and social security every month and work now per diem, yet I can get no bailout or help. Where is the justice or fairness in this. This country can help every other country, foreigner and the big wigs of wall street but cannot help the little man who has lived and worked al their life here. The greed is outragious with the rich getting richer and the poor getting poorer.

Re: Mortgage Crisis Solution Excluded From Bailout Plan

gerantoine — Thu, 25 Sep 2008 15:05:26 -0000

Finally, after looking at C-Span for hours of testimony in the Senate and Assembly banking committees, I urge you to postpone your definitive answer to “bully” Comrade Paulson’s 2 ½ page plan to “save” our financial system. I have concluded that his disrespectful short plan has no merit and is only another way to postpone the day of recognition of the Republican administration’s catastrophic failure, while passing the buck to the next administration. You need to know everything. Accepting to give a blank check now, even in a modified version, does not serve much purpose: Be helpful: let them pray: heaven and the market can wait!
To present the root cause of the current crisis as being primarily mortgage financing is a misleading oversimplification. Why place part of the blame on the small guys? The root cause lies with this administration and the extraordinary power of leverage it gave to what PIMCO called a “shadow banking system” of hedge funds, CDS, private equity able to leverage 30 times assets, even when these assets were questionable, without any regulatory control, not speaking of a hole in a 62 trillion dollars market for credit default swaps.
To say that if will cost the tax payers “only” 700 billion this time is an obvious scam. It certainly won’t push the economy forward! Some say it is not a “true” solution. Others would even call it a lie! Experts conservatively put the amount needed at 3.5 times this amount or $2.5 trillion. Last week money markets broke the buck, withdrawals reached half a trillion and the response from the Treasury has been a blanket guarantee for the $3.5 trillion invested in money markets. Somehow, the Comrade Secretary did not see the need to ask us for that. This means that, comes January, we will be revisited by a new Treasury Secretary for more (much more) of the same bail out.
In other words, we are given another smoke screen, to let a 3rd Shrub remain in power for another 4 years. Why should the taxpayers help those who caused job losses and foreclosures? Do they deserve your applause? We need to get real: we cannot afford trillion dollars budget deficits, nor a bloated defense budget that should be reduced by at least 50% to restore our country’s economic strength.
We will be better off resisting another call to quench another fire. They exaggerated and pushed the “panic button” to get the Patriot Act passed. They lied to push us to war in Iraq. It is again another of their swindles. We cannot trust them. We should not trust them. Don’t applaud! Third time should NOT be a charm! Please wait for the new administration before giving your definitive answer. Comrade Paulson gave you this opportunity by trying to make you responsible by bullying your committees: Don’t let them get away! Take it!
Respectfully yours,

Gerard F.Antoine

Re: Mortgage Crisis Solution Excluded From Bailout Plan

eddie — Thu, 25 Sep 2008 10:47:07 -0000

I need to refinance my two homes (one being an investement property). Both loans are 30 year conv adj rate mtges. My investement property 5 year fixed rate will expire this coming month. I was wondering if i should wait untill the bailout plan or if i should lock in on a rate this month.