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Housing - one stimulus at a time

Keeping tabs on real estate and politics

By Katie Wickham | Home Owner in Lodi, CA

Obama Mortgage Relief: Live Blogging!

President Obama just spoke before a crowd in Mesa, AZ, unveiling his $75B foreclosure crisis plan.

Here’s a play-by-play of the speech:

This is a “crisis unlike any we’ve ever known.”  Families can’t afford to leave, but can’t afford to stay.

  • 6 million homes in foreclosure or at risk of foreclosure across the US.
  • Study in Chicago found that a foreclosed home reduces the price of nearby homes by as much as 9%
  • Costs associated to local government for a foreclosure can be up to $20,000
  • Created a credit crisis – we all pay a price.

Plan will help between 7-9M families restructure&refinance their mortgages to avoid foreclosure.  It helps them, and their neighbors by preserving neighborhood home prices.

Here’s how the plan will work:

1. Make it possible for 4-5M Freddie Mac&Fannie Mae loan holders to:

  • refinance at lower rates
  • changes the policy that Fannie and Freddie  are generally not permitted to guarantee refinancing for mortgages valued at more than 80 percent of the home’s worth
  • enable families with higher loan rates who may be underwater to refinance
  • Although Fannie & Freddie would take in less money from loans, they would lose less due to foreclosures

2. Create new incentives so that lenders can work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure

  • sub-prime loans are only 12% of all mortgages, but about 50% of all foreclosures.
  • establishes clear guidelines for mortgage industry that will encourage lenders to modify mortgages on primary residences
  • lenders wanting to receive financial assistance from the government and modify home mortgages must meet these guidelines, which will be in place by March 4
  • reduced payments must be no more than 31% of homeowner’s income

3.  Take major steps to keep mortgage rates low for millions of middle-class families looking to secure new mortgages

  • Treasury and Federal Reserve will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to ensure stability and liquidity.
  • Treasury will provide up to $200 billion in capital to ensure that Fannie Mae and Freddie Mac can continue to stabilize markets and hold mortgage rates down
  • will also work with state housing finance authorities

4. Pursue wide range of reforms to help families stay in home

  • Continue support reforming our bankruptcy rules to allow judges to reduce home mortgages on primary residences to their fair market value, as long as borrowers pay their debts accordingly
  • As part of the stimulus plan, award $2 billion in competitive grants to communities bringing people together and testing new and innovative ways to prevent foreclosures


By Bonnie Sterling,  Wed Feb 18 2009, 18:49
Of course, there is no perfect plan but there is certainely something missing. Many of the homeowners I am talking to, even those who put money down or borrowed conservatively compared to the height of the market values are upside down in their property value. They figure that the market is SO far away from bringing the debt in line with the value, they just dont see the point of continuing to pay substantially more for their mortgage than their neighbor pays to rent a home, sometimes almost twice as much, and even though we pay a lot for our housing in California, I am talking about fixed first or first and seconds around the 500,000 with payments around 4,000 per month. Some of these loans were not adjustables or neg am. These are often held by those who were equity owners. Given the mortgage crisis relief details outlined today, I dont see help for these homeowners. Sounds like help out there will be for those who took on more debt than they could ever have hoped to handle and had to take it with unstable lending practices and loan. But for the more conservative borrower, they are suffering the fall out of a market created by those less scrupulous and it appears that they will be the victim as the programs being proposed seems to have nothing to offer them. They can not refi because the values are too low and their credit is generally good enough that they dont want to file bankruptcy. They are people who have stable jobs but have lost discressionary income. They are people who would have been ok with modest adjustments in the market, that they anticipated, not knowing and always surprised when I explain to them that this neverending flow of foreclosures is caused because people were able to buy homes with no money down - sometimes receiving money back at close, mortgages that came with payments they and the lenders KNEW they couldnt afford after two years, there were two loans - one for the 80% and the other 20% for the down payment they didnt make, no proof of income and moderate credit scores. This plan seems to largely serve those people but leave the more RESPONSIBLE, Old School buyers without any relief.
By Larry Thornton,  Wed Feb 18 2009, 19:08
I have a VA laon and my payments are up to date. I need to sell this house and move my wife to a more moderate climate. This Michigan weather is just to cold and damp for her arthritis. I am a retired railroader, 71 years old. My wife (55) has had both knees replaced and 3 vertabrea fused. Needs both shoulders replacee. Our home ywo years ago would have sold for $142,000.00 and now the value is down to $83,000.00. I worked hard to increase the value and the work did improve. But the crooks on wall street have stolen my equity. Still owe $122,000.00. If I sell at short sale, the VA makes up the difference. That makes me inelligible to get another home down south under VA. I have no money to put down. I counted on my equity. Just how will the Stimulus help us? Or will it just pass us by? Olethunder@comcast.net. Please reply.
By David Eyrise,  Wed Feb 18 2009, 19:15
Actually the relief for the Old School Buyers will come in slowing down the foreclosures from happening which is depreciating values of the Old School buyers neighborhoods. Yes it sucks. Yes it's not right, but doing nothing to stop this may save the values from spiraling down even more and wiping out what value is left.
By Barbara Gregus,  Wed Feb 18 2009, 19:18
I couldn't agree with you more...and I'm only about to warm up on my rant.
Let's go back to some basic principles; when the downstream in a river is polluted, you look upstream for the source of the pollution. In the case of this massive mess we are in today, you've got to look at the root of the problem, LENDING. In my state (NM) anyone that could fog a mirror could be a lender (okay they say that sometimes about real estate agents but get REAL...we have to pass a test, background check, get licensed AND carry E/O insurance and if a REALTOR(R) subscribe to a code of ethics) not true with a lender in our state. How much money did those lenders make on the backend? For us, the HUD WAS transparency (see my commission). I saw buyers go from lender, to lender to lender until someone would do the deal - I didn't have any vested interest in their lender of choice. The people in trouble today NEVER should have received a mortgage to begin with and how exactly, even in a NO DOC loan did those numbers get...well, fabricated??? Rare are the families that ran into some personal devasting troubles, most just signed beyond their means. No one held a gun to their head. I was not privey to the finances of the borrower, I only know if they qualify or not and obviously that category is subjective. So, let's give more money to people that got buyer's into the mess to begin, BAIL THEM OUT, give those same ignorants even more money to get out of their mess or at least, suffer no consequences and see if we can fix the problems of people who never should have done what they did and get out without any stink on them. The ones that will suffer are the ones with a large downpayment that make their payments on time, that live in the house Jack built in the neighborhood with short sales and foreclosures.
Real estate agents often get a bad mark by the public for "preceived" wrongs - perhaps we should use the money to build more prisons and put those that caused the problems in them, this would create more jobs for out of work real estate agents that could now become corrections officers for the lenders now in prision...well, you know where I'm going with this. I'm not putting ALL lenders in this category because there are many that couldn't and wouldn't do the deal because the numbers never worked but admit it- you saw the same people you couldn't finance get a loan because "someone had different guidelines" what did that mean?' AMEN.
By Lisa Cline,  Wed Feb 18 2009, 20:11
Barbara Gregus,

You are so right on the money and I couldn't agree with you more! I myself am a Real Estate Agent in New Jersey and have said the same things as you. We can not control our buyers financing and only know what the Fico score is and what they can afford. I saw so many loans go across my desk over the years that just baffled me. Most could not afford what they just purchased but the lenders said they could. They bought way above their means just to say they have the McMansion like the Jones. Who by the way had no business buying that size home either! I blame the government for allowing these loans to be pushed by the lenders who would write them and the buyers for thinking they could live above their means without any conequences. The NO DOC loans would not have been so bad, it there were more guidlines and contingency's to follow. I myself have had to use the NO DOC loan program to purchase the homes we have since both myself and my husband are self employeed. But we are responsible enough to know that we needed to put down a substantial downpayment in order to afford and pay for what we were purchasing. It is all about self control, knowing your limits and not allowing anyone confusing you into purchasing something you have no business buying in the first place. The homeowners like us, that stayed within our means, followed the rules and took out the 30 yr fixed and are now facing the upside down mortgage, those are the homeowners that should be helped not the people who willingly and knowingly purchased a home they could not afford.
I am not confident that any of the stimulous plans are going to work. We all know the core of the economy is the housing market. Without that area thriving, we are all in big trouble as it trickles down the everything else. I do not see enough money being distributed to that aspect from the new bill. And most of all, I do not see anyone having to pay the consquences for what they have done to the housing market , the economy and this country! It is just a shame that law abidding tax paying citizens of this country have to BAIL OUT our government , put our country into enormous amounts of debt and these same people are still in charge of where our money goes without any questions asked or answer to the law!
By John C. Hiscott,  Wed Feb 18 2009, 20:18
I am in the same Vote... Bought in 2006 (with no money down) Thank god! Did an 80/20 30/15yr fixed loan and we can make our payments..... But why on earth would we continue to pay for a house thats we paid 270000 for when its now worth 150000. Funny enough we just got approved for another mortgage. We could even Buy and Bail considering Arizona is an anti defiency state and we never refied to cash out... All we would be out is our credit score and some morals. But we would have an extra 1200 - 1400 a month discretionary and could move 2 doors down! LOL........ Not sure what we will do our how we will do it. But being over 100K upside down on a mortgage with 6.5% interest rate doesn't seem like my neighbers not forecloseing (which there are many) will stop houseing prices from dropping. I don't forsee this economy turning around until Our President solves this problem. Although he touched base on it today.... The root of this evil is the lack of equity that the Responsible consumer who will do what ever it takes to make a payment. Until this consumer gains the equity back in there home or has a vast reduction in the mortgage there will be a NEW wave of foreclosures. From people like myself who Can Afford to pay but if you Crunch the Numbers... the 200K in mortgage interest over the never 10 years to stay in ahome that STILL MAY NOT Be worth what we paid for it...Whos to say we won't be upside down still in 10 years....15 years....... Doesn't Make FInancial cents! Thats a savings of like 1000$ for each Fico Point!

Mesa Arizona
Deeeeeeeeeep Underwater in the Arizona Desert!
By Tom,  Wed Feb 18 2009, 21:08
How will the $8000 home-buyer credit work? Will it be treated as a loan, or credit?
By Nancy Headlee,  Wed Feb 18 2009, 21:28
People! Learn to spell!
By Brian Frank,  Wed Feb 18 2009, 22:41
Borrowers like John in AZ mindset will help continue the foreclosures and the weakening of the market. you promised to pay!! If still have the means you pay...
By Irene Anderson,  Wed Feb 18 2009, 22:44
Dear Larry,
Unfortunately, this does not help you at all. You will have to wait for the home to gain in equity and it will be slow going because of the current economic situation we find ourselves in. I would suggest consider renting with the option to buy. This would secure your mortgage payment at your current home each month and allows you to move on to a more comfortable enviroment for your wife. You won't have money to purchase a new home, but if you have at least 3.5% down payment you would qualify for a FHA loan which would be a minimal amount if you decided to buy a condo. Then when the market gains in strength you might have a buyer who is ready, willing and able to buy your home and has been currently renting it from you or you can start fresh with a new buyer. I would love to say there is a win win for every homeowner out there, but if you don't need to sell at this time, sit tight and wait out the market is the advise I am giving to most homeowners today. God Bless. Also remember, this didn't happen over night, this economic disaster and it won't be fixed by throwing money at the situation. We need to start taking care of our own, buy American whenever you can. When you go to the supermarket, even if it is faster avoid self checkout's someone doesn't have a job because of self scan today. if that cashier was there ringing you or me up, they wouldn't be on unemployment or need our assistance, they would be self reliant. Just my humble opinion.
By Irene Anderson,  Wed Feb 18 2009, 22:47
Dear Lisa,
As a real estate professional, you can size up a buyer pretty easily if you pay attention. In my opinion I sell buyers what the can afford, I will only work with reputable loaning institutions not the corner mortgage broker. I like to refer to Wells Fargo whenever I can, they are a strong lender with high standards. This ensures I am not selling a property to anyone who can't afford it. If that means they move on to another realtor so be it. I have to be able to look myself in the mirror each and everyday.
By Irene Anderson,  Wed Feb 18 2009, 22:53
Dear Barbara,
Good post. In NY we have the same problem with corner mortgage brokers, if they owned a calculator and could breath they were writing loans. They were not held to any standard. As a realtor I have to renew my ethical license every 2 years, I am licensed by the state and tested for my knowledge of the housing market, fair and honest dealings, fair housing laws, and ethics. I have to be scrutinized with backround checks and to ensure that I do not have a criminal record as well. Most of the people writing these bad loans with 106% financing were crooks and criminals. I know what my buyers can afford before I take them to see homes, I only take them to see what they can afford and if I have to walk away from a buyer because of my standards, let some other realtor have at them. No paycheck is worth selling my soul.
By Debbie,  Thu Feb 19 2009, 01:24
My husband and I purchased a modest home in NJ last April(2008) in a family neighborhood for 210,000(fixed 30 yr. mortgage.. Now our home, due to foreclosures in the neighborhood, are selling for 155.000. -a 60,000 drop in 10 months! It all seems like a bad dream!
By Voices Member,  Thu Feb 19 2009, 03:41
Here is a website that has a lot information (legal information). Inform yourself and your attorney. I found this page when I was doing research for one my clients who has his house under foreclosure. It is worth reading.
By Voices Member,  Thu Feb 19 2009, 04:04
Here is a website that has a lot information (legal information). Inform yourself and your attorney. I found this page when I was doing research for one my clients who has his house under foreclosure. It is worth reading.
By Tony Barker,  Thu Feb 19 2009, 06:27
Turning this "crisis" (if it truly is one) is simple. Mandate lenders to put the existing back payments on the tale of the loan and maintain interest on it. Let the borrower start normal payments or foreclose after the nest 3 months.
This would save people who hit a bump in the road of life. One time fix only. Next governments insure the risk loans and allow FHA interest rate as exchange for the reduction on a loan by loan case basis. This would lower
Payments and reduce out of pocket for the US government and keep more people in the home. Allow voluntary interest rate reduction to lenders who may be guilty of predatory lending practices as a form of immunity to their
past actions.

The reason I say "if it is a crisis" is the natural order of supply and demand, market forces and free market consequence. Some people were cheated, some were foolish and some were both. In the before mentioned world, all suffer the loss (or as we say in RE) pay the "stupid tax".

Socialism, tells people they will cover their mistakes. Buyer does not have to beware and we are not responsible individually but collectively for our actions. It is a mistake to try to save everyone, all the time and never works.

Finally, I am honored to be among all of you great RE professionals and enjoy your views even as they differ from mine. http://www.premiere-homes.com
By Barbara Gregus,  Thu Feb 19 2009, 06:38
Rachel, I went to the http://livinglies.wordpress.com site it is interesting and I found the following,"And in states like Florida an army of con men (10,000 convicted felons were licensed as mortgage brokers) descended upon a public that had never seen this kind of behavior because until the securitization of loans the bank’s money was at risk, the loan officer’s job was at risk, and the stockholders were at risk. " (and Nancy, if this isn't spelled right I want you to know I did a copy and paste and it is a quote.....). At least Florida took the time and energy to license their convicted felon lenders. The problem in New Mexico is that we don't know how many are of the lenders are convicted felons because we don't even bother to license them...

Speaking as small business owner, Qualifying Broker and real estate franchisee - I wish there were more focused efforts on helping us through these difficult times. Unfortunately, I did not see my name on the list for the stimulus package. Bummer. I'd promise not to redecorate my office, buy new curtains or give myself a bonus (I don't actually get a salary, so a bonus is out of the question!) but I would pay bills, I swear. Pinky swear.
Many licensees are leaving the industry hoping to find other work which adds another strain to our economy. In our board, nearly 20% of agents have taken their license and gone inactive. Not a bad thing because about 6% of real estate agents really work in the industry with a full-time effort (not sure where the 80/20 rumor came from). My personal philosophy is it that it takes a full time effort and production to know our industry - after all, who would use a heart surgeon that does 2-3 operations per year? Silly me. But, we're not hearing much about real estate agents/owners and our woes, it is still pretty focused on lending. We're hemorrhaging in our real estate industry as small business owners (hey, it's a great time to start a small business, I think I read that in an Obama speech) and I've yet to see any focus on this problem as across the country real estate offices of all brands are closing. I think the last man (or woman) standing may actually win this one, I just hope my knee doesn't give out...

While our market is still perfoming well (#44 out of 50 for lowest foreclosures), the writing on the wall is pretty clear - on average 50% of office listings (and I spoke with several other offices so I find this a solid stat) are now short sales. We are at the tipping point of a foreclosure market that many of you have already experienced. It will be interesting to see if the Stimulus Package, impacts our housing market or we end up like FL, AZ, NV. But the cyclical problem is, if you couldn't afford the home to begin with, how can you afford the home now?
By Fred,  Thu Feb 19 2009, 06:51
The root of the root of the cause is a basically fraudulant monetary system (now broken) enabled by politicians who's job is to keep their job by giving out candy($) created out of thin air by a compliant self seving banking system. It is a true symbiotic system where the politicians enable the bankers who pay the politicians. We are all just road kill. Any system where something is borrowed or an iou is issued to someone (think gov't bonds) when the borrower (think politicians and pork) know it cannot be repayed is FRAUD. Normally, this is prosecuted and the borrow is thrown in jail. In this case it is perpetuated by the jailers (politicians).
And I'm a positive person.
The dollar will need to be devalued to solve the problem. There are only 3 known ways to get rid of debt: 1) it's paid back as agreed; 2) It's forgiven; 3) It's inflated away by devaluing the unit in which it is measured.
The latter course is the only vible one for the government as it cannot be repaid and the Chinese (and other mjor bond holders) are unlikely to forgive us. Savers will be punished because the system is slanted to leverage. Best to you all and best of luck. If our children don't hang us I'm certain our grandchildren will.
By Vee,  Thu Feb 19 2009, 06:59
Today, I sit in a real estate office as the secretary where my hours have been seriously cut wondering just how on earth I am going to pay my consumers bill. I am a good employee. I am a team player. I like my job and don't want to leave it even if I could find another job. They are rare out there.
I paid my house payment on the house I have been in for 15 years and because I refinanced to get some work done on it I actually owe more than it is worth, of course. My neighbor of several years passed away leaving us with relatives moving in that think the side of their house is a junk yard for their garbage to pile up in excess of 50 or so garbage bags and such. They currently have 5 dogs who bark non stop and the township is doing nothing.
I really want to leave the house we have made into a home, but, of course. I can't. Consumers energy has increased to an all time high along with every other bill we have. Groceries have increased right along with everything else. How could we have known we would wind up this upside down? Our savings are gone. We have no other funds than our bi weekly paychecks. And now both of us are employed but our pay and hours have seriously cut.
I watch the news and read all this about the stimulus package. This is what gets me. I didn't get a vote on how to spend my money. The folks who put me in this mess got that vote. Why did we give them money directly? Why wasn't this huge astronomical amount of money given as lump sum checks to each of us to decide how we would get to stay in business? Give me the money I will have to pay back on this stimilus package and I will decide if GM gets my money or if I want to give some money to a study on a field mouse.... I heard that one.. Sure hope its not true.
Help???? Where??? I am stuck and we have always worked hard. Frustrated doesn't even begin to describe how we feel.
By Laurie,  Thu Feb 19 2009, 07:06
While I sit and wait for my taxes to deposit into my bank acct just to pay my mortgage (for Jan no less), I listen to these people discuss that I should refinance, that a stimulus is coming, about foreclosure. Never in a million years did I think that I would be in this position. My husband and I are 50, one daughter is in her soph yr at college and the other graduating from HS this yr, also thinking that she will be going to a private college, little does she know.... My girls are pretty smart and along with their support we may be downsizing and moving to a smaller home so that our mortgage is half of what it is now. Our home is not even that big now, but it is nice and we lived here for almost 16 yrs. Our credit is bad, we had to go with an FHA mortgage for our refi last yr, and like everyone else go from paycheck to paycheck, with my husband possibly getting a cut in salary, maybe a bonus %$##@& I called in to work yesterday, told them I wouldn't be there, hung up and cried. So now we can refi again, yippee, another FHA I'm sure.....but at least we can erase the high credit and cut our card. I can't even find full-time work, because no one is hiring, the positions are there on the wesites but response time tells you everything. What is a person to do or how long will it be til our medical and other bills get paid. I can't keep track anymore of who I owe, I am depressed. I've never had depression problems in the past, now I think I might. It's hard not to breakdown when someone at work asks how are you today...
I walked through one house, even though downsizing is one option of ours, we couldn't even fit all of our furniture in this house. Cute as can be, but amid the other large homes surrounding it, I knew I couldn't live there with the work that would have to be done to it. Debbie is so right when she says this all seems like a bad dream. Well, I guess I will check to see if the taxes have deposited into my bank, said by the 17th I should see the deposit, today is the 20th.
By Vee,  Thu Feb 19 2009, 08:06
hm... I am pretty sure that tax funds deposit on Fridays unless you went with a rapid refund.
I really don't get the thing about calling into work saying you won't be there. Isn't that certainly counter productive?
Especially since you have already stated that you didn't pay your January house payment. Every bit helps. Just keep your head up and let's keep slugging.
By TF_buyer,  Thu Feb 19 2009, 08:17
Our home is upside down in value if you consider the purchase price. We are not upside down if y ou consider our mortage balance since we were responsible and put down 25% when we purchased the house. The only way to make this fair and moral is to allow loan writedown based on the purchase price to current value ratio....Otherwise, I lose out when I sell the house while the irresponsible buyers make out now and in the future.
By TF_buyer,  Thu Feb 19 2009, 08:20
We are talking about irresponsible bankers and homeowners..what about the greedy and irresponsible realtors who were partly responsible for pushing the price up. I had to fire my realtor because she kept arguing with me that the market is still strong six months ago. They threw flame on the fire by creating bidding wars and misleading people on the value of the house. I wonder if a single realtor told their client that they cannot afford the house they were buying....
By shiningstar1135,  Thu Feb 19 2009, 10:13
My turn on the soap box...first let me say that I am saddened by the comments posted here about being upside down, having to move, jobs, etc.,. I truly hope everything works out for you. I wonder if we (the collective we) shifted our thoughts and ideas and tried to look at the current housing/job situation differently if we couldn't affect change? First, look at how long you've lived in your house, what your payments have been on a monthly basis and the look at what the cost of renting the same house would have cost you. On average you've spent less money then you would have if you had been renting, and gotten a tax deduction for it as well. Now, if you aren't in a situation where you have to sell because of health or job I offer this though: Money is all illusion. The values we place on things are illusion and our current illusion just became apparent. Your house is still your house, filled with your things, you still like/dislike your neighbors, everything is the same except you've been told for months now how bad the market is, how much money you've lost, how your house isn't worth what you owe on it, etc. Let me ask you, were you intending to move now? Was that because you wanted a different house in a different neighborhood? Perhaps a larger or smaller house? Okay, you can't move now, and since you have to live somewhere, why not just stay put and be thankful that you have the great house you have. Sure, some will continue to say but the value is falling, it's not fair! Who ever said life was fair? Some people will get a bailout, help with mortgage rates, etc., but do you realize that it is only for 5 years? After that the interest rate will start to rise on those mortgages until they reach parity with the market at that time. We can lay blame at all kinds of doorsteps but I ask, does it make you feel better to be so angry, does it solve your problems? Can we all really expect one person to have all the answers? Don't we all have some responsibility in our economy? It can't be everyone elses problem and not mine. Are there ways you can cut your spending? Cable bills, lease payments on cars, mall shopping? If we all stop living outside of our means we will all end up living better. I live in one of the most devasted states in the union, Michigan. The heart of the rust belt. Yes, jobs are hard to get and more people are getting laid off every day. Housing prices are falling. We must all pull together, cut where we can, start buying differently, support local community by buying local, buy American and ride it out. This is not a country of whiners, so stop whining and help your neighbor and be grateful for what you have.
By Lucien Vaillancourt,  Thu Feb 19 2009, 16:33
To TF Buyer. Realtor's do not set the price of homes. The market sets the price. Home prices are driven by supply and demand just like any other commodity. If there is one home for sale in a neighborhood and 10 people want to buy it guess who gets the home. Now that there is less demand things are going the other way. If there are 10 homes for sale in a neighborhood and one buyer guess which house the buyer selects. When a would be homebuyer comes to me and says they want to buy a home one of the first things I ask is "have you been pre-qualified for a loan"? If they answer yes and show me a pre-approval letter from a lender I am happy. Am I supposed to second guess the lender and try to convince them not to buy a home? I say no. It is my job to help them find and buy the home that meets thier needs and desires.

Everyone is looking for someone to balme for the situation we are in. It is easy to point the finger at mortgage lenders and brokers because they are on the front lines meeting face to face with customers. They are the ones who collected the information from the borrowers but were they the ones who decided to make the loan? Absolutely not. I would say that most borrowers seeking a home loan went to the mortgage broker or lender and asked for the money. They "applied" for a loan the same way someone applies for a job. The mortgage broker simply matched the applicant to an available program based on their credit and financial situation. Were there fraudulent loans made? Yes I am sure there were. Did those loans make up a significant number of the millions of transactions that took place during the boom years? I say no. Are those few loans the cause of falling home prices? Probably not. So who is to blame?

Heres my take on who, what, and why. Lets first look at the "What". This is simple. Loan programs. Programs that did not require documentation and verification of income or assets. Programs that did not require down payments. Programs with negative amortization, option arms, and interest only loans. All of these were high risk arrangements for the lender and borrower. Now the why. Why would a borrower enter into such a high risk arrangement? Because they believed that the rapid appreciation in home values would continue fast enough and long enough to build enough equity to refinance into a less risky loan or to sell in a year or two for a big profit. So who was greedy? Why would a lender make such a high risk loan? First part of this answer is that the lender was also counting on values to increase enough so that the home could be easily sold in a forclosure should a borrower default on the loan. The second answer to this question is where the "who" comes in. The first name that comes to mind is Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs. The second would be US Rep Barney Frank D-Mass, House Financial Services Committee Chairman. The third would be Senator Chuck Schumer (D-NY) who promoted no money down mortgages. All three of these people are, in my humble opinion, directly responsible for the financial crisis by promoting risky lending practices and then denying that a problem existed. If you need to point a finger at someone you should start with these three.

As far as the Obama mortgage relief it won't work. By rewarding the irresponsible behavior and decisions that brought on this situation we are encouraging more of the same. Those people who have made the sacrifices and lifestyle changes necessary to continue to make their payments as promised will now question themselves. Why should they continue to make these sacrifices? Why not let the government step in and reduce their payments, reduce their debt, and restructure their loans? Remember this, behavior that gets rewarded gets repeated.
By Yannis Legakis,  Thu Feb 19 2009, 19:35
When the forest grows too wild... the inevitable fire is not only natural, but necessary. We need to take our medicine, and let the market work itself out. Yes, that means things will got worse, but I think that's better than these band aids that only prolong the problem. The dishonest lenders, buyers who lied on their applications, and the banks that turned a blind eye, and don't for get our gov't... are all complicit in the current situation. Then you have the wall street @ssholes that packaged all this garbage into mortgage backed securities. Greed. If anyone should get a break, it's the first time home buyer who needs a primary residence. The others made their bed, they can lay in it.

Politically, this will never happen... but that's my 2 cents.
By Yolanda,  Thu Feb 19 2009, 20:06
We already lost our home and wish this bill was put into effect sooner.
By Zhuoming Zang,  Fri Feb 20 2009, 00:04
Well. People are expecting some plans what can help them out from under water houses. Yet how much they could be saved? I also point out about the appraisal system. Many houses are under appraised its value. it hurts both seller and buyer. Who determines the value of the property? Buyer? Seller? Appraiser? Lender?...
There is a true case in San Jose 95128 area. A property was listed at $585K;an buyer sent offer, and made
deal at asking price. But when buyer checks the appraisal report, the value is only at $510K because of there are so many short sales and REOs. Then, buyer was unable to get a loan. It put seller into a short of value of property.
I think it is a time that lender to reset the appraisal system. I suggest all my clients who are highly expecting the new plan that just don't expect too much.
By Vee,  Fri Feb 20 2009, 07:47
Shiningstar... I believe you took my writings to mean that I am doing a boo hoo thing when I am not. I was merely stating the situation I am in. I am very angry, yes, over a government and big business who have decided how to spend my money and my children's money and probably into my grandchildren's money. They don't have a right to do that.
If they wanted to really help... give it to us. It's OUR money. WE earned it. WE will work for it and have worked for it.
To add to this, my car was too much of a payment, so I did trade it in last November for a van that is half the payment. I need to have a dependable vehicle due to a health issue. I have to have viable transportation that will not leave me stranded in the cold of winter here in Michigan where I live also. It is a life and death issue for me for which I don't feel the need to go into here. No I don't collect for disability and yes I work for a living.
I have gleaned from my finances any bit of fat that I possibly can. The mall???? I can't tell you the last time I have seen the inside of a mall. I am wearing shoes I bought 5 years ago and haven't had my hair cut in 6 months because of money saving. So please don't try to tell me I am not being frugal. You know what they say about assumptions. I pay huge amounts like most people do on health insurance and have huge deductibles.
So let me vent in a time when I feel like my entire life of working hard is all for nothing. I am tired of struggling. I have struggled all my life. I am tired.

PS... the car company we are trying so hard to save has my car again for the 8th time since November for repairs. Hm.... and we just gave them how much?
By shiningstar1135,  Fri Feb 20 2009, 08:31
I'm sorry you are in the situation that you are in and I hope it gets better for you. I was not speaking to any one person, just collectively. I have been through tough times too. I lost my house in 2003 because of my stupidity with a predatory lender. We've gone through under employment and unemployment and health issues and insurance costs. I've been there, done all that. Oh, and raising 4 kids through it all.

There is light at the end of this tunnel, just hang on and believe it. I don't have a problem with venting, but I don't want to see us lose site of who we are and what we're capable of doing. Yes it would be great to receive a big fat bailout check in the mail but it's not going to happen. When we have natural disasters and the federal government steps in to help, aka Katrina I never heard of one person complaining that the government was spending our money on people who should have known better then to live in a city supported by levies that were not safe. Did you?

This is a disaster, albeit financial, and the government feels that the best way to soften the fall is to do a bailout. Do I like it? No, but I haven't heard of another true plan that is viable. No knows with certainty that this will work, but I trust that the President has gone over and over this with his advisors and they feel this is the best they know how to do with what they know of the situation. Again, it isn't perfect, but what if we do nothing? What will happen then, especially in areas like ours.
By Voices Member,  Fri Feb 20 2009, 08:39
I have read many of these comments and agree with some and not with others. I sympathize with all those who are losing their homes or need to sell because of health or job reasons and owe more than their home is now worth. But I see some real benefits in the new plan to help the overall market, by decreasing the huge amount of forclosures that are happening every day, which are then bringing down the values and prices of all the homes in the neighborhoods around them. This new plan will allow a stabalization of the housing market and the potential for the prices to rise again, although slowly.

If you own a home where the market value has decreased to less than you purchased your home for or less than you currently owe on the house, but you don't have a driving force causing you to sell right now and you can afford your monthly payment, then stop worrying and live your life. All things go round and round in the world of real estate markets and the value of your home will eventually improve. So stop dwellling on the fact that on paper you have lost so much money. You don't have to sell now, you have a roof over your head, you can pay your mortgage payments and you are only contributing to the general fear and anxiousness of society by sitting around complaining and worrying. You probably would pay nearly the same amount to rent and you wouldn't receive a tax break for it. By the time you do have to sell there is a good chance that the situation will have calmed down if we can break this chain of forclosures and stabalize the market.

I do have to say this though, there were many people who were caught up in the situations that are causing them to go into forclosure because they can not afford to continue to make their payments, who were not ignorants as referred to by one person who commented here. They were first time buyers who knew nothing of all the various challanges they would face in purchasing their first home. They relied on the expertise of their mortgage brokers to give them Honest advice and guidance about the true impact of what the consequences of the variable rate loan they were signing up for would be. Many were flat out lied to and told that the rate would not increase for years when it reality it went up within 6 months or 1 year and continued to rise until their payment was twice that of their original payment. They were not treated with honesty and respect and were taken advantage of in order to make a commission and get another loan through. So don't always think it's the fault of the buyers, many of whom were unaware of the injustise that was being done to them, until they saw their monthly payments increase over and over again.
By Dan,  Fri Feb 20 2009, 18:48
I feel bad for a lot of the people out there, I really do but I don't agree with the bailout or the mortgage relief. There are plenty to blame but no one in the government wants to really look into the problem because they fear what they will find. Republican and Democrat - they all encouraged this to happen. It will come back to them and their tampering with the free market system. Everyone cannot own a home, everyone cannot be rich. That is not what the country is about.

This country is about getting a fair chance and having the freedom to pursue a better life. That is it. Everyone has the Opportunity to own a home, be rich, be married...etc who said it was easy, with no setbacks. In fact, it’s hard and those that work hard - deserve the riches they obtain. If you break the rules you get punished - why isn't their more outrage and investigation into who did what? Put the bankers, loan officers, the investment company CEO's, the financial managers if they are guilty of something on trial. And please do not forget the government officials who act like they have no idea how this could happen. Is so hard to see that the housing boom was ignored because the politicians just wanted to take credit while times were great to get votes? The few times it was questioned - the questioner was ignored or made to be a fool.

You know what kills me, these clowns are still complaining about the banks - not lending enough money. What do they want them to do? Go back to no income checks, 100% financing, you worked one day this year, here is $350,000 loan - type lending? You may ask - who is saying that? I'll tell you who - The President and this mortgage relief bill are saying that exactly. They are doing it again - just making it look like they are trying to help. Not to mention one word no one ever talks about. Inflation - you cannot dump this much money into the economy without causing inflation. It’s going to happen - 100% chance - just a matter of time.
By Jasone,  Fri Feb 20 2009, 19:23

Few today understand the illegality of the Federal Reserve. Most think they are benefiting when the price of their home is inflated higher and higher and their mortgage debt is made less and less onerous through inflation. The Federal Reserve is in place today to perpetuate inflation, thereby assisting governments’ prolific spending habits.

I agree with most of your post. Point 3 I disagree with: "3) It's inflated away by devaluing the unit in which it is measured". Inflating debt away only services the debt, but does not pay off the debt. Granted, a $20K mortgage is much less onerous today, than it was 40 years ago.

Thanks for your thoughts,

By Angela T. Britt,  Sat Feb 21 2009, 04:39
I live in Virginia Im in the same boat my Loan is higher than the value of my home no equity can't sell want to sale what can I do? My loan is for 215,000 as of today the value of my home is lsted at 188,000 can't afford to do a short sell don't have the money to pay the difference what can I do?

By Dan,  Sat Feb 21 2009, 07:07
You stay in your home longer or mail the keys to the bank and take the foreclosure hit. And for thos who think "mailing in the keys" is immoral I say that it was the bank's resonsibility to ensure that the property was properly collaterized (I think that's a word) before they leant their money. As far as I'm concerned they are just as responsible as the owner.
By Fred,  Mon Feb 23 2009, 04:11
Jasone, I agree with you about the Federal Reserve - a cartel of private banks. Also, originally, they were not allowed to monetize the debt (print money to buy bonds) - they just started doing this in the late teens, early twenties. Congress tweaked the law to accomodate this. The corporate funding of election campaigns and perhaps lobbying, should be against the law. If lobbying isn't the first cousin of bribing, it's the 1/2 first cousin.
Regarding debasing the currency (inflation), the old debt is paid back with cheaper dollars...assuming the tide lifts all boats somewhat evenly- including one's pay check. I believe the big banks are all insolvent because they are overstating assets on their balance sheets. Those assets marked to market would reveal them to be naked in an outgoing tide (Buffett's analogy). When they take a house back at auction at the loan price, I'm told it goes on the asset side at that ficticious price. When it is finally listed in an mls and sold, they then write it down. A recent Realty Trac article speculated 70% of all foreclosurs are not yet in ANY multiple listing system. Yikes!
Recent sales in my area are heavily weighted to shorts and bank sales. Not all, but at least 25 to 30%.
The us dollar will need to be devalued in order for our exports to become attractive and allow what little is left of our manufacturing capacity to produce and sell abroad and to each other. The problem is every other nation has the same problem and all are debasing against each other...a vicious cycle. The US must once again PRODUCE and sell - export something besides the US dollar. The world is choking on the US Dollar. If China wanted to attack us, they just need to dump dollars - yes, they would be killing the goose, but if the goose is getting too long in the tooth then they may just take their losses and throw one be wad of $$$ at us taking out the whole system in one strike. They would never have to fire a single weapon.
Poor Mr. Obama - he seems to be such a sincere man and an excellent communicator. Too bad all the Keynesians swarmed around him before he even got in the door. The Austrian school has no one in Washington other than the Honorable Ron Paul. This is like watching a circus act going badly.
I'm trying to stay positive but it's starting to take a lot of energy.
I've tried contacting my Congressmen/women but it seems to have the same effect as talking to my TV.
Ok - one foot ahead of the other.....my day begins.
By Angie,  Thu Feb 26 2009, 10:07
My husband & I purchased a home here in PA , in 2004, for $92,900 (was an "estate"). We've done many improvements to the house oevr the last 5 yrs & would like to move back to NJ however I'm told they're only granting loans to people with absolutely perfect credit right now. We were always able to make our mortgage payments & never went beyond our means, not even close. Our intention was to be here for a while & then possibly "flip". Luckily for us we bought low & even though the home has depreciated in value it is still much above what we paid for it. My concern is when, or even if, we'll be able to purchase another home (sell this one & buy another), not a brand new home either, Im fine with an older house. My fear is that we'll be stuck here forever, like I'm sure so many right now have the same concerns. We both have "good" credit but it's not absolutely perfect, we're not behind in any payements at all & rarely ever are. I'm just wondering if this new bill, & rules, Obama has put forth will directly help any of us who want to sell & then buy, those of us who are not first time home buyers. Other than the stimulus, is there really a light at the end of the tunnel for people like us? How difficult will it be to eventually be able to sell & then buy? It worries me.

On top of that I'm still seeing homes for sale in many places that are overpriced & have hardly any property or sq. footage, I'm not seeing a large dip on the MLS of which I've looked at daily for the last 5 yrs. I still see homes selling for over 300k which have no property & homes for sale for 300, 400, even 500k & no they don't sit very long. I have seen many HUD homes & basic foreclosures but most are still up there in price. My hope was that things would crash so low to where someone could sell low & then buy low & in the end it wopuld even out financially but according to the MLS I'm not seeing anything like that.
By Anita Chadwick,  Fri Mar 6 2009, 07:02
The president's plan does absolutely nothing for people like us who have jumbo loans. We are in the same boat, we paid $2.5 for our home in January 2007, put in over $300k in improvements and now have a loan balance of $2.1 and our home value is probably $1.6 now. We can't sell...there aren't even very many loans available to buyers in this range. So we get to loose our house because of all this crap when we have more invested in our home than some people have even paid for their homes. We will be forced to rent after loosing about $1,000,000 of what we put down and into our home. My husband's income has dropped 70% due to the economy after 15 years of building his business. The business is now at risk of failing. Their revenue has been cut by 50% due to everyone scaling back. Sure take it from the people who own their own businesses and took a risk to get there. We have a baby too, now we won't have a home. We won't be able to get our lender to reduce our interest enough for us to make it. We ruin our credit and loose our home. It makes me sick.
By Tater,  Wed May 13 2009, 15:30
I believe the politicians accountable for allowing the banks and mortgage companies to break federal laws by use of predatory lending practices should be in prison. Let's start off with Acorn, LaRaza, Mr. and Mrs. Fienstein and so on. why should "working class americans" bite the bullet again. We're losing our retirement accounts, medicare and social security benefits not to mention the possibility of losing our homes because of their criminal acts. When do the people responsible for this CLUSTER pay for what they did?????????????
By Chanelle,  Wed Jun 3 2009, 19:57
i losed my home 2008 wat can i do if i want to perchase another home
By Chanelle,  Wed Jun 3 2009, 19:59
i want to buy instead of renting but i lost my home 2008 how can i go about it ,reson why we got rip off buy a morgage comp
By Seahorsey,  Mon Jul 6 2009, 13:00
I know so many people who have been denied refinance for various reasons, even when not deliquent & freddie/fanny backed loan, house value below what paying for house..... Someone should make a blog that has a map of us states where people could click on their state and leave a blog about how they DIDNT get refinanced or help. We cannot sell the home we bought less than 2 yrs ago due to the market here, yet we have to move due the bad job market here!
By Homeless,  Sun Oct 10 2010, 17:38
2 years ago my husband lost his construction job in AZ, he was able to find another job in retail making substantially less money. We decided to take advantage of the Obama mortgage modification program. We were granted a lower interest rate and a 40 year mortgage, our debt was not reduced. Now 2 years later, our house is worth $100,000 less than when we did the modification, and I have been transfered out of state with my job. We love our house in AZ and hope to return to it, so we have decided to rent it out, since we can't sell it due to the economy. When we went to buy a house in the new city, we were denied a new loan due the the modification we had received 2 years ago. So by not forclosing and not asking for the debt to be reduced we are still being punished. Had I not done the modification, moved bought a new house and just let the AZ house foreclose like everyone else, I would own a new house in my new state.
By Ronni,  Wed Feb 1 2012, 18:10
We have been trying to get Bank of America to refinance us since 2009 when ALL this started. Make a long story short went back to BofA . They stated they could take another look at are loan, as of today we are on a waiting list according to C/S number 55. I have asked to Refinance our 1st & 2nd at our owing balance and have not received an answer. WE are hoping this goes thru for us or will be heading to the streets!

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