By directing the GSEs to relax their eligibility requirements for refinancing, the Obama administration will increase the losses on the GSE portfolio and add to the final cost of the bailout.
Irvine Home Address … 54 CITY STROLL Irvine, CA 92620
Resale Home Price …… $537,375
.jpg)
I've been caught stealing;
once when I was 5…
I enjoy stealing.
It's just as simple as that.
Well, it's just a simple fact.
When I want something, and
I don't want to pay for it.
Jane's Addiction — Been Caught Stealing
Attention renters: the government is stealing from you and giving the money to the loan owners who occupy the houses they can't afford that you are waiting to buy.
Obama has succumb to the pressure from the extreme left that wants to give people free houses. Rather than take a courageous stand and say no to more bailouts and loan owner assistance, the Obama administration has decided to give loan owners a break, increase the taxpayer losses at the GSEs, and ask renters, prudent borrowers, and no-debt homeowners to pay the bill.
I think this policy really sucks.
The $85 billion in savings they are touting will be added to the billions of losses the government has already covered since taking over the GSEs. This is not a low-cost program. That $85 billion in revenue would have helped offset losses at the GSEs. Instead it will go to benefit banks and loan owners. That isn't the way I want my tax dollars squandered.
FHFA removes barriers to refinance more borrowers
by JON PRIOR — Monday, October 24th, 2011, 8:45 am.jpg)
The Federal Housing Finance Agency removed several key barriers to the Home Affordable Refinance Program Monday to allow more underwater borrowers to move into lower-rate mortgages.
HARP, which launched in March 2009, helped 838,000 Fannie Mae and Freddie Mac borrowers with loan-to-value ratios between 80% and 125% refinance. But roughly 7% of those held LTVs above 105%.
In order to assist more of the estimated 11 million borrowers who owe more on their mortgage than their home is worth, the FHFA removed the 125% LTV ceiling on the program.
I got an email from an appraiser right after this was announced. By removing the LTV restriction, the government is taking appraisers entirely out of the refinance transaction. Further, it basically says the value of the collateral doesn't matter. No matter how far underwater the owner is, they are eligible for the refinance. That doesn't sound like a good banking practice to me.
Of course, the servicing banks are happy, particularly BofA which will get a nice revenue boost from all the refinances.
The FHFA also eliminated certain risk-based fees borrowers had to pay and waived certain representation and warranty risk for lenders of the new, refinanced mortgage. An appraisal would also no longer be required if an automated valuation model estimate was already provided by the government-sponsored enterprise.
HARP was already extended earlier in the year, but the FHFA committed to pushing the program end date out even further to Dec. 31, 2013 for loans originally sold to the GSEs on or before May 31, 2009.
The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months, the FHFA said.
At least they are limiting this program to the people who have been paying their bills. I think most of these people should have strategically defaulted, but if they didn't, they are being rewarded for their actions. If this program had been opened up to delinquent mortgage squatters, it would have been outrageous.
Realistically, for the deeply underwater, this merely delays the inevitable. If you are living in Las Vegas, and you have a $300,000 mortgage on a $120,000 house, a refinance at a lower rate isn't going to help you much.
Mortgage insurers agreed to automatically transfer coverage from the old loan to the new loan, and servicers agreed to resubordinate second liens into the new refinanced mortgage.
Fannie and Freddie will release more specific operational details for servicers and lenders by Nov. 15.
The FHFA could not give a specific number of borrowers the revamped program could reach, but in its published frequently asked questions, the agency said the “the best estimate is that by the end of 2013 HARP refinances may roughly double or more from their current amount but such forward-looking projections are inherently uncertain.”
Considering all previous projections have been completely wrong, it is likely this won't reach that many people. And those it does reach will likely strategically default or short sell eventually.
“We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach,” said FHFA Acting Director Edward DeMarco. “Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.”
The CEOs for Fannie Mae or Freddie Mac both said the program would definitely reach more borrowers.
“By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates,” Fannie chief Michael Williams said. “While HARP is only one refinancing program, it is a critical one for those homeowners who may be underwater on their mortgage and facing difficult decisions during these tough economic times.”
It's only critical to the banks who are trying to fend off more strategic default.
“These changes mark another step on the road to recovery for the nation's housing market and underscore Freddie Mac's vital role in making affordable mortgage financing available to America's homeowners and future homebuyers,” said Freddie CEO Charles “Ed” Haldeman.
No, this marks another impediment to the recovery of the housing market and guarantees the inventory from the crash will be metered out over a longer period of time.
In a conference call with investors Monday morning, JPMorgan Chase analysts said the representation and warranty waivers would come through two key areas. Lenders would not be responsible for the original loan file and would also not will be held to new appraisal mistakes because of the AVM.
“We believe this is the most material of all the things they are doing,” analysts said.
It's hard not to become jaundiced with the way our government steals from us and gives money to those who are not deserving (if someone can make a compelling argument why loan owners should be bailed out, I am open to hear it). It really feels like the government is out to make sure anyone who avoided the housing bubble is being punished while those who foolishly participated are being rewarded. Loan owners are given the house while renters are given the bill.
Governments have been redistributing wealth since ancient times. Perhaps I should just accept this and fade quietly into the night. But I can't do that. I find so much of this irritating and outrageous, and I don't read many others who are pointing out the injustices. It's as if loan owners have control of the media and only their point of view matters. Perhaps someday I will feel differently. I guess I haven't picked up enough houses in Las Vegas yet.
New homes in Woodbury under $260/SF
One of the reasons Columbus Grove prices fell so far so fast was because the builder kept building and selling while mortgage financing dried up. It takes active and motivated sellers to push prices down quickly. Without their activities, prices drift down slowly and transaction volumes remain low.
Woodbury has fallen more since the crash than other neighborhoods that are not as nice. I live in Woodbury, and I really like it. I think it is one of the best Villages in Irvine. The only explanation I have for its weak price performance is the plethora of overextended borrowers from the bubble (most of Woodbury was built out during the peak of the housing bubble), and the ongoing activity of the Irvine Company as they try to build out the community.
The new product in Woodbury is selling for considerably less than most people realize. (Median US New Home Price Has Biggest 3 Month Drop Ever) Today's featured property is $259/SF. Remember when most of Woodbury was selling for north of $400/SF?
At this price, today's featured property has a reasonable cost of ownership (the Mello Roos is a guess). I have long maintained the problem with the new product offerings has largely been price. If prices on the new product remains this affordable, sales volumes ought to pick up. We will see.
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599
sales@idealhomebrokers.com
Irvine House Address … 54 CITY STROLL Irvine, CA 92620
Resale House Price …… $537,375
Beds: 3
Baths: 3
Sq. Ft.: 2074
$259/SF
Property Type: Residential, Condominium
Style: Two Level, Spanish
Year Built: 2011
Community: Woodbury
County: Orange
MLS#: S677619
Source: SoCalMLS
Status: Active
On Redfin: 3 days
——————————————————————————
This two story masterpiece lives like a single family residence! Downstairs, enjoy the attached two car garage, tech center, main floor bedroom and open living room, family room, kitchen combo. Upstairs, enjoy the large loft that be easily be a playroom or entertainment area, huge master retreat with walk in closet, dual sink bathroom and generous sized secondary bedroom. Fixtures include gourmet kitchen with granite countertops, stainless steel appliances and more! Design credit available to customize your flooring! Located in the desirable Village of Woodbury, just outside your door is shopping, parks, pools and more. One of the last opportunities to own a brand-new home in Wodbury. Charming motor courts provide access to oversized 2 car attached garages. Within walking distance to stores, restaurants, entertainment at Woodbury Town Center. Less than two miles from the I-5 and the 133 Toll Road.
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis 
Resale Home Price …… $537,375
Cost of Home Ownership
————————————————-
$537,375 ………. Asking Price
$107,475 ………. 20% Down Conventional
4.18% …………… Mortgage Interest Rate
$429,900 ………. 30-Year Mortgage
$122,824 ………. Income Requirement
$2,097 ………. Monthly Mortgage Payment
$466 ………. Property Tax (@1.04%)
$200 ………. Special Taxes and Levies (Mello Roos)
$112 ………. Homeowners Insurance (@ 0.25%)
$0 ………. Private Mortgage Insurance
$298 ………. Homeowners Association Fees
============================================
$3,173 ………. Monthly Cash Outlays
-$344 ………. Tax Savings (% of Interest and Property Tax)
-$600 ………. Equity Hidden in Payment (Amortization)
$160 ………. Lost Income to Down Payment (net of taxes)
$87 ………. Maintenance and Replacement Reserves
============================================
$2,477 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$5,374 ………. Furnishing and Move In @1%
$5,374 ………. Closing Costs @1%
$4,299 ………… Interest Points @1% of Loan
$107,475 ………. Down Payment
============================================
$122,522 ………. Total Cash Costs
$37,900 ………… Emergency Cash Reserves
============================================
$160,422 ………. Total Savings Needed
——————————————————————————————————————————————————-
I’m not usually a fan of programs like this, but I think it will be a lot more effective than you think, and will not impact potential strategic defaulters as much as you think. From the research on strategic default, one of the key indicators of whether someone will strategically default is the presence of other defaults in the neighborhood. The other is being deeply underwater. Those two factors lead to strategic-default to be a very bubble area centered phenomena.
I think you are right that people who are deeply underwater will not use this program. Often, even with the refi their costs will be above renting. However, there is a large part of the country where a 25% or so reduction in payments (going from a 6% loan to 4%) is huge. Also, these homes may in shallow water – 10-20% underwater (possibly they made a 10% DP and the home has fallen 20% in price). The other option, that is also part of the program, is keeping payments constant, but reducing the term of the loan – move a 6% 30yrFRM to a sub-4% 15yrFRM. Sure they are underwater, but you can keep payments nearly constant and they will generate 20% equity on their own in less than 5 years.
This program has the potential to help millions, but will not help many in the areas hardest hit by foreclosure (bubble areas). However, politically, there are a lot more states hit by the malaise of the recession than by the acute housing bubble. Those that might be angriest about this are GSE bondholders, but without gov intervention, they would be in much worse shape overall, so they really should not complain.
This is almost certainly correct. On the surface I might agree with IR, but he makes an assumption (maybe not even concisously) that I think is unwarranted. That assumption is that the GSE will aggressively put-back defective loans. But I firmly believe the message that Sec. Geithner delivered 12/24/09 was that they would not be doing this. So the GSE’s will end up guaranteeing a portfolio where some fraction of it is now down to 4% (or lower if the Fed buys a lot of MBS, which is a different issue, but is possible) from the 6% area. And exactly as said above, borrowers in a not too horrible position will have their incentives to default reduced.
And if you can’t trust Timothy Geithner, who CAN you trust?
After all, he’s shown a steadfast willingness to disregard the wishes of his financial overlord cronies and stand up for the common man.
I think he’s related to Gandhi!
“Governments have been redistributing wealth since ancient times. Perhaps I should just accept this and fade quietly into the night. But I can’t do that. I find so much of this irritating and outrageous, and I don’t read many others who are pointing out the injustices.”
IR, maybe we are seeing this kind of occurrence muted in all mediums because the typical redistribution storyline is when money or a privilege is taken away from the upper class and given to the lower class (the Robin Hood syndrome), so it’s hard to play the sympathy bit for those who already have much, even when it truly isn’t wealth extorted at the expense of the poor. In this case, however, the renter population, which is typically the middle to lower class, is the one who is getting screwed with these kind of policies. The problem is that because responsible homedebtors and true homeowners are also part of the group of people being screwed over, those two categories of people are generally upper-middle class and generally have substantial tangible assets already. It’s kind of a sentiment of “well, they already have their lot in life taken care of, so who cares if we take a little more away from them.” It’s always easier to inflate the value of a dollar than to outright steal a dollar out of someone’s hand, because the passive act can go unnoticed so easily.
I just don’t think we’re hearing much about the phenomenon you are describing because it takes a bit of logic and research to realize the scheme involved, and most sheeple are too dumb to realize they’re being fleeced. For example, try explaining to your average joe why making extra principal payments on their 5% home mortgage is a better investment than paying that same money into a CD yielding only 0.5% return, and you only get a blank stare.
…Try explaining to your average joe why making extra principal payments on their 5% home mortgage is a better investment than paying that same money into a CD yielding only 0.5% return…
No kidding.
Whats even more amazing is how many average Joes don’t even understand the *concept* of percent.
The general lack of math literacy in this country is beyond ridiculous. No wonder so many people are hopelessly in debt and will never recover.
Not to mention a very well known Sunday Financial talk show host is against the idea of early mortgage pay down, pushing stocks instead.
Ah, the unutterable essence of American cluelessness.
Fond memories of utter blockheadness flood into my mind from my days as a mathematics TA. Particularly the student who waved me over during a calculus final – 2nd semester calculus, that is – and asked me earnestly: “Could you tell me the formula for the area of a rectangle?”
Or the cashier who broke down when I presented my 20% off coupon for my $2.00 order, flailing her arms at her manager: “What’s 10% of $2 – I don’t do percents!”
I was in South Carolina a few years ago and after pumping $10.25 of gas into my car, I went in to pay. I gave the girl a $20 which she typed into the register and saw that she owed me $9.75. I pulled a quarter out of my pocket so she could just give me a $10 but she looked at it quizzically, put $9.75 on the counter, placed my quarter on top of the pile of cash and coins, and slid it all back to me. Genius.
I’m fine with HARP. If you accept the position we (taxpayers) are in, then it’s a reasonable plan. We already own every GSE-backed loan. If we can refinance many of the underwater loans we already own and minimize our losses, why wouldn’t we?
As IR stated, this may not be the best deal for most underwater homeowners, but that has to be evaluated on a case-by-case basis.
Now I want “HARP-3” – Allow the GSEs to use current underwriting standards to refinance qualified borrowers currently in underwater non-GSE loans. The only deviation from current underwriting guidelines would be with the LTV.
Here’s how the GSEs could take on the risk of refinancing underwater loans they don’t currently own, while charging for the risk:
If you refinance with an LTV of 120%, then you’ll pay 200 bps MI until the LTV drops to 115%, at which point the MI will drop to 175 bps.
If you refinance with an LTV of 115%, then you’ll pay 175 bps MI until the LTV drops to 150%, at which point the MI will drop to 150 bps.
If you refinance with an LTV of 110%, then you’ll pay 150 bps MI until the LTV drops to 105%, at which point the MI will drop to 125 bps.
If you refinance with an LTV of 105%, then you’ll pay 125 bps MI until the LTV drops to 100%, at which point the MI will drop to 100 bps.
The examples above assume a 30Y fixed-rate mortgage. If you choose a 15Y refinance, then the MI should be half of the above examples.
What amazes me most about this program is that it creates two completely separate refi markets. You have the regular one for the “typical” households with bank lans and then this wild west no questions asked no fees approach for under water loanowners. Or am I missing something? Who will ultimately decide if you can qualify for a forced no appraisal refi, as long as your loan is backed by the government? I’ve heard bank-backed loans may start a similar program, but that will add even more confusion to our already ridiculous situation.
Jeepers, what is so hard to understand about this? The GSEs have already guaranteed these loans. We, the taxpayers, own the GSEs. The fact that the LTV is imprudently high for a normal re-fi is irrelevent since either the borrower pays or we pay. If it is made easier for borrowers to pay and some subpopulation of such borrowers pay instead of default, we, the taxpayers are ahead. I suppose you could fantasize about a world where the GSEs put-back $700B of lousy loans, but in a more realistic world this is okay.
e.g. A family with a house worth $400K and a mortgage at $500K with 25 years left at 6.5% and a $3,160 payment would have these HARP-3 refinance options:
1. Bring $20K cash to the closing financing $480K @ 4% for 30Y for a $2,292 payment + $800 monthly MI for an initial total payment of $3,092; or
2. Bring $40K cash to the closing financing $460K @ 4% for 30Y for a $2,196 payment + $671 monthly MI for an initial total payment of $2,867; or
3. Bring $60K cash to the closing financing $440K @ 4% for 30Y for a $2,101 payment + $550 monthly MI for an initial total payment of $2,651; or
4. Bring $80K cash to the closing financing $420K @ 4% for 30Y for a $2,005 payment + $437 monthly MI for an initial total payment of $2,442; or
5. Bring $50K cash to the closing financing $450K @ 3.5% for 15Y for a $3,217 payment + $281 monthly MI for an initial total payment of $3,498. This increases their payment $338, but dramatically reduces their principal each month going forward.
Another total failure by Obama and his team to recognize that foreclosure and bankruptcy are actually the droids they’re looking for.
These are “solutions” to be embraced, not avoided or “kicked down the road” for every 3 and 4 year old kid to pay off. Instead denial and delay continue to be embraced as solutions with disregard for the consequences.
The US economy cannot wait for anymore for debt reduction, spending/entitlement cuts, and greater rewards to save in order to drive future capital investment.
This forgiveness policy drives US debt even higher and destroys the rules of contracts. He’s getting poor advice on economic policy, but this is all common sense so what’s the excuse?
My God lambs to the slaughter!
This is by far the cruellest underhanded program this government has ever come out with.
Even with a sub 4% loan these people will still struggle with abnormally large payments and, obviously, continue to over pay for a house they’ll lose money on in the end.
The government should take the role to guide it’s citizen’s into making responsible financial decisions. NOT come out with programs like these to simply benefit the banks.
Even at 4%, a payment on a $300,000 mortgage is hundreds of dollars more a month than at 6% on a $150,000 loan.
I didn’t agree with strategic default in the past but from what I’ve learned on this blog these folks would be better off saving their house payments until they get kicked out after a year or two. They could then buy another place if they want after three years in the penalty box.
…and just one of the nice outcomes is more more disposable income to pump into this failing economy!!
We need jobs NOT underhanded government programs to shift more money to the banks at the expense of the tax payers and the suckers they sign into this program!!!
I’d say the cruelest plan ever was paying women not to work indefinitely and paying them more for every additional child. I can think of no better way to encourage early and often pregnancies and entrench poverty for generations.
Except in countries like Japan where the birth rate is negative, the population is aging and shrinking and they need to replace people.
We are not in that situation yet as our population is still growing.
Mussolini was a dictator – we voted these fools in
Irvine Co.’s Bren wins urban planning award
http://lansner.ocregister.com/2011/10/27/donald-bren/140153/
Let’s simpify this:
It’s all a zero sum Game, the Banks want to get bad Loans off their Books so they can have a fresh start,let’s just forget that those fictitious profits during the good days ever happened… what happened to the $180 BILLION ( and counting)wasted trying to prop up the Banks and Property values has cost the Taxpayer (You and I) so far?
Despite the $180Bn which has vanished, Property values are still declining, millions are still under water, Renters who are willing and able to buy are terrified to do so.
How much is this hair brained HARP scheme going to cost us? If it doesn’t work can we start a class action suit against them for defrauding us? Issue a notice to perform signed by every one of the 99% er’s ?. How do we hold “them” accountable as Individuals?
It’s time for a lobby representing renters and responsible homeowners: something like “The Coalition of Solvent Families.”
And, no, the word “family” is not optional: I am completely inflexible on this point!
I fear the harm that a strong renter’s lobby can inflict – consider Manhattan – but an end to both the mortgage interest deduction and all government presence in residential lending should appeal to the self-interest of a substantial part of the population – sorry, a substantial number of families – as well as a basic sense of simplicity and fair play among the population as a whole.
“It’s Your Family’s Money”, “Tax Deductions for Borrowers Pull Food from the Mouth of Your Child”, and “Bad Flipper: No Mercedes!” should fit nicely on bumper stickers.
“It’s a Child’s Home, not a Financial Instrument!”
Families refused to surf the bubble with their children’s future. Are free-market prices too much to ask for our families and children?
Obama provides a stealth bailout to loan owners and the Massachusetts Supreme Judicial Court opens the door for a not so stealth bailout to former loan owners.
Has anyone taken a close look at the ruling in the FRANCIS J. BEVILACQUA, THIRD vs. PABLO RODRIGUEZ case yet?
I’ve only given it a quick perusal, but I gathered enough to realize I’m really glad I haven’t purchased a foreclosure in Massachusetts recently.
I hope the nonsense doesn’t spread, I fear it might.
Bevilacqua v Rodriquez…Bevilacqua didn’t buy a foreclosure, he bought a fraud and it wasn’t Rodriquez’s fraud. It is no bailout of Rodriguez (or any other debtor) that the party who might have exercised foreclosure in response to a default has to proceed in accordance with property laws. It isn’t like the law is unbelieveably complex either, rather people took dumb shortcuts to save a few dollars. Bevilacqua has a case, but not with Rodriguez.
The real purpose of this program is to switch non-recourse loans to recourse and perfect title for lenders on loans for which they may find difficulty proving. Any of you who think government programs are for the benefit of the taxpayer or homeowners or …, are the people in the room who don’t know who the suckers are. Government programs involving loans are written for the benfit of the banks. Think for a second. Hasn’t every government program that has been started to supposedly help the homeowner really just benefitted the banks?
It is a stealth bailout for the banks, not the homedebtors.
BHO’s plan is brilliant!
He is recapturing the left with the refinance plan and getting the banks off the hook for all the bad loans.
1. The refinancing will help the borrowers lower payments for a year or more. Most will be foreclosed, but that will be after the elections.
2. “In a conference call with investors Monday morning, JPMorgan Chase analysts said the representation and warranty waivers would come through two key areas. Lenders would not be responsible for the original loan file and would also not will be held to new appraisal mistakes because of the AVM.” That will get rid of the banks’ liability for the bad loans, because the refin will payoff the loan and the refin will be good loans that be the federal govt responsibility (liabilities). The banksters will be pleased.
3. The politicans, banksters, far left to moderate leftist, RE industry, far right, and borrower will be pleased. Only ones to get shafted are the savers, renters and future taxpayers.
The motto of “we’re doing for the children” has become we’re doing it to the children”.
This part looks to be yet another boon to the banksters, a way to transform loans w/legal liabilities to the GSEs to loans w/o those liabilities, at (of course) taxpayer expense. DDay at Firedoglake had a good post on this a few days ago.
&
I want to thank you and awgee for pointing out how the banks are benefiting from this. I should have explored that angle more thoroughly in my post.
Nah, you found the original story & wrote the post. Should you ‘miss’ something it’s your astute observers duty to make the fine points. Why else would you encourage comments?
> This two story masterpiece …
Is it a condo, or a freaking Rembrandt?
Here’s a clue … the Rembrandt is the one that goes up in value. 😉
Attention renters: the government is stealing from you and giving the money to the loan owners who occupy the houses they can’t afford that you are waiting to buy.
=====================================
You’re just figuring this out? I have been running this exact flag up the pole for 3 years.
There’s another part to it, which is particularly insidious. If you apply for this ‘new’ refinancing and get it, you sign away your rights on any future legal action against the loan holder, regardless of how egregious their actions.
Interesting how droolingly eager the government is, to not only prop up RE prices and backstop all the garbage financial instruments of mass global destruction, but also to encourage continuing moral hazard on the part of lenders. Why be sensible when you can do – literally – any asinine thing you want with other people’s money and never face the consequences? Regulations preventing your gambling addiction? Why, just go buy yourself new legislation overturning the regs! Corporations are People, dontcha know.
Most of the zombie institutions have already paid their required settlement bribes to the SEC to avoid prosecution and wipe the legal slate clean, and it paid off for them in spades. Steal a trillion, pay x-billion as a settlement without having to admit guilt…PROFIT!
This is unlikely to ever end, I fear. Especially not with those on capitol hill claiming the banks didn’t do anything illegal. Actually, they did…and the easy proof is in the settlements themselves. No illegalities = no settlement, and certainly no need to write in language on refinance agreements, which dissolve the rights of the borrower to take legal action against the loan holders.
Recourse loans, Just Say No, to debt slavery. Default, jam it in the arse of the financial sector, and do yourself a favor atthe same time by losing debt.
Remember folks, after 2012, you will get a tax bill after default, so default now and save yourself the hassle from the government that sucks….ours.
Agreed. Remember, the Obama goal is one and the same as that of the banks – create debt slaves.
A population of indentured servants is a hard working group, going to work dawn ’til dusk in the futile hope of freedom, at least until the guns (or pitchforks, if they can successfully take the guns) come out.