An August Surprise from Obama?

[thundley4]

That should be bribe, I think.

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:

1) Republican leaders believe this is going to happen since GOPers and Democratic moderates in the Senate are unwilling to spend more taxpayer money on more stimulus. But such a housing plan would allow the White House to sidestep congressional objections and show voters it is doing something tangible about an economy that seems to be weakening.

2) Wall Street banks are alerting their clients privately to this possibility. Here is what some are cautiously saying publicly. This from Goldman Sachs:

GSE policies are one of a dwindling number of policy levers the administration has left to pull, so it is conceivable that changes could be made, though there is no sign that a policy change is imminent. The Treasury’s essentially unlimited ability to provide financial support to the GSEs creates an interesting situation over the next twelve months: the GSEs could potentially be used to provide additional support for the housing market and, to a lesser extent, the broader economy in 2H 2001.

And this from Mizuho Securities:

As policy makers ponder their next move the data suggests that they face not only a stalling recovery but a growing risk of deflation taking root in the economy. As a result, the Administration has turned back to industrial policies by approving the purchase of a sub-prime auto lender by GM as a means for pumping  up domestic sales, especially since the latest auto sales data indicates that consumers are still responsive to incentives. This precedent increases the risk that the government will use its control of Fannie and Freddie to increase consumer cash flow and juice the economy again.

http://blogs.reuters.com/drudge.html

[DefiantSix]

Yup.  He's pulling exactly (well, not EXACTLY, but awfully damned similar) what FDR did in the 1934 mid-terms in order to buy votes for his beleaguered Congress-shits.

The 1934 mid-terms didn't turn out as well for the Republicans as all the "conventional wisdom" was expecting (they were damned lucky to hold onto what they had).  The RINO cocksuckers running the Republican party into the ground this time had better realize that they need to make a fight of it if they don't want to lose even more seats in Congress come November.

[debk]

In one of the many industry things I get every month....there was an article on the number of homeowners who had applied for mortgage assistance, that the banks/lenders were "supposedly" helping. It was giving the numbers of those who had applied and the percentage of how many were helped and how many weren't. The percentage of those who were actually helped was in the 20's.

It reported that some 230,000 homeowners, facing foreclosure, that had applied for mortgage assistance (refinancing, decreasing the interest rate, extending the life of the loan) were all that had been helped out of the millions of applications. Most of the others were having their foreclosures processed.

For those thousands upon thousands of homeowners, it's too late for any help from Frannie or Freddie. That's a whole lot of votes...particularly if there are 2 voters or more per household.

[JohnnyReb]

Ain't Obama still sitting on about of the stimulus money?  Maybe this is what he's been saving it for....buying votes.

I own 2 houses....wonder if I can get a partial refund on the purchases?...yeah, that's what I thought the answer would be.

[DefiantSix]

Ain't Obama still sitting on about of the stimulus money?  Maybe this is what he's been saving it for....buying votes.

I own 2 houses....wonder if I can get a partial refund on the purchases?...yeah, that's what I thought the answer would be.

That's exactly what he's been saving the 'stimulus' money for.   To stimulate folks to vote for Dim'rats.

[thundley4]

That's exactly what he's been saving the 'stimulus' money for.   To stimulate folks to vote for Dim'rats.

Nope, that money is being saved for 2012 to bribe the voters to reelect him. 

[DefiantSix]

Nope, that money is being saved for 2012 to bribe the voters to reelect him. 

The 'stimulus' - TARP included - is over a TRILLION dollars of borrowed money.  He could buy every voter in 2010 a house with that money, and still have enough to bribe the DUmbshits in 2012.

[debk]

Ain't Obama still sitting on about of the stimulus money?  Maybe this is what he's been saving it for....buying votes.

I own 2 houses....wonder if I can get a partial refund on the purchases?...yeah, that's what I thought the answer would be.

Yes, he's been sitting on a ton of it.

Part of the problem with the mortgages is, that even though the banks/lenders were told to help people in trouble...they didn't/haven't.

Many, many people could have been helped in a variety of ways.
1)by reducing the interest rate on their loans, for a specified period of time
2)adding the missed payments onto the back end of the loan
3)accepting interest only payments for a specified period of time, but keeping the principle the same.
4)permanently reducing the interest rate
5)significantly reducing the monthly payment, with the difference tacked onto the total amount due
6)extend the "life" of the loan to 40 or 50 years. (while this sounds extreme, it isn't. as statistically, the average
   in a home is less than 10 years, as people move up, out, divorce, die, transfer, etc.)

Any of the above things could have been done by banks/lenders for the last few years for thousands of people.

But they didn't. As a result, we are in this huge housing crisis.

This is what has happened instead....

1)2 or more foreclosures in a subdivision, or in a half mile proximity in an urban area, up to 3 miles in suburban,
   20 in a rural....affects every single home in that circle!! it can be devastating to a subdivision.
2)a foreclosure is usually listed at 20-50% LESS than the average value of the homes surrounding it (based on
   the above radius)
3)2 or more foreclosures within the circle, will force a fair-market resale to be priced lower in order to sell, or the
   seller must be prepared for the property to sit on the market for an extended period of time.
4)2 or more foreclosure sales within the circle, will reduce the average value - per square foot - of the
   surrounding properties and obtainable sales prices for fair market homes.

Because of the above...this situation is created.

A buyer goes into a subdivision, and there are 4 houses on the market....2 fair market sales - 1 is a transfer
out of the area, estate sale, or divorce sale. The other is someone who has found a "move up" house to move to.
both are in average condition. the other 2 are foreclosures. one in average condition, the other needing 30%
of what would be a fair market price. The first foreclosure is listed at 80% of fair market value, the other one
is an additional 30% less than the first.

(I'm going to try the math on this....math is not my friend)

For example:

4 houses in a planned subdivision. Each house is 2500SF give or take 50. House values in the subdivision, based on prior sales, have historically been in the $225,000 to $250,000 - PRIOR to 2 foreclosures appearing in the subdivision. Resale prices have been between $90 and $100 per square foot.

Fair market house 1 is $225,000, because of the circumstances, needs to price low, for a fairly quick sale. Homeowner is getting a divorce and the court orders the house sold, profits split. Divorce isn't final until house is sold. House is in average condition, decorated to homeowner's preference. ($90/SF)

Fair market house 2, is $235,000 because seller needs all the money they can get for the "move up" purchase. They only have 3 months to sell, or they lose the "move up" house. House is in average condition, but seller has painted the interior to all neutral colors, spruced up the landscaping, painted the trim, put tile on the bathroom floors, and some other "do it yourself" inexpensive things to aid in the desireability of the house. ($94/SF)

Foreclosure 1 is in average condition. Homeowner didn't trash it before leaving, but decor is to former seller's preference, all bank has done is surface clean prior to listing, and minimal maintaining of yard. Since the other two houses are listed at 90 and 94 per square foot, the bank will take the lower amount, and knock 20% off for hopefully a 30-day "quick sale". It's listed for $180,000. ($72/SF)

Foreclosure 2 is a mess. Built in appliances gone, holes in walls, light fixtures gone, HVAC system (outside) has disappeared....damage cost to repair is averaged at $22,000, based on "opinions" from 3 realtors. Average of realtors opinion is factored in, bank lists it for $155,000. AND it qualifies for a Home Path Renovation Loan. ($62/SF)

If the buyer is qualified to $250,000, which house do you think they will buy? Which house would you buy?

Chances are, the bank will take as much as 10% less, maybe more, depending on how many homes are currently listed within a half mile of the foreclosure. Plus they guarantee 3%, or more, commission to the buyer's agent.

Most buyers will opt for foreclosure 1. They save enough money to redecorate. Ambitious buyers, will take foreclosure 2, redo it to their personal preference, with the renovation loan.  

Fair market house 1? They are going to continue to lower their price as much as they can, in order to get out of the house and settle the divorce. If they can't sell, they can't finish up the divorce. Obviously they have options - rent or quit claim. Or in today's market, they end up doing a short sale. Which is not as bad as a foreclosure, but because a short sale is less expensive to do than a foreclosure, the bank/lender may still sell the property at a foreclosure price in order to save some money and recover as much of their money as possible.

Fair market house 2? Yeah...it's been on the market 120 days, can't reduce the price or they won't get the "move up", they either continue to try and sell...or take it off the market. And hope the housing market puts their house value back up in a couple of years.

Obviously sold prices, that have occurred in the last 180 days are a large influence in how a foreclosure house is priced. However, even if both foreclosures and FMH 1 close at list price, the average price per SF for the subdivision has come down.

Take an area with 10-20% of current lists are foreclosures, 20-30% of sales over the last 180 days, or longer, are foreclosures, housing market tumbles, and many people who want to sell their homes (at fair market) can't sell them for what they paid for them 5 years ago.

The stimulus money was signed in almost 2 years ago....not only was it not used to help the majority of people in trouble, there was a way to significantly slow the continuing housing crash by the banks/lenders doing any of the options I listed at the top, and they wouldn't have needed to use the stimulus money to do them. Instead, they took the money, helped their institutions have a better bottom line, by foreclosing, selling the properties at an even greater loss, and getting the tax benefit on their profit/loss statements.


I know this is long....but the whole thing really pisses me off.

F'n Obama will use the whole mess to recover the housing market to make himself look good and make a bunch of people think he is a "savior" of their homes. 


                                          

[thundley4]

Deb, a question. I have read many different articles and blogs claiming that the "help" offered so far by Obama has only managed to delay foreclosures, but not stop them. Is that true from what you've seen?

[debk]

Deb, a question. I have read many different articles and blogs claiming that the "help" offered so far by Obama has only managed to delay foreclosures, but not stop them. Is that true from what you've seen?

In the last 2.5 yrs, out of all the ones that I know that have been in trouble, I've had to personally evict (which is just beyond horrible) and I'm not talking about the 4 renters - which is even worse because they were paying their rent, and was occupied by the homeowner (some have already left when I get the house)...and talked to them quite a bit, all but one have tried to work it out with the bank/lender. They all thought the lenders were working with them, until I've either shown up at their door or reached them on the phone, and that's how several have found out they weren't being helped. They had filled out hardship papers, a couple had even sent money with the papers, and I show up and tell them their house was sold on the courthouse steps a few days before.

The lone one that I don't know what he was trying to do, was very nasty to me...and as it was not a very safe situation for me to be in...I didn't go back, I just told the bank to do whatever they had to do. I was not going back. He had recently been shot, I was not sure if he had a gun, but I don't make enough money to risk myself getting shot.

I would say that at least 75% of the reports that I do, the houses are foreclosed, because I see them in the paper. I personally do anywhere between 20 and 40 reports a month. I don't know how many agents within my mls board do the reports also. I do know there are several in my office that do, and my company has over 600 agents in 5 offices, and each office has at least 1 or 2 agents that do these. Add all those reports up, and that's an awful lot of property going into foreclosure.

I only know one person that has applied for help to their lender - I think it's Fifth Third Bank....and they applied before they missed any payments, right when the husband lost his job. Their interest rate was reduced, I think for 5 years. The amount of money they borrowed has not been reduced, and because they hadn't missed any payments, there is nothing to "tack" on to the back of the loan. Because the interest rate was reduced, it lowered their payments quite a bit, and I think for a year or two, it's interest only payments. There was no government assistance in this process, they just asked the bank to consider restructuring their loan.

While there haven't been any foreclosures in their neighborhood, a couple of sellers, basically "dumped" their houses as one was building a new house, and the other was transferred. Because of that, their house is down $50-75,000!!! from 3 years ago. At this time, they have no plans to move, so they are hoping the market is back up before the interest rate changes in 5 years.

I don't know of anyone, who has applied for government assistance, and received it. That does NOT mean that no one in this area has been helped...but if they have...I haven't read anything about a significant number who have been helped. If there had been a lot, it would have been published in at least one of the umpteen newsletters that I get from local, state, and national real estate associations, lenders that are sending stuff out all the time, or any of the other stuff I get.

I read in one of them the other day, that home ownership is on a steep decrease. That it had been on a yearly rise since WWII, and I think 2009 was the first year there was a decline. The article said that it's possible, we will never see the number back to where it was, but the hope was it would get back up to where it was 5 years ago, somewhere between 10 to 20 YEARS!!!

I did just get an email from a lender in Nashville today. FHA is taking mortgage applications for those with a credit score of 580. FHA loans allow a great ratio of debt to income than conventional loans do. Guess the government decided it was better to lower the score and allow more people to get themselves into a potentially precarious mortgage situation, than keep all these houses sitting empty.

[NHSparky]

580?  AYFKM?  I was sweating a 100 percent finance on my own when I bought my house almost 4 years ago because I had "only" a 720.  It's not anywhere near that now, but I could still buy my own house with a 580, which I know I'm above?

Amazing.  Simply amazing.  People who can't qualify for new car loans are getting mortgages again. 

[debk]

580?  AYFKM?  I was sweating a 100 percent finance on my own when I bought my house almost 4 years ago because I had "only" a 720.  It's not anywhere near that now, but I could still buy my own house with a 580, which I know I'm above?

Amazing.  Simply amazing.  People who can't qualify for new car loans are getting mortgages again. 

Surprised me too.

The same lender also said, investors are allowed to have 10 property loans. Most investors have been lucky to have 7 for the last couple of years. It hasn't been 10 properties for at least 3 years. The only reason I can see for raising this number, is that there are so many foreclosures...which are obviously cheaper to buy, and there is an abundance of people who are looking for places to live that have lost their homes, and investors can rent their properties for more than their monthly payments.

People who have had a foreclosure, have a very difficult time ever getting another home loan, even though with a bankruptcy, one can get a mortgage after 2 years. They also have a very hard time passing a credit check for rentals, particularly one that's run by a property management company. This is often very unfair, as though they might not have been able to pay a high mortgage payment, they often can pay a lower rental payment quite easily.

[true_blood]

Amazing.  Simply amazing.  People who can't qualify for new car loans are getting mortgages again. 

Yup! You're right, it is amazing and mind boggling.
The goal of this administration, collapse the system! Here we go again!