More Government Housing Shenanigans

[CycloWizard]

I saw a billboard advertising MakingHomeAffordable.gov and decided to see how my money was being given to irresponsible homeowners this time. There are too many programs to list here, but here are a few that I find particularly endearing:

Principal Reduction Alternative (PRA)

Eligibility
You may be eligible for PRA if:

• Your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.
• You owe more than your home is worth.
• You live in the home carrying the mortgage you want to modify.
• You obtained your mortgage on or before January 1, 2009.
• Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
• You owe up to $729,750 on your 1st mortgage.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

So, to qualify for this program, you must have bought a house which is far too expensive for you (>31% of your income for payments), must owe more than your home is worth, and must be behind in payments. Those all sound like behaviors that government should be rewarding.

Home Affordable Foreclosure Alternatives (HAFA) Program

If your mortgage payment is unaffordable and you are interested in transitioning to more affordable housing, you may be eligible for a short sale or deed-in-lieu of foreclosure through HAFA. The benefit of a HAFA short sale is that you are no longer responsible for the difference between what you owe on your mortgage and the amount that your home sells for. You will also receive $3,000 in relocation assistance upon successful closing of your short sale or deed-in-lieu of foreclosure.

Eligibility
You may be eligible to apply if you meet all of the following:

• You live in the home or have lived there in the last 12 months.
• You have a documented financial hardship.
• You have not purchased a new house within the last 12 months.
• Your first mortgage is less than $729,750.
• You obtained your mortgage on or before January 1, 2009.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

If you can't be bothered to pay off your house, but don't want to deal with the stigma of foreclosure, the government (read: the rest of us) will actually pay for you to move somewhere else and clean up your mess for you.

HUD Emergency Homeowners' Loan Program (EHLP)

The EHLP is designed to provide mortgage payment relief to eligible homeowners experiencing a drop in income of at least 15% directly resulting from involuntary unemployment or underemployment due to adverse economic conditions and/or a medical emergency. Other EHLP eligibility requirements include:

• Income Limit: Applicant has a total household income equal to, or less than, the greater of either $75,000 or 120 percent of the Area Median Income (AMI) for a household size of four (4) persons previous to loss of income resulting from involuntary unemployment, underemployment, and/or medical emergency/serious injury.
• Delinquency: Applicant must be at least three months delinquent on mortgage payments, as signified by notification by their lender/servicer.
• Likelihood of Foreclosure: Applicant must have received notification of their lender's/servicer's intention to foreclose on their mortgage as a result of the delinquency, and must also certify to the likelihood that their mortgage will be foreclosed upon.
• Ability to Resume Payment: Applicant can be determined to have a reasonable likelihood of being able to resume repayment of the first mortgage obligations within 2 years, and meet other housing expenses and debt obligations when the household income rises above 85% of the previous level.
• Principal Residence: Applicant must reside in the mortgaged property as their principal residence, both at time of application and for the duration of the program loan period. The mortgaged property must also be a single family residence (1 to 4 unit structure or condominium unit).

I like this one because my wife and I would qualify if I made 2% less last year... and didn't pay my mortgage for a few months. Since I make more than the threshold value and pay my bills, I simply get the pleasure of paying for someone else's mortgage.

This is the heart of big-government insanity: rewarding people for negative behaviors. If I want to buy a new house after saving for years, I have to pay more because people who aren't saving get assistance from HUD/FHA, and now I will be the only fool on the block paying the full amount the house costs because the requirement to get government help is simply not paying your bill and buying too much house.

 

[a777pilot]

Just another example of the government picking winners and losers in the market place. Ya, like the government how's anything about the free market place. LOL!

I would rather have the government keep the tax breaks for those with jets than these folk.

This is sort of like not keeping score during the game so everyone feels good about themselves. All but those of us that have to pay for this shit!

 

[boomerang]

Bring it on. We're headed for collapse regardless. I think it's better to get it over as quickly as possible instead of drawing it out.

Holder Launches Witch Hunt Against Biased Banks

No Job, No Problem

Settlements include setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit and even counting "public assistance" as valid income in mortgage applications.

In several cases, the government has ordered bank defendants to post in all their branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps.

This all has a familiar ring to it, doesn't it?

 

[Thump553]

If PRA is what I am thinking it is (just put a client through it) what happens is the principal is reduced to the current FMV of the property but it is not forgiven. When you sell (or refinance) you must pay back three quarters of the difference between the sales price (FMV) and the adjusted principal balance until all the "forgiven" principal is paid back. That's nowhere near the giveaway program the OP's posting suggests-it basically is an incentive to keep underwater homeowners from walking away now. It's a win-win solution to a lousy situation. The lender/govt win because otherwise homeowners walk away now, all the balance above current FMV is lost, more REO properties on the market depressing prices and recovery further, etc.


Just like many government programs, if Faux News or the like gives you half the story you're bound to be outraged. When you know all the facts, no outrage.

 

[boomerang]

If PRA is what I am thinking it is (just put a client through it) what happens is the principal is reduced to the current FMV of the property but it is not forgiven. When you sell (or refinance) you must pay back three quarters of the difference between the sales price (FMV) and the adjusted principal balance until all the "forgiven" principal is paid back. That's nowhere near the giveaway program the OP's posting suggests-it basically is an incentive to keep underwater homeowners from walking away now. It's a win-win solution to a lousy situation. The lender/govt win because otherwise homeowners walk away now, all the balance above current FMV is lost, more REO properties on the market depressing prices and recovery further, etc.


Just like many government programs, if Faux News or the like gives you half the story you're bound to be outraged. When you know all the facts, no outrage.

Let's see some links...

 

[AnonymouseUser]

I wish people would stop blaming each other for the housing mess, and look at the real criminals here - the banks.

The banks took advantage of many homeowners knowing they couldn't pay, forcing many of them into sub-prime mortgages because the profits were higher and the loans were guaranteed by the gov. Once the housing crash occurred, they then took advantage of everyone else (taxpayers) by giving themselves massive low-interest loans (bailout), threatening to crash the entire system if they didn't get what they wanted.

Now the original victims are given a small bailout, and you want to go after them with pitchforks, but guess what? The banks are the real winners yet again. These bailouts help the banks just as much as it does the homeowners, yet nobody sees it that way.

Please redirect your anger in the proper direction and stop hating your neighbors.

 

[Robor]

I wish people would stop blaming each other for the housing mess, and look at the real criminals here - the banks.

The banks took advantage of many homeowners knowing they couldn't pay, forcing many of them into sub-prime mortgages because the profits were higher and the loans were guaranteed by the gov. Once the housing crash occurred, they then took advantage of everyone else (taxpayers) by giving themselves massive low-interest loans (bailout), threatening to crash the entire system if they didn't get what they wanted.

Now the original victims are given a small bailout, and you want to go after them with pitchforks, but guess what? The banks are the real winners yet again. These bailouts help the banks just as much as it does the homeowners, yet nobody sees it that way.

Please redirect your anger in the proper direction and stop hating your neighbors.

Exactly. Anyone outraged at the homeowners or people who walked off bad loans needs to watch "Inside Job" for some perspective.

 

[CycloWizard]

I wish people would stop blaming each other for the housing mess, and look at the real criminals here - the banks.

The banks took advantage of many homeowners knowing they couldn't pay, forcing many of them into sub-prime mortgages because the profits were higher and the loans were guaranteed by the gov. Once the housing crash occurred, they then took advantage of everyone else (taxpayers) by giving themselves massive low-interest loans (bailout), threatening to crash the entire system if they didn't get what they wanted.

Now the original victims are given a small bailout, and you want to go after them with pitchforks, but guess what? The banks are the real winners yet again. These bailouts help the banks just as much as it does the homeowners, yet nobody sees it that way.

Please redirect your anger in the proper direction and stop hating your neighbors.

Yes, the poor innocent people who bought McMansions they couldn't afford deserve all the pity in the world. The banks probably held a gun to their heads and forced them to sign the closing papers. Then the government stuck it to the banks by bailing them out for government-mandated irresponsible lending. There is plenty of blame to go around to be sure, but the government creating programs that take my money and give it to irresponsible people/banks/anyone else dicking around is unconscionable.

 

[Thump553]

Let's see some links...

Look them up yourself if you want. I just related the actual experience of a person in that program from the viewpoint of a lawyer who actually read the mortgage modification documents involved.

 

[Lithium381]

Awesome!

Person A is bad with money and makes bad decisions...... the only solution is to throw money at them!

It's like a bucket with a hole in it that we're trying to keep full of water...... don't bother fixing the hole, just keep pouring in more water

 

[CycloWizard]

If PRA is what I am thinking it is (just put a client through it) what happens is the principal is reduced to the current FMV of the property but it is not forgiven. When you sell (or refinance) you must pay back three quarters of the difference between the sales price (FMV) and the adjusted principal balance until all the "forgiven" principal is paid back. That's nowhere near the giveaway program the OP's posting suggests-it basically is an incentive to keep underwater homeowners from walking away now. It's a win-win solution to a lousy situation. The lender/govt win because otherwise homeowners walk away now, all the balance above current FMV is lost, more REO properties on the market depressing prices and recovery further, etc.


Just like many government programs, if Faux News or the like gives you half the story you're bound to be outraged. When you know all the facts, no outrage.

Yes, we'll rely on your anecdotal statements based on what you think may have been based on this program (even though you're not sure) rather than the actual program website. We'll also then sit by while you claim that we are the ignorant ones getting our information from idiots.

From the PRA website:

PRA was designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount you owe on your home.

More than 100 HAMP SM-participating servicers are required to evaluate homeowners for principal reduction. Participating servicers are required to develop written standards for PRA application.

So I am paying taxes to counsel people on whether or not they need to pay back the amount they voluntarily agreed to pay back. I'm paying taxes to coerce lenders to let these people out of the voluntarily-agreed-to terms of the mortgage contract. Finally, I'm paying more on my mortgage to subsidize the hit these lenders will take at the whim of the government. But that's only if you read the PRA website. Instead, why don't we listen to you, the obviously unbiased observer who thinks he heard about this program once a while back and is sure it's nothing untoward?

 

[Thump553]

My client met the criteria of the PRA program. The lender was one of the participating lenders on the PRA website. We were told by the lender that this was a government program. Nowhere on the PRA website is anything inconsistent with what I said above-the website is completely silent about how the "forgiven" principal is treated.

I said I thought my client's case was a PRA matter because I wasn't absolutely positive.

As far as the rest of your whine, you do realize you are complaining about maybe pennies you pay (at most) in the government's attempt to stave off the real estate meltdown, and that if the meltdown was allowed to proceed unabated you would lose tens, maybe hundreds of thousands off the value of your home?

This reminds a bit of the old story about wrestling with a pig, so instead of wasting my time I'll leave you to your induced rage.

 

[fskimospy]

Yes, the poor innocent people who bought McMansions they couldn't afford deserve all the pity in the world. The banks probably held a gun to their heads and forced them to sign the closing papers. Then the government stuck it to the banks by bailing them out for government-mandated irresponsible lending. There is plenty of blame to go around to be sure, but the government creating programs that take my money and give it to irresponsible people/banks/anyone else dicking around is unconscionable.

Good to see that the ultra right wing myth of the CRA being responsible for the mortgage meltdown is alive and well. How many times does that need to be disproven before people will stop praying to its altar?

 

[Argo]

I wish people would stop blaming each other for the housing mess, and look at the real criminals here - the banks.

The banks took advantage of many homeowners knowing they couldn't pay, forcing many of them into sub-prime mortgages because the profits were higher and the loans were guaranteed by the gov. Once the housing crash occurred, they then took advantage of everyone else (taxpayers) by giving themselves massive low-interest loans (bailout), threatening to crash the entire system if they didn't get what they wanted.

Now the original victims are given a small bailout, and you want to go after them with pitchforks, but guess what? The banks are the real winners yet again. These bailouts help the banks just as much as it does the homeowners, yet nobody sees it that way.

Please redirect your anger in the proper direction and stop hating your neighbors.

I blame both. I recon none of those homeowners had their hand twisted to accept those deals.

 

[JSt0rm]

I would of rather bought all the homes of these people then give the banks all that money that they just flip thru treasuries.

But naw, we are mad at people who are upside down on their loans or became unemployed and lost their homes or were hoodwinked into buying more then they can afford. Those are the criminals here.

 

[Argo]

I would of rather bought all the homes of these people then give the banks all that money that they just flip thru treasuries.

But naw, we are mad at people who are upside down on their loans or became unemployed and lost their homes or were hoodwinked into buying more then they can afford. Those are the criminals here.

Hoodwinked how? Hey this mortgage is 30% of my income, and I have no savings in case I lose my job, and I only have 2% equity. But the guy in the suit says it's a good idea so I must buy this house.

Where is personal responsibility?

 

[JSt0rm]

Hoodwinked how? Hey this mortgage is 30% of my income, and I have no savings in case I lose my job, and I only have 2% equity. But the guy in the suit says it's a good idea so I must buy this house.

Where is personal responsibility?

Everybody thought it was a good idea, well mostly. When someone has a dream its very easy to tell them something they want to hear. Like take on this interest only loan and in 5 years you will sell the house for 50% more then you bought it for. Yes please they all said. And when the shit hit the fan and property values dropped? People bailed on the property because they had nothing in the house but a headache and 2 years worth of interest only payments. Now we cry and point at that homeowner? Fuck that. If I was underwater 70k-150k on some shit house I would walk away too.

 

[Jhhnn]

Awesome!

Person A is bad with money and makes bad decisions...... the only solution is to throw money at them!

It's like a bucket with a hole in it that we're trying to keep full of water...... don't bother fixing the hole, just keep pouring in more water

Actually, Person A was just a run of the mill person who thought themselves to be a good conservative, had a good job, and believed the current Repub hero, GWB, about the wonders of the Ownership Society. They borrowed right at the limit of what they could afford from people trained to gain their trust, then lost their job and got screwed along with millions of others in the greatest financial flimflam since the stock market scam of the 1920's.

But don't let anything like that get in the way of smug self righteousness & denial...It could have been you, and if your Repub heroes have their way, it will be.

 

[AnonymouseUser]

The homeowners figured at worst they would only hurt themselves if they foreclosed, but the banks knew how bad it would really hurt. The homeowners were personally irresponsible, but the banks were criminally negligent.

 

[mcmilljb]

What some of you fail to see is that some people lost their jobs and therefore couldn't afford their house house with their new job. These are the people that should be helped if the gap is small. It's a good thing to keep excess inventory down.

However I think there are too many fake boogeymen in the housing market. If someone is too far underwater, the person just needs to let it go if they can't pay. Let the bank and homeowner take the hit. The bank loses some money and sells the house. The homeowner has the credit ding and goes on with his life. We're too busy propping up bad situations; it's like we're still trying to keep an inflated bubble from falling. It benefits no one because the bank still has the bad mortgage on their balance sheet.

The money being wasted on "keeping people in their homes" should be going to creating jobs. If they have a job, they can find an affordable housing. You don't have to own a home. A lot of homes could be rented to their current owners until the economy turns around. The money diverted from the bad programs could go towards getting people trained in high demand jobs. Then those people buy houses, goods and services which gets the economy going again.

 

[Infohawk]

Yes this kind of complicated intervention is silly and unfair. I say that as someone who thinks the government should provide shelter to the indigent.

 

[BoomerD]

I'd rather have seen the US Government buy up all the "distressed mortgages" and forgive them than to have them bail out the banks who caused the mess in the first place.
Not necessarily the "main street banks" who were loaning money to anyone with a pulse, but rather, those who were gambling on the credit default swaps, those who were buying mortgages like crazy, even though they really weren't worth the paper they were printed on.

Bailing out the American citizen who was/is struggling to make ends meet in this FUBAR'd economy makes more sense than bailing out the banks who continue raking in huge profits and paying outlandish bonuses to the very people who caused this in the first place with their "funny money" schemes.

It's easy to point fingers at people who bought houses at inflated prices...but MANY of those people could afford their mortgages when they bought...but may have been suckered in by the promise of low mortgage rates in adjustable mortgages...and the promise that they'd only go down...not up. Then, once the bubble popped, people started losing their jobs left and right...folks whose jobs were based around construction, in the multitude of related industries; building materials, home furnishings, home renovation materials and supplies, appliances, auto sales, cities and counties who started seeing huge drops in property tax collections...the list goes on and on...

Is it their fault that the economy went to shit? Hell no. Should they be "helped to keep their houses?"
That's debatable, but it serves NO ONE if everyone loses their houses and they sit empty.

Desperate times call for desperate measures.

Stop bailing out the rich and start bailing out the working class.

 

[JSt0rm]

good post boomer and its sad that the republicans always get brain washed into thinking the problem is the middle class who just got fucked epic style. I dont plan on being middle class myself but anyone with half a brain realizes you arent going to sell shit to poorest of the poor people out there and then you are left with old money creepers only who dont pay any taxes and let their money sit tired and weak.

 

[Jhhnn]

What some of you fail to see is that some people lost their jobs and therefore couldn't afford their house house with their new job. These are the people that should be helped if the gap is small. It's a good thing to keep excess inventory down.

However I think there are too many fake boogeymen in the housing market. If someone is too far underwater, the person just needs to let it go if they can't pay. Let the bank and homeowner take the hit. The bank loses some money and sells the house. The homeowner has the credit ding and goes on with his life. We're too busy propping up bad situations; it's like we're still trying to keep an inflated bubble from falling. It benefits no one because the bank still has the bad mortgage on their balance sheet.

The money being wasted on "keeping people in their homes" should be going to creating jobs. If they have a job, they can find an affordable housing. You don't have to own a home. A lot of homes could be rented to their current owners until the economy turns around. The money diverted from the bad programs could go towards getting people trained in high demand jobs. Then those people buy houses, goods and services which gets the economy going again.

It's remarkable how right & how wrong a person can be, all at the same time.

You're right about lots of problems in housing being due to unemployment.

You're wrong about the role of banks atm. They're not the principals, the holders of mortgage debt. They bundled mortgage payments into MBS, sold them to investors of all stripes. Banks merely service the agreements & the money flow. They actually held most of the crappiest debt themselves, which has now been liquidated. What's left is a blend of various mortgage obligations in MBS, good & bad jumbled together. Servicers make extra on delinquent mortgages, taking more out of the cashflow from good mortgages going to investors in the process. When they actually foreclose & sell the place, their income goes down. That's why foreclosures are way, way in arrears, and why servicers simply refuse to foreclose on some properties, even though they're abandoned. If it's still on the books, they're making money off it, cheating the investors in the process. Servicers don't want to foreclose- they've got their hooks in the investors the way it is, and see no reason to let go.

That's also why anybody who's way behind on their mortgage is a chump to vacate before actually being evicted. People have been living in places they haven't made a payment on in years. Their credit is already trashed, so they have nothing to lose but free rent.

All of the govt programs are geared towards people on the edge, people who might be able to keep their place if the terms were different. That's actually good for investors, who get half a loaf other than the nothing that servicers will leave them when they're done, and it's also good for neighborhoods & the economy in general.

Once you figure out who's making money off of rundown empty properties that aren't for sale, you'll figure out why things are the way they are.

High demand jobs? Heh. I gotta giggle. Name the high demand jobs you're talking about, and tell us how many of those actually exist.

 

[CycloWizard]

My client met the criteria of the PRA program. The lender was one of the participating lenders on the PRA website. We were told by the lender that this was a government program. Nowhere on the PRA website is anything inconsistent with what I said above-the website is completely silent about how the "forgiven" principal is treated.

I said I thought my client's case was a PRA matter because I wasn't absolutely positive.

As far as the rest of your whine, you do realize you are complaining about maybe pennies you pay (at most) in the government's attempt to stave off the real estate meltdown, and that if the meltdown was allowed to proceed unabated you would lose tens, maybe hundreds of thousands off the value of your home?

This reminds a bit of the old story about wrestling with a pig, so instead of wasting my time I'll leave you to your induced rage.

How much do I pay in taxes? Do you have any idea? I can't lose hundreds of thousands off the value of my home because I bought a home at its real value to me within my budget. The sale of said home has been held up for two months because of FHA shenanigans, during which time we can't accept offers from other buyers because we're under contract. The house I'm currently buying on the other end can lose 80% of its value and I'd be ok with that because I can easily afford the payments. The other 20% would be a loss of down payment because I'm actually qualified to buy the place.

Baseless personal attacks aside, maybe you could read the actual program website to get real information rather than simply calling real facts a "whine" when it disagrees with your half-hearted anecdote. The problems in the housing market are created by government manipulation of the market, forcing loans to people who would not otherwise qualify. Meanwhile, I rented a hellhole apartment to save up for a down payment of a cheap condo while paying taxes to subsidize the people buying without one. Now, the government is bailing these people out of the houses they couldn't afford, sticking the responsible few among us with the bill in two ways:
1. Paying taxes for the government subsidy, and
2. Paying more than market value for houses because demand is inflated by government meddling.