Back in March when the home assistance program was announced I contacted my lender about refinancing. They had set up a web site specifically for this. Great! Technology at work. I filled out a short questionaire to see if I qualified. Lower wages? Check. Underwater mortgage? Check. OK I qualify (unfortunatly). Due to some technical snafu's with the web site it takes a while to speak to someone but I finally get an appointment to speak to a "specialist" today, 4/15.
Now remember, over the past month I have many times heard our president urge us to contact our lenders to get the ball rolling so I assume the lenders and the govt. are ready. Well, they are not.
Today, when I spoke to the lender rep. I was told that there's nothing they can do for at least six weeks as the govt. is in the process of reworking the plan and and they, the lender, will not get all the new info and processes until then. The rep. said someone will call me then. In six weeks. The can't do anything for at least six more weeks.
My lender is one of the big ones you hear about in the news and a major part of the political scene so I don't understand what's going on and I think all parties involved (govt. and lenders) are very confused about this process. I know I am.
Once upon a time some thousand years back a country X faced serious economic crisis resulting financial and banking institution failures, massive unemployment, trade crisis that slashed kingdom revenue. King and his chief minister were worried about moving economy. All solutions they brought were failed rather deepened further. Entire kingdom was sleepless. Worried King ordered the ministries “Perceiving economic down turn I decide to invite all the economists and ministers for their suggestions to overcome the deepening crisis and find solutions. Suitable idea will be rewarded”.
Our Human Nature is Beyond a Response to Stimulus
An emerging problem facing many people today is that the price of a product that is presented to the consumer does not accurately represent the consumers’ real costs. I would challenge any person to walk into any new car dealership and figure out what will be the real price to be paid or the real cost incurred based on the listed price on the sticker, the advertized price with or without rebates, unknown “APR’s”, dealer price, employee price, and whatever information you can gather from the internet. I know that agreeing on a price, weather cash or credit, can take hours. And when I am finished negotiating and driving away in my new car I wonder if what I agreed to pay was really fair or did I hurt myself by paying too much? I wish I knew!
The finance charges of buying anything using credit must be added to the initial purchase price to know its real cost. The cost of buying anything on credit is hidden or disguised from unaware or ignorant people. The price held in a person’s mind or seen on the sticker certainly does not equal the total payments made over time. It is probable that three different people with three different credit histories will all agree to purchase an identical car at the same price and all three people will incur very different real costs to their lives. Three examples of financing $20,000.00 of the purchase price of identical cars over a period of five years for our three different people of various credit histories could be:
1. Excellent credit…. $20,000.00 at 3% interest over five years is 60 payments of $359.37 totaling $21,562.46.
2. Fair credit…………..$20,000.00 at 8% interest over five years is 60 payments of $405.53 totaling $24,331.62.
3. Poor credit…………$20,000.00 at 15% interest over five years is 60 payments of $475.80 totaling $28,547.91.
These examples are not made to pass any moral judgments’ on borrower or lender. The examples exhibit the difference between the same $20,000.00 price in each person’s mind and the three different total costs of $21,562.46, $24,331.62 and $28,547.91 incurred by each individual respectively. We all know that the real cost of buying an identical car is different for different people in different circumstances. Fair or not, differing real costs for differing consumers is the reality people experience. What is problematic is that many people confuse the price they have in their mind with the total cost that is actually paid over time. The total cost paid over time is reality while the price they have in mind is not. The $20,000.00 price in mind is believed to represent each individuals’ real cost when in the real world each individual incurs, respectively, the different real costs of $21,562.46, $24,331.62 and $28,547.91. What is believed to be real (as price) is not real (as is the total cost over time); the idea that the price accurately represents the total cost when credit is used is mistaken.
Imagine being a person of fair credit, believing he is paying $20,000.00 for a car, and in reality paying $24,331.62 for that car over time. How many times can the $4331.62 mistake be repeated? I do not know. You might say that ‘people really do know how much they are paying or at least they should know’. That may be true: but, the first point is that their purchasing behavior was based on the belief that the $20,000.00 price held in mind was the real price they are paying; and, the second point is that the idea of the $24,331.62 total cost, if it came to mind at all, came to mind generally as an afterthought which had little or no influence on their purchasing behavior.
I wish to drive this point home just a bit further. Imagine being the home owner when I ask you how much you paid for your house. Will your answer be the buyer/seller negotiated price (of say $200,000.00)? Or will you answer with the total cost calculated over time (of say $20,000.00 down payment, $180,000.00 mortgage over 30 years at 4.5% with monthly payments of $912.03 for a total cost of $348,333.52)? Most people say $200,000.00. This may be self deception on a mass scale; a deception that for some people makes huge differences in their standard of living. A home buyer with less down payment or worse credit might agree to this: $0.00 down payment, $200,000.00 mortgage over 30 years at 5.5% with monthly payments of $1135.58 for a total cost of $408,806.90. While there is a $60,473.38 total cost difference facing the different buyers, I will bet, most home buyers will say and believe and behave as though they paid $200,000.00 for their house.
Reality will not be ignored long before it demands to be recognized, and in the real world price does not always equal cost. If I define price as the number that is held in one’s head it will equal the physical number printed on the products sticker or it will equal an amount negotiated (that is often to be financed) between buyer and seller. Within a cash transaction price will equal the cash exchanged for the product or service and most importantly it will accurately reflect an immediate real cost. Within a credit transaction price will not reflect a real cost and thinking that it does can be a costly mistake. Reality for the cash purchaser is different from the reality of the credit purchaser.
Real costs involving credit are the total cost calculated as price plus interest paid over time. If I define cost as what will be actually paid then that number must be calculated and kept in mind if an accurate representation of reality is to influence a purchaser’s behavior. Believing that price equals cost does not make it so. At Wall Mart or at a grocery store the cash, check, or amount debited, is equal to the price of the goods purchased. When those same goods are purchased using a credit card the price printed at the bottom of the receipt will not represent the real cost of the goods for that buyer. It is the knowing and respecting of this fact that price easily misrepresents cost that will influence behavior. Masses of people behave in a purchasing manner that suggests that they do not know or respect these truths. For many buyers using credit the purchase price held in mind never represents their real costs; their real costs are actually out of mind. What they think is the price they are paying is a fantasy held only in their imagination; reality is actually a rising total debt because real things purchased on credit have a higher real cost than at first appears.
As simple and as obvious as this seems it is my contention is that it is the ignorance (by many people, businesses, and governments) of this real difference between that price which we picture in our mind and that total cost which we really pay over time that is at the heart our present economic crisis today.
It is often hard for many people to believe how big their debt is when they believe they didn’t really spend that much. And perhaps they didn’t spend that much, but for what they did buy they ultimately paid a high price. Most people that buy on credit behave as though the price they are paying for the good is what it costs them. In reality it costs far more. With regard to a credit purchase a person’s belief in mind could hold that the price is low enough to represent the thing as being worth buying; whereas, for the person mindful of the real cost that cost is too high to represent the thing as being worth buying. A person’s behavior is based on what they believe to be real; that is, they see reality as the sticker price that is easily held in their head or they see reality as the total cost paid over time. In the first case, when only mindful of price, the price (which does not equal real cost) appears low and they purchase immediately. In the second case, when mindful of the real cost, the real cost (which does not equal price) appears high and they put off the purchase.
Behavior based on mistaking the price for cost has profound ramifications for economic systems. Credit purchases based on this mistake will artificially stimulates a demand for the goods and services purchased because the price appears lower than its real cost. Businesses, however, will actually produce enough goods to meet this propped up demand for all the consumers that confuse or ignore the difference between the idea of a low purchase price and the real cost involving credit. Behavior of persons mindfully considering the difference between a cash price and the higher real costs incurred by using credit will adjust demand downward with regard to any good or service requiring the use of that credit.
Our present economic crisis is based in the fact that a great number of people are being forced to becoming aware of a need to consider this price/cost difference. Their behavior, which led to an over extension of debt and an overconsumption of goods, is a direct result of not considering this difference. Their changing behavior, which is now withdrawing from the use of credit, is based in having in mind the real cost of using credit. When the real cost of credit is kept in mind then demand for goods and services will no longer be artificially stimulated. Demand will come down to a level based on the real costs instead of the non-credit cash price greatly impacting businesses that use credit to help generate profits.
Businesses that generate profits by financing the purchases of their goods or services are now facing difficulties proportionate to their use of that financing for those profits. It is conceivable that some companies switched to generating their profits through financing because price competition for cash purchases drove profits very low. It then became easier to compete for profits based on financing because that financing hid the real costs from most consumers. Automobile companies, retailers such as Sears, conglomerates like GE and any kind of business that has become dependent on their own financing of purchasers to generate profits has contributed to the misleading relationship between price and cost by presenting to consumers prices that seem low when in reality the financed cost is high. When using financing to generate profit the price tag on a good or service will tend to be lower (to entice people into using credit) than what would be necessary to generate that same profit without using financing. It is probable that businesses highly dependent on profits through financing will even discourage cash purchases because selling for cash at the list price will produce little or no profit at all.
Ultimately businesses that financed the purchasing of their own products built a capacity to produce enough goods to supply a market where people behaved in a manner that mistakenly accepted the price as equivalent to the financed cost. Once consumers realize their mistake they will withdraw demand leading not only to an oversupply of goods but also to an over capacity to produce them (the basis of deflation). Thus if the use of credit decreases so will the ability to generate enough profit to stay in business. And if credit tightens an initial oversupply of goods and services will face deflationary pressures (of too many goods needing to attract fewer available dollars) leading to falling prices. Once the original oversupply is consumed the list price on goods will have to rise to a point that will make up for the loss of profit that was generated by financing purchasers if the business is to continue operating. Of course the higher list price will also discourage demand.
Retail businesses (that are not operated as finance companies) generate their profits based on what is paid for the product at the moment the transaction occurs. Whether a good is paid for using cash, check, or credit makes little difference to the retailer at the time of purchase; because, for the retailer the price on the sticker accurately represents what is received in payment. From the retailers point of view the sticker price represents the real cost to the consumer. Inventory is ordered and manufacturers produce goods for a market based on that retail price; but, that retail price that seems real to the retailer is not the same as the real cost to the buyer using credit.
The consuming of products purchased on credit has long term effects on retailers and their customers. From the point of view of the retailer corporate profits should be able to be estimated by taking the price paid by the consumer, minus the businesses costs involving the product incurred, multiplied by the number of units sold. While that will work for past purchases it will not work well for future projections. In reality, the cost of credit is incurred in the future and this has two results: first, future demand will be less than current demand; and second, the real cost to consumers is much higher than the price the retailer receives. Future profits must adjust downward with a cannibalizing of demand.
The lender of credit becomes the collector of the difference between the price paid to the retailer and the real cost to the consumer; the retailer collects the sticker price and the consumer pays to the lender a higher real cost over time. By extending credit for purchases today the lender enables an increased stimulation of demand for today. By collecting payments of interest and principal in the future on today’s purchases the lender will stimulate a decrease in future demand by absorbing the consumer’s future purchasing power. For the unaware retailer or consumer the lender of credit is, in reality, collecting a sacrificial cost from both the retailer (sacrificing future demand) and the consumer (sacrificing future purchasing power); and, both retailer and consumer let it happen because of either ignorance or the convenience of having one bird in the hand rather than having two birds in the bush. Both the consumer and the retailer, when dependent on credit to complete the transaction are related to the lender of credit as addicts are related to their pusher. The lender, who is extending credit to facilitate today’s exchange between buyers and sellers, when those buyers and sellers are blind to the real costs of purchasing things, is no longer profiting by performing the service of assessing practicality and risk; but, the lender is profiting from both purchaser (in lessoning future purchasing power) and seller (in lessoning future demand) by supplying the convenience of immediate gratification to anybody ignorant of real cost assessment.
Yes, I am pointing fingers at the banks issuing credit to ignorant consumers! I am pointing fingers at payday loan companies serving desperate people seeking loans at loan shark rates! I wonder, what would happen to people if banks would issue enough credit to people that they might have trouble paying it back? If I was a bank, I would like to keep borrowers just under that troubled threshold. If I was a bank I would be interested to know what profits I could generate if, as a bank, I were to raise the interest rate on my customers from 10% to 20% or even 29%. I might even justify the rate increase based on a late payment; I might even use the post office to help generate some late payments by mailing out payment notices near do dates and requiring the payment to be mailed to the opposite coast. I might even raise fees on those late payments. Another thing I might try, if I were a bank, would be to entice credit users from my competitors to transfer their loan balance to my bank by promising an absurdly low interest rate of 0%; I will bet that at the first late payment the interest rate could be raised to 25% -- 0% to 25% in a heartbeat – what a good deal for bank profitability.
Hmmm… if we, as bankers, could only keep people under that painful threshold of not being able to make their monthly payments: Hmmm… if we cannot then the huge interest rates we are charging will have to make up for the amount of people defaulting on their debt: Hmmm… if that does not work perhaps we could get congress to make it harder for people to declare bankruptcy. How profitable can we banks be and what might be the overall consequences?
Hmmm… if we could only get these people out of debt we bet they would thank us and feel relieved: Hmmm… if we could only encourage the debtors to exchange some of their short term debt (such as credit card or auto loan debt) for the equity that is in the home; in this case expensive short term debt will be exchanged for cheaper long term debt. We realize that it would be like taking out a 30 year loan on a car that may only last about 10 years and we realize it would not be a good habit to establish; but, people need relief from their pain now and they deserve a vacation from all their debt. Perhaps people will thank us bankers for bailing them out of their troubles.
What must it be like to have $10,000.00 in credit card debt? At 10% the cost of servicing that debt for one year is $1,000.00. At 20% the cost would be $2,000.00. And, at 29% the cost would be $2900.00. For those consumers habitually in $10,000.00 of debt, at 29%, it means that the goods they purchase every year for $10,000.00 really costs them $12,900.00. It also means that the $2,900.00 of interest payments goes to the provider of finance and not to the profits of retailers or producers; in fact, the $2,900.00 cannot go to purchasing any good at all. In this example, it means that $2,900.00 of the total cost of $12,900.00 goes to the production of no-thing beyond convenience. In this example, it means that $2,900.00 must be subtracted from future purchasing power. In this example, it means that the real cost of goods to consumers that are habitually in debt is very high. It also means that in saving this $2,900.00 there is real hope.
There is hope that once people become mindful of and as long as they stay mindful of the cost of credit their behavior will be modified toward less demand with regard to the real cost of things used. Our present mindfulness of the high cost of credit, whether caused by job loss, out of pocket medical expenses, a credit overextension that can no longer be refinanced, or the actual pains of bankruptcy, will encourage a behavior toward increasing savings. Increasing savings or bankruptcy are the only things that will get people out of at least short term and high cost debt. And pain is the encouraging factor in keeping people mindful of their real circumstances.
Once people are out of debt and as long as they stay mindful of the real costs of things, then the real benefits of working through the pain can materialize. Those benefits will ultimately be a real increase in disposable income of $2,900.00 for the future out of debt person in the above example. That amounts to an increase in disposable income that dwarfs any stimulus check sent to consumers by the federal government last year or coming from the government in 2009. Not only that, by saving, consumers are actually behaving in a caring manner toward themselves. And, that $2,900.00 saved may eventually go towards purchasing a future good or service instead of future interest payments. That could lead to more employment of people that actually produce things that will be used. But, please note, this real kind of recovery can only be achieved by working through the pain. Giving and taking pills to deaden the pain will keep out of mind the things needed to be held in mind if behavior is to change.
As human beings we do not respond to stimuli in the same manner as plants or animals. All organic life responds in a manner of moving toward or away from stimuli. Human beings do not have to respond in the same way as organic beings because we can respond through knowledge of the thing that is stimulating us. It is through thinking and feeling things that are outside us that we get to know them and our place in the world. Things that are outside of us stimulate us into thinking and feeling about them. It is for this reason that what we think and feel about any thing always has to be checked out in the real world. Are we thinking correctly about things? Are we feeling appropriately? Answers to these questions are revealed only through activities we undertake. If we do not get the results we expected by our activities then our thoughts about how something could be accomplished are wrong or our motive to act in the direction we felt to be right is wrong or both our thinking and feeling are wrong. In any case we had better stop what we are doing and reflect. Was what we were thinking and feeling about things accurately telling us something about the real world outside of us or was it really telling us about something inside ourselves? Knowing the difference is what allows us to act as human beings and not just respond to stimuli like plants and animals. Getting to know the world outsides us and responding to it as it really is distinguishes us as human beings. Generally, in getting to know the real world we will sometimes experience pain. Pain is often a sign that we have been moving in the wrong direction. Pain generally stimulates people to wake up and reconsider their relations to the world. Pain says pay attention. Anesthesia for the pain is no cure.
Even the granting of easy credit to help sell the initial over supply of goods left in the marketplace will not place the now known high cost of credit back in the bottle. People are now leery of using credit because of the pain they are feeling; for, it is this pain that is keeping credit’s real cost in mind. Since the real cost of credit is better understood by the consumer the businesses that have supplied the goods and services based on the use of that credit will have to scale back production and they will also have to figure out how to generate profits on goods that are purchased at or near a cash price because those goods that need financing will be purchased by pained consumers more fully aware of the real higher cost of using credit.
Credit has no need to disappear. Goods will come to an end of their useful life and need to be replaced. Big ticket items will still need to be financed. And people will be educated by pain as to what they have been doing to themselves by ignoring reality. Like it or not, many people’s idea of how they would like reality to be is not mirroring how reality actually is. A necessary process of disillusionment is affecting everyday life. It is part of a process of getting healthy. What people are coming to terms with is that our present standard of living is being borrowed from our future standard of living. The consumer, in withdrawing from overdependence on credit, is showing a mindfulness of the problem. To believe that the consumer should do more of what is causing them pain by encouraging the further use of credit (by making it cheaper to borrow) is insanity. Saving is an act directed toward the future. It is and act directed at taking care of ourselves over time. And it is about time that the idea of participating in our own care better take root in our minds if it is to have any hope in changing our behavior in our future.
Businesses and governments do not know how to respond to the consumer’s new mind. Businesses and government officials are crying for more stimuli, either through greater government spending (most Democrats) or through decreases in taxes (most Republicans). In begging for the reestablishment of old and blind habits businesses and government desire the dissociation of price in mind from real cost because it is the traditional way things have been done. If they could only eliminate the pain then the consumer’s mind would seem at peace yet stay asleep to reality. But the consumer is awakening to the real problems of the cost of doing things in our habitual manner. And reality is forcing us to stop and reflect on how we are doing things. Reality will painfully stand in our way when we are doing things wrong. Hopefully we can get to know things as they really are and behave accordingly as the human beings we really are.
Maury Garvey, 2/25/09.
I am writing with the hope that you may be able to assist me with my mortgage crisis. My mortgage lender is Indymac Federal Bank. I currently have a 30year conventional loan with a 6.8% interest rate. In July of 2008, I applied for a loan modification with Indymac Federal Bank. I applied for the modification because my husband was ill and was unable to work-full time. I was working full time but the payments were a struggle. I was denied the modification because Indymac stated that I did not meet the investor’s guidelines. Indymac would not tell me what those guidelines were or who the investors were. On December 31, 2008, I was laid off from my job. On February 10, 2009, I applied for another loan modification with Indymac. I was denied again. This time Indymac stated that I was denied because I did not have a job and that I did not meet the investor’s guidelines. (I supplied them with my husband’s income and my unemployment compensation). Indymac Federal Bank representatives stated that there is nothing that they can do for me until I gain employment. Indymac refused to work with me and I was denied a loan modification when I was employed and then denied again because of unemployment. Indymac has red-flagged my account with a note that says “the customer will call in when she is employed.” With the economy the way that it is, my job search has been extremely challenging. My mortgage is two months behind and I am on a temporary forbearance payment that ends in March. If I do not gain employment by March and if I am not able to get some type of loan modification, I may lose my home to foreclosure. I have three children and no where else to go. I know that the President is working on a mortgage relief plan that will be effective in March but Indymac representatives stated that I still may not qualify for his plan and that I will not qualify if my mortgage gets behind three months. At this time, I am turning to you for help. Kindly assist me and let me know if you have any suggestions as to how I can keep my home.
God Bless America!
MyBO: Robert Gibbs on the President's Housing Plan
C4L: Member Blog Spotlight: Santelli Responds to Gibbs
One thing for everyone to know, hearing the two of them combined is funny, but it reminds me of people going after each other on the show, Yomamma. (Look, both of them are talking about drinking coffee while criticizing sarcastically each others' opinions about the housing plan.)
Another point, I am critical about the MSM's influence on issues and opinions, and I've made this really clear on many of my pre-election posts. Also, due to the biasing that the MSM has done, it is understandable that Obama's staff have been really edgy. However, in this case, the concerns from people like Santelli are from a point of view that happened to start off as off the mainstream, but it managed to become a signal that the MSM is paying attention to on its radar!
In my opinion, I am happy that Rep. Paul's supporters are getting some well-deserved MSM coverage, but also, that Pres. Obama is also doing what he can under the stressfull and intimidating conditions he has been going through.
HOWEVER, ONE THING MUST BE KEPT IN MIND, REGARDLESS OF WHETHER OR NOT YOU SUPPORT OBAMA OR PAUL OR ANYONE ELSE, MAINSTREAM OR OTHERWISE: THE MSM, OR CORPORATE MEDIA LOVES IT WHEN A DEBATE OVER AN ISSUE DISSOLVES INTO A HISSY FIT BECAUSE IT MAKES GOOD RATINGS, AND THE SUPPORTERS OF EITHER SIDE BECOME SO POLARIZED INTO SUPPORTING THEIR PERSON OR ISSUE THAT THEY BECOME UNWILLING TO HEAR THE OTHER SIDE OUT, WHICH IS ALSO WHAT THE COPORATE LEADERS WANT IN ORDER TO KEEP THE *TRUTH* OF THE SITUATION SILENT!!!!!
I know that some MyBO members may disagree with me, while people who are C4L members that casually read MyBO might take my post as ridiculous, but granted that there are bills like HR 645 that are out there that no one is paying attention to, and there are several other events called out on blogs like MyBO and C4L, it would be nice that people remember to actually calmly and open-mindedly speak to each other.
Because it requires open and honest discussion and the issues at hand are worth looking into, I say that it is necessary that supporters from MyBO and supporters from C4L, as well as supporters from other sites have an open dialogue about this before we become too polarized!
Agree or disagree, but this is my opinion based on my observations on the video links.
Thank you for hearing me out.
Sincerely,
EMK
"The society's deprivation relies/ not on our differences/ but the separation within."
--Linkin Park, "Frgt/10"
Good morning everybody,
Our group received a request for assistance with mortgage payments and/or electric bills this week. While we don't have any monetary funds at this time, I would like to open up a virtual discussion about how we could solve these issues locally. If you know of existing groups or programs in place to solve these issues, please post them here. If you have ideas about how we ourselves could be of service, please post those as well.
To get you started thinking, I will post some of the ideas folks have come up with so far:
I had one thought, which was that Chris and I could unplug things and turn down the heat, lose the cable tv, etc. and then "adopt" a family to help with their electric bill. Riverside for Change families could decide to participate on a household basis, and maybe single folks could partner up to "adopt" a family. We'd be helping the environment and our neighbors.
Holly put forward that The Jacksonville Urban League has housing counseling programs, for buying homes and for finding subsidized housing. http://www.jaxul.org/
Anybody else have ideas?
Casie SimpsonRiverside for Change
I am going to piss off a lot of people, but I don’t care. It is kind of the same response you get when you tell an addict that they have made bad choices. “but everybody around me were making the same choice.” If you are in a mortgage you can’t afford, it is because you were irresponsible. That is not a disputable fact. However, everybody wants to make “responsibility” a relative figure. It is not. If I should go belly up and be unable to afford my mortgage, well then in the end I was irresponsible. In nature they call that “dead”. In the US we call them “victims”
Questions and Answers for Borrowers about the Homeowner Affordability and Stability Plan
Borrowers Who Are Current on Their Mortgage Are Asking:
Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.
You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:
Borrowers Who Are at Risk of Foreclosure Are Asking:
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.
Only the first mortgage is eligible for a modification.
The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.
Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.
Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.
You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.
You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes
First of all - if you haven't learned already - DO NOT respond to anyone who contacts you about loan modification. They are seedy poor-intentioned opportunists. If you are looking for some help, contact your mortgage company or lender directly, and ask for their "hardship" or loan modification department. Your lender will not charge you exhorbitant fees to modify your loan. The other guys will try to charge anywhere between $1200 and several thousands.
Now, if you are like many, your earnings have likely reduced since the time you acquired your loan, and in most cases, your adjustable rate mortgage (ARM) has ratcheted up to an unbearable, unspeakable amount. Know that your lender will likely not modify your loan terms unless you are currently employed. So, if you aren't, go get a job at McDs or WalMart and while you are hunting for the big job to replace your old one, submit your loan mod request.
The best bet, of course, is to refinance your home entirely. Selling it in this market is a terrible idea, for most, with the exception of a select few. However, if you were insightful enough, or divinely lucky enough to keep your job, or even better, increase your earnings throughout this economic meltdown, you will very likely be turned down for a loan modification.
Further, if you always paid your mortgage first, utilities second, and kept food in the fridge (as we were taught to prioritize our needs v wants), and either neglected to pay or made "slow pays" to credit card companies (unsecured debt) - your credit is shot. Furthermore, you will not qualify for a loan modification (because you paid your mortgage bill, and your income is the same, or higher than before).
When faced with the choice to sleep in a warm bed and eat a full meal or pay high interest to a greedy credit card company, well, the choice is obvious. However, the consequence for keeping your kids fed and stationary (in a home) instead of keeping up with credit card payments is that you will have to live in that very home, at twice the price, and will have to endure the bad credit you "earn."
So, essentially, the home you tried so hard to keep becomes a jail cell - and like being convicted, it feels like you have to pay your soul every day, for the rest of your life. The only way for you to get out of it is to increase your credit score. But to do that, you need the extra money that is now being diverted to increased loan interest from your ARM.
While plans are in the works to help out people who paid their credit cards, but NOT their mortgages, defaulted on their loans, were foreclosed, and now renting - I see no help for those of us who did the opposite. They get help getting into a new home, with their "foreclosure" being looked at less harshly, because the nation has laid blame on the industry, not the individual. (I, too, don't blame the individual - just want to point out that they are looked at more favorably)
The rest of us are being penalized for penny pinching and keeping our homes. Bad credit = can't refinance. Paying mortgage + finding/keeping work + maintaining/increasing income = can't qualify for loan modification. If you look at the numbers, although I made more money last year than ever before, my take-home is less than it ever has been, and close to zero, after you count my "adjusted" mortgage payment and add in only the sustaining expenses. I don't have enough to pay full amounts on credit cards - and am often running a negative balance sheet - then there's the late fees...... ughh. No matter what, though, I always pay the mortgage before it becomes 30-days late.
Where's the bailout for me? According to my lender, I don't " Qualify" for a loan modification because my gross income is measured directly against my monthly payment. No consideration for the fact that I have four dependants. No consideration that our medical costs are higher than the average family because one of my children is disabled. No appreciation or "good faith" is offered to me for the fact that I always, ALWAYS paid them.
I want to see someone "stimulate" my lender into rewarding me and everyone else like me who are being forced to live BELOW our means, unable to save for education, retirement, and other pursuits of happiness simply because THEY were allowed to sell me an unscrupulous product.
Till then, I'll be brown bagging it, telling my kids they have to wear an extra sweatshirt to bed at night to keep the energy bill down, cancelling all enriching family trips in lieu of "camp nights" in the backyard, living inside a home in need of costly repairs - Even though I am making more money than I ever have before.
Mr. President, would you please consider a solution that accounts for all of us, rewards those whoh paid their mortgages, and provides consequences to greedy lenders? Well, I suppose I should be thankful I have a home, right? Thank you, lenders.
What is wrong with the following proposal? It addresses the housing situation head on AND it will stimulate the economy in areas most affected by the crisis. 1) Use the remaining 350 billion in TARP funds to buy up the REAL troubled assets. That buys out TWO MILLION problem mortgages at an average of $175.000 each. It pumps $350 billion directly into the credit market**. There can be no complaint by the original lender with regard to restructuring a mortgage where that makes sense.
Use stimulus package money to do the following: 2) Identify homes occupied by families as opposed to those that have been abandoned by speculators. 3) If the home is abandoned, take it off the market and contract with local small businesses to manage the property. Maintain the landscape and provide security to avoid/reduce vandalism etc. These activities result in jobs and protect property values in the community. 4) If the home is occupied (by the former owner or renters) make every effort to keep them in the home. Again, contract with local businesses to manage the properties in terms of collecting rent, restructuring mortgages etc. This translates to more jobs and fewer people joining the ranks of the homeless. 5) As conditions improve (probably a few years down the road), start putting houses back on the market in a controlled way using local real estate companies. As was the case in the 80’s S&L crisis, this could recover much of the cost of the program. Again this creates jobs and supports home values in affected communities.
Again my serious question is, "What is wrong with this proposal?".
** CAUTION: Wall street bankers will fight this tooth and nail because they want you to use tax payer dollars to COVER THEIR BAD BETS. They have no interest in resolving the real housing crisis.
Having just read the statements of Bert Ely, a banking consultant, on BusinessWeek Online, I am appalled we have agreed to give banks more money without even knowing what they intend to do with it.
In the link below, it is clear that bankers are not changing their policy on how then lend--they have no intention of doing so. And the funding they get will be used to "pad their balance sheet" in case things get worse. Then you have someone like Bert Ely who thinks that the problem stems from some homeowners that are "irresponsible". Who is responsible for offering these lending instruments that got homeowners into trouble in the first place? Bankers that are greedy and cannot resist tapping into additional cash when the opportunity presents itself.
The banking industry should be ashamed of the "bait and switch" policies they use. I recall hearing of the "interest only" loan and being appalled that that type of loan could be offered. It was marketed to homeowners who had a hard time buying a house because of down payments. This type of loan is what is leading the "toxic mortgage" crisis, not homeowners that have difficulty making mortgage payments after losing their jobs and having their ARM or "interest only" loan balloon on them.
Banks should be highly regulated--to prevent them from offering such creative financing as "interest only" loans and high rate ARMs. Banks should be held responsible for preventing people who are not good credit risks from getting loans, not laying out the red carpet for them and then kicking them in the face when they cannot make the payments. Giving banks more money at this point is absurd and I for one will do everything I can to make sure they don't get billions more until the mortgage mess is cleaned up.
As for me: In 2006 I bought a 1400 sf. home in Florida near my new job for $270K (at the top of the "bubble"). In Oct 2007, I was laid off. After job hunting for 6 months, I finally found a position in Texas and relocated. During this time, I not only used my savings but had to tap into my 401K to continue making my mortgage payments. After relocating, I put the Florida home on the market starting at $279, then $260, $250, $220....etc. Finally decided to try to rent and received only 1/3 of the mortgage payment (remember the value of my home was supremely overinflated), so continued to dip into my 401K to support myself and my "toxic mortgage".
http://news.yahoo.com/s/bw/20090116/bs_bw/jan2009pi20090115722585
GLOBAL ECONOMIC RECOVERYRehabilitate * Replenish * Research * Restore * ReviveThe economy has collapsed and banking institutions are responsible for creating the financial problem. What can be done immediately to speed up recovery to our financial markets?THREE THINGS TO IMPROVE THE ECONOMY1. CREDIT CARDSNo credit cards should be issued to anyone under 21 years of age unless they pass a basic test on the knowledge and use of credit. In fact, outlawing the predatory nature of credit card companies through junk mail would save thousands of tons of paper, thereby conserving the environment.The bank modifications during the present administration regarding credit cards and bankruptcy law also helped perpetrate the financial mess the world is presently involved in. These laws need to be repealed.2. MORTGAGESWhy bail out banks? Why not require banks to unload foreclosed homes at 50% of the value of the original mortgage within 90 days of foreclosure.This was done during the Reagan Administration by the VA in Oregon and other states and the nation was able to crawl out of the mortgage crises in the eighties. This solution will free up cash while allowing new home buyers the ability to afford a home.3. SMALL BUSINESSIssue $50,000 small business grants to any recognized company that was formed after 1 Jan 2005. Veterans should receive an additional $25,000 to help modify the business to fit their needs.The people who started these small businesses deserve to be rescued financially from the deception perpetrated by the Bush administration.
Making Create Pay Check Stub paystub payroll payslip online
http://www.fakepaycheckstub.com http://obhaven.blogspot.com http://showproofofincome.blogspot.com http://showingproofofincome.wordpress.com
President Elect-Obama and his ecomonic team, should take learn alittle something from the expample set by Rudy Giuliani.
When Giuliani took office, he started with a lot of quality of life changes. At the time they seemed meaningless to a lot of people, but gettting rid of panhandlers and increasing a visible police presence helped everyone believe he was making real and lasting change.
Please take a page from Rudy's book and start with making sure every American feels change where they need it most...in their wallets. The ecomonic bail out, right now is a joke. Companies with their hands out is just sick. Fortune 500 companies telling their vendors, and I swear this is a true statemtent, "the money we owe you for this year, we intend to pay, but the money we have not paid from last year...forget about it...we are not going to talk about it". These are the people you are bailing out.
Business 101, if a business is failing because they have no money coming in to pay their bills, then bailing them out does not change the fact that they have no money coming in to their coffers.The bail out money has already been used to bolster wasteful expenditures and mergers.
Here is my great point. Force all the banks and the newly formed banks and any financial institution that takes bailout money, including foreign enities; to create new Debt Management Departments, that will be required to help current and new customers repair their debt. The new customers will be required to open accounts and the deposit money with the institution and the Debt Management department will consolidate the customers debt and place the customer on a spending plan and provide education that will result in a customer with a higher credit score and lower debt.
What is the upside for the bank? They will consolidate debt at a prearranged rate, sugguest consolidation loans and facilliate payback through the customer's accounts. The bank ends up with good debt customers that are extremely valuable and loyal customers that can now apply for car loans, mortgages, education loans etc.
The problem is that banks are afraid of people defaulting on mortgages.
The Feds already guarantee some mortgages through the Veteran's Adminstration and FHA with great success, so why not extend that program? With $700 Billion the Feds could guarantee all mortgages under about $150k for six months, with an option to extend the program to a year.
That would eliminate the bank's fears, instantly turn toxic mortgages to safe ones, and let people stay in their homes. It's much simpler than figuring out what everyone's home is worth and buying all the shaky mortgages out there. Buying the mortgages means the government would be stuck with the properties. It's much cheaper with little risk to the taxpayers.
As long as we're paying the mortgage bill anyway, why not pay it on behalf of the citizens who are paying the taxes. Banks and mortgage agencies don't need to benefit from their predatory practices. Let's help Joe America for a change, instead of the wealthy institutions.
As long as the mortages are backed on paper by the government, the banks have no excuse to freeze the nation's capital. Everyone around the financial world can breathe a sigh of relief.
Every effort must be made to keep families in their homes while they look for work, resell their home, or make other arrangements with the property. One provision of the Federal deal must guarantee no covered home will be foreclosed on during the terms of Federal protection. We don't want countless Americans made homeless, their kids dropping out of school, crime in their neighborhoods to rise, valuable real estate to slide into broken down abandoned properties.
Saving families from being evicted would win a lot of loyalty for the bill's backers.
A second condition of the backing would protect home buyers caught above the arbitrary $150k line. Bankers could not foreclose on any home, or demand full payment of the amount above $150k, during the term of Federal protection.
MORTGAGE REFORM PRESENTATION This presentation provides recommendations that will halt the devaluation of real estate and provide solutions to resolve our current financial crisis
MORTGAGE REFORM(the following four area will be addressed) -Laws/Rules/Regulations -Mortgage Rate -Refinance Process -New Purchase/Equity Loans
LAWS,RULES, and REGULATIONS: ( The first two points are recommended for permanent adoption, the third needs to be determined - but I would suggest 2004 to present) -Prohibit Foreclosures from being included in the appraisal process for determining property values -Decouple Mortgage Rates from Federal Reserve Management of Interest Rates and manage by independent Federal Agency -Establish Moratorium on completed and pending Mortgage Foreclosures from inclusion in Credit Scores
MORTGAGE RATE -Reduce rate immediately to 3% (or lower) -30 or 15 % annual fixed rate only -NO special packages such as interest only or ARM
REFINANCE PROCESS -Direct Financial Institutions to approve the refinance existing mortgages -No Appraisal -No Credit Check -Refinance total amount owed to include closing costs and equity loans
NEW PURCHASES/EQUITY LOANS -Appraisal Required -Credit Score Considered
Am I the only one tired of hearing the candidates talk about the middle class? WHAT ABOUT THE LOWER CLASS? We're in the worst position for this economic crisis, yet we seem to be ignored! Except by McCain, perhaps, who has at least stated a plan for the mortgage problem.
I want to know what Obama plans to do to help the lower class who struggle for financial stability and are struggling even harder now.
Obama came from an average family. Let's hope he hasn't forgotten us.
Dear John:
Amid the misinformation on Senator Obama's positions throughout your speeches you intersperse the occasional plank from your own platform. One point that your supporters seem to love is the promise to cut government. Spending, people, programs all get demonized.
Since the various bipartisan attempts to minimize the damage wrought by financial collapse you have come up with the idea of buying up all those failing mortgages. I won't argue the merits of your plan - because a one-line plan is merely an idea and an idea can not be discounted without analysis.
I will however suggest that in following throught on that idea, you have only two choices:
Most people, even Republicans, would probably agree the first choice is unwise. That leaves the second. Basically do what the banks are doing or should have done. That requires people. People cost money. Your mortgage plan would increase the size and cost of government. It would be a new additional program.
I'm not even going to make you admit it is, at the very least, liberalism in banking, even though I believe it is more like socialism in banking.
But it definitely is opposite to your "less government" pledge.
C'mon, Senator. The path goes left or right. Make up your mind and let us know who you are. Is the real John McCain a laissez-faire conservative or a closet liberal?
