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ManintheMiddle
Joined: 20 Oct 2008
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 Posted: Wed Feb 18, 2009 7:35 pm Post subject: RIGHT ON, MR. PRESIDENT: OBAMA GETS IT RIGHT THIS TIME |
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Obama understands the housing crunch and how it has affected the American economy quite well, thank you very much, as evidenced by his recent speeches in Denver and Phoenix.
He "gets it," because he sees that the culprits were not only the greedy Wall Street bankers who backed bad mortgage loans, nor the real estate agents who peddled flawed policies, nor the hedge fund owners who capitalized on the fallout after the bubble burst but the homeowners themselves who bit off way more than they could chew, assuming debt burdens well beyond their means to afford when the flexible interest rates kicked in. No, you are NOT entitled to a 5 bedroom, two story house with patio and pool. Pursuit of the American Dream is not an entitlement despite what millions wanted to believe. And, yes, you need to state your income and back it up with documents like other good boys and girls in the housing market. The who-gives-a-f**k Californian roller coaster ride is over, and even those homebuyers who bought with the intent to sell out of sheer speculation must get off. Common sense at last?
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Obama throws $75 billion lifeline to homeowners
By MARK S. SMITH and ALAN ZIBEL, Associated Press Writers Mark S. Smith And Alan Zibel, Associated Press Writers
MESA, Ariz. � President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure Wednesday, declaring an urgent need for drastic action � not only to save their homes but to keep the housing crisis "from wreaking even greater havoc" on the broader national economy.
The lending plan, a full $25 billion bigger than the administration had been suggesting, aims to prevent as many as 9 million homeowners from being evicted and to stabilize housing markets that are at the center of the ever-worsening U.S. recession.
Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" � those in which homes' market values have sunk below the amount the owners still owe.
"All of us are paying a price for this home mortgage crisis, and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said.
The new president, focusing closely on the economy, in his first month in office, rolled out the housing program one day after he was in Denver to sign his $787 billion emergency stimulus plan to revive the rest of the economy. And his administration is just now going over fresh requests for multiple billions in bailout cash from ailing automakers.
Wall Street has shown little confidence in the new steps, declining sharply on Tuesday before leveling off after Wednesday's announcement. The Dow Jones industrials rose 3 points for the day.
Success of the foreclosure rescue is far from certain.
The administration is loosening refinancing restrictions for many borrowers and providing incentives for lenders in hopes that the two sides will work together to modify loans. But no one is required to participate. The biggest players in the mortgage industry temporarily had halted foreclosures in advance of Obama's plan.
Complicating matters, investors in complex mortgage-linked securities, who make money based on interest payments, could still balk, especially those who hold second mortgages or home equity loans. Their approval would be needed to prevent many foreclosures.
"The obstacles have not gone away," said Bert Ely, a banking industry consultant in Alexandria, Va.
Another cautionary note came from John Courson, chief executive of the Mortgage Bankers Association.
"It seems to offer little help to borrowers whose loan exceeds their property value by more than 5 percent," he said, noting that that requirement would limit the plan's success in some of the hardest-hit areas in California, Florida, Nevada and Arizona and parts of the East Coast.
Indeed, Obama himself said, "This plan will not save every home."
The goal is to lower many endangered homeowners' payments to no more than 31 percent of their income. But that depends on a high degree of cooperation by lenders who have been increasingly wary of new lending as the crisis has deepened.
Still, the Obama administration, after talking with mortgage investors, appears confident that it is providing the right mix of incentives and penalties to make sure mortgage companies take part. Obama said he backs legislation in Congress to allow bankruptcy judges to modify the terms of primary home loans � an idea ardently opposed by the lending industry.
"Taken together, the provisions of this plan will help us end this crisis and preserve, for millions of families, their stake in the American Dream," Obama said. Yet, he also added: "We must also acknowledge the limits of this plan."
He called on lenders, borrowers and the government "to step back and take responsibility" and said: "All of us must learn to live within our means again."
There's broad economic anxiety across the nation, an Associated Press-Gfk poll indicated.
Nearly three in four people say they know someone who has lost a job in the past six months as a result of the tough economic conditions, according to the poll, released Wednesday. And more than half say they worry about being able to pay their bills and about seeing their retirement investments decline. So far, Obama's job approval rating still is high, at 67 percent, and he is scoring strong marks for his handling of the economy.
The president unveiled his housing plan at a Phoenix-area high school in a state with one of the country's biggest foreclosure rates.
Nationally, Moody's Economy.com says that of the nearly 52 million U.S. homeowners with mortgages, about 13.8 million, or nearly 27 percent, owe more than their homes are worth after many months of declining prices.
How soon will the new plan show results?
"You'll start to see the effects quite quickly," Treasury Secretary Timothy Geithner told reporters in Phoenix, noting that rules governing the changes will be published March 4.
In theory, homeowners facing foreclosure or borrowers owing more on their homes than their mortgages are worth would have more opportunities to refinance their loans so that they have lower monthly payments. Lenders would voluntarily participate in the government programs.
The $75 billion Homeowner Stability Initiative would provide incentives to mortgage lenders to cut monthly payments in an effort to persuade them to help up to 4 million borrowers on the verge of foreclosure. The goal: cut monthly mortgage payments to sustainable levels, using money from the $700 billion financial industry bailout passed by Congress last fall.
Another part would specifically help people with dwellings whose market value has sunk below the principal still owed on the mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 million to 5 million families do just that � if their mortgages are owned or guaranteed by Fannie Mae or Freddie Mac.
To boost confidence, the Treasury Department said it would double its support to the two mortgage giants that the government essentially took over last fall.
It said it would absorb up to $200 billion in losses at each company by using money Congress set aside last year and will continue purchasing mortgage-backed securities from them. Fannie Mae and Freddie Mac are projected to need a combined government subsidy of about $66 billion, well short of the new promise of up to $400 billion.
Obama emphasized that his plan focuses on helping families who have "played by the rules" stay in their homes.
But, he said, it will do nothing to help "the unscrupulous or irresponsible." He cited so-called speculators who took out risky loans on multiple properties to make money by selling them during the housing boom, lenders who took advantage of naive buyers by glossing over the fine print, and people who willingly bought homes that were way beyond their means.
"This plan will not save every home," Obama said. |
Can I hear an A-men, bruddahs? |
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Rusty Shackleford
Joined: 08 May 2008
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| Posted: Wed Feb 18, 2009 8:08 pm Post subject: |
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Whoa back buddy. The actors in the market (homeowners, bankers etc) were only responding to (distorted) incentives in the loans/money market.
And where might those distortions have come from? Let's try government demanding banks soften lending criteria so that sub-prime borrowers might buy a house they don't have the means to pay for.
The tech bubble was caused by the Fed lowering interest rates hence increasing the money supply. Likewise with the housing bubble and subsequent crash. Except this time you get the double whammy of increased money supply and the rules of prudent lending being thrown out the window, at the same time.
Obama's a politician not an economist. He doesn't "get" shit. |
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Jeff's Cigarettes
Joined: 27 Mar 2007
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| Posted: Wed Feb 18, 2009 8:54 pm Post subject: |
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| But, he the man wid the plan...gimmi 5! |
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ManintheMiddle
Joined: 20 Oct 2008
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| Posted: Thu Feb 19, 2009 1:59 am Post subject: |
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Rusty wrote:
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| The tech bubble was caused by the Fed lowering interest rates hence increasing the money supply. Likewise with the housing bubble and subsequent crash. Except this time you get the double whammy of increased money supply and the rules of prudent lending being thrown out the window, at the same time. |
Not quite; you're a little rusty on your macroeconomics as of late. I suggest you view the CNBC program "House of Cards" for a refresher course. Among others, they interview Greenspan at length, the guy who had the Fed Reserve lower those interest rates you speak of.
Put away Rush's playbook and check it out. |
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Hater Depot
Joined: 29 Mar 2005
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| Posted: Thu Feb 19, 2009 6:41 pm Post subject: |
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I have some sympathy for people who bought more house than they could really afford. Throughout the housing bubble, wages were stagnant while interest rates were low and housing prices were shooting up. Under the circumstances investing in a very big house made sense.
That's the problem. Everyone involved was acting rationally according to their own narrow circumstances. An economy can crash even as all individuals act rationally. One illustration is the paradox of thrift. |
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