rssAnother Hole in the Obama Foreclosure Plan
Thursday, February 19, 2009 at 12:42 pm
- 10 Comments
As we wrote today, there’s a real hope among housing experts that President Barack Obama’s new plan to tackle the foreclosure crisis will be wonderfully successful, but the voluntary nature of the program has left more than a few doubts lingering.
And here’s another reason to worry: The component of the plan that expands the refinancing option for struggling, but not delinquent, homeowners excludes those whose outstanding mortgages exceed 105 percent of their homes’ value.
Here’s a longer explanation. Currently, homeowners with mortgages valued below 80 percent of the home’s worth can — if the loans are backed by Fannie Mae and Freddie Mac — refinance those loans to take advantage of currently low interest rates. But there’s a ban on refinancing if the mortgage exceeds the 80 percent debt-to-value threshold. The Obama housing plan doesn’t remove that ban, it just bumps the ceiling up to 105-percent.
So if you owe $340,000 on your $500,000 home that’s now worth $380,000, you’re newly eligible for refinancing. (Debt-to-value = 90 percent). But if you owe $340,000 on your $500,000 home that’s now worth $320,000, you’re not eligible for refinancing. (Debt-to-value = 106 percent.)
The New York Times today translates the 105 percent ceiling into practical terms:
That means many homeowners in areas like Florida, Arizona and Nevada, where home prices have plunged the most, will not be eligible.
Put another way, the hardest hit areas will get the least help. Can someone explain that, please?
10 Comments
Comment posted February 19, 2009 @ 10:23 am
I can explain this: the government doesn't want to dole out money to homeowners who are likely to default, which is what you would expect with mortgages that are seriously underwater.
Comment posted February 19, 2009 @ 10:27 am
It appears aimed at the individuals that Franks and Obama and Acorn forced Fannie and Freddie to issue to those that could not afford the loans. Where is this money coming from? Where did Congress authorize this spending? Just a few details I am not understanding. Doesn't Congress control spending?
Comment posted February 19, 2009 @ 11:49 am
I think there are valid arguments on both side about this government plan. Will it raise the budget deficit? Probably. Will it help? That’s a good question. I think economies go through cycles and this might be one of them. I read a good article on recessions and their history on
http://www.recessioninfocenter.com
Comment posted February 19, 2009 @ 11:51 am
I think there are valid arguments on both side about this government plan. Will it raise the budget deficit? Probably. Will it help? That’s a good question. I think economies go through cycles and this might be one of them. I read a good article on recessions and their history on
http://www.recessioninfocenter.com
Pingback posted February 19, 2009 @ 2:26 pm
[...] Weasel Zippers wrote an interesting post today on Another Hole in the Obama Foreclosure PlanHere’s a quick excerpt…a real hope among housing experts that President Barack Obama’s new … The Obama housing plan doesn’t remove that ban, it just bumps the [...]
Pingback posted February 19, 2009 @ 2:28 pm
[...] Weasel Zippers wrote an interesting post today on Another Hole in the Obama Foreclosure PlanHere’s a quick excerpt…a real hope among housing experts that President Barack Obama’s new … The Obama housing plan doesn’t remove that ban, it just bumps the [...]
Comment posted February 21, 2009 @ 5:32 am
Yeah this plan has raised some issues with us over here at http://www.refinancingcondo.com I can not believe the disregard for some of the hardest hit homeowners. It is risky to refinance someone with 90% LTV so why not just cover pretty much everyone and offer near 100% refinance options for people in the worst effected areas. Crazy!
Pingback posted June 22, 2010 @ 12:45 am
[...] 7.Another Hole in the Obama Foreclosure Plan « The Washington As we wrote today, there’s a real hope among housing experts that President Barack Obama’s new plan to tackle the foreclosure crisis will be wonderfully successful, … But there’s a ban on refinancing if the mortgage exceeds the 80 percent debt-to-value threshold. The Obama housing plan doesn’t remove that ban, [...]
Comment posted March 30, 2011 @ 4:19 am
How does anyone know what their house is currently worth in this economy? Foreclosed properties in our area can be had for as little as $60,000. We bought when the market was high in 2007. So our $550,000 purchase price is worth ? in 2011. Our equity is gone and we are 10 years away from retirement. So why doesn’t everyone qualify for a refinance? I’m not sure my house is now worth as much as the mortgage due! KittyKat55
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