Comments on: Foreclosure Freeze - Project Lifeline

By: Fred

Fred — Fri, 29 Feb 2008 04:15:29 +0000

Lets not bail out homeowners, let them give their houses back to the bank, let house prices fall 80% to allow vultures to buy. If you would had bought in ’05 you wouldn’t think like that. Then allow banks file bankruptcy and investors to loose all their money. Real state then will probably be worth only to rich foreigners.
Now government should not get involved in this problem because first it is way too late, in ‘06 may be would have worked and second tax payer prefer spend their money in wars and helping other countries rather than helping ourselves. We are humans.
The only way to fix this housing problem, as Sen. Chuck Schumer and others stated, is for lenders to cut down on the borrowers’ debt. The rest extends the agony. After all, both lenders and borrowers are high-risk investors looking for high returns. Now is time for both to compromise before loosing all and the economy take a perhaps forever dip or at the end of this tunnel wakeup controlled by our own enemies.

By: Patrick

Patrick — Thu, 14 Feb 2008 20:00:31 +0000

Adfecto, Good points. I’m not sure this is going to be a good thing for our country overall. I think it may help a few on an individual basis, but it won’t have that much impact on the economy as a whole.

By: Adfecto

Adfecto — Thu, 14 Feb 2008 18:54:38 +0000

Band aide for a bullet hole. However, that doesn’t mean the government should even be TRYING to fix the problem. Unfortunately for some, the free market needs to be allowed to punish both the borrowers and the lenders. On the books already are a series of laws that cover foreclosure (mostly at the state level). Maybe a few states need to get on the ball to bring their laws up to the level of most of the country but I see no place for Congress in this matter.

By: Patrick

Patrick — Thu, 14 Feb 2008 01:34:51 +0000

foreclosurefish, I have a feeling this is a political move in an election year. You bring up a good point that financial institutions can voluntarily do this anytime they wish. Why they haven’t is anyone’s guess. But now that there is a financial incentive backed by the government, it makes more sense for them to do so. I’m sure there is some form of kickback or tax break involved for the financial institution. Of course, the news channels neglected to talk about that!

By: foreclosurefish

foreclosurefish — Thu, 14 Feb 2008 01:29:06 +0000

I think you’re right about this. Not only are average people not going to benefit from this program, they are even going to have to foot the bill for Congress to come up with and draft up and discuss voluntary programs. If the programs are voluntary, why are our lawmakers working on them? Banks and homeowners come to voluntary agreements on solutions to foreclosure every day without government intervention.

And nothing that the government does has the results that it intended. Or at least it won’t have the publicly stated results that are intended. What the banks and government (or am I being redundant?) are really considering with this Project Lifeline isn’t exactly clear yet.

By: FFB

FFB — Wed, 13 Feb 2008 19:19:04 +0000

Kinda seems like the government is artificially keeping up the price of homes. In many areas home prices have fallen but still not to a reasonable level. I’m not saying I want people kicked out of their homes but sometimes you have to let the system fail in order for it to correct itself. And it would correct itself given the chance.

Here I sit, we haven’t bought a home because they are too expensive and the government is helping keep the prices up!

By: Patrick

Patrick — Wed, 13 Feb 2008 19:06:32 +0000

fathersez, I’m sure foreclosures hurting banks is a universal truth!

Ron, I agree with your statement that government involvement usually screws things up somehow. I believe this may help isolated individuals, but as a whole will not change the course of our current economic situation.

Kirk, Very thorough response! I tend to agree with many of your statements. This program may help some people, but overall, I don’t see how it will be a benefit (other than the media presenting it in favorable terms). It is an election year, and the economy is doing poorly. In my opinion, these kinds of programs are a result of political posturing and little substance.

American Dividend Investor, “This plan is simply going to delay the inevitable.” Well stated. This may help certain individuals, but on a macro level, I doubt it has much effect.

Thanks for the comments!

By: American Dividend Investor

American Dividend Investor — Wed, 13 Feb 2008 16:40:02 +0000

I tend to agree with the above posters. This plan is simply going to delay the inevitable. If the homeowners can’t afford the mortgage this month why will they be able to afford them in 2 months?

American Dividend Investor.

By: Kirk

Kirk — Wed, 13 Feb 2008 14:50:37 +0000

I hate to be a humbug, but I think this will be useless. It is another example of the government being able to claim they are helping the homeowner.

As Patrick points out, the restructuring is not guaranteed. These folks need to qualify for the new loan, which most will not be able to for a couple reasons.

One, it was estimated almost 70% of these subprime and Alt-A loans were liar loans. These folks grossly overestimated their income in order to get the home. When the bank finally does some due dilligence, they will see that these folks can’t really afford the home they bought.

Two, the press talks about how people are losing their homes due to the resetting of payments for the exloding ARMs. In actuality, most folks have defaulted before the reset took place. This means they flat out cannot afford the home. If they default during the teaser rate, then they have no chance to make it even with a fixed 30 year rate.

Three, it isn’t just the bank holding the loan. These are securitized instruments with investors who expect payment. The bank sold these instruments to investors (and made a pretty penny, mind you) so they have to take these folks into consideration. They can’t just take a smaller payment without facing a lawsuit (and rightly so).

If these type of programs are successful in keeping people in their homes with modified rates or payments, it will only hurt the real estate market, not help it. You will not find any buyers of securitized mortgages ever again. What investor would buy something where the government can step in and say you aren’t getting paid. No one. That is why third world countries have so much trouble garnering foreign investment. Also, the banks will charge higher rates to new borrowers because they will demand a higher payment to guard against the risk of being forced to give a free ride to a homeowner who made a bad mistake.

So while the Bush administration is patting themselves on the back, we need to realize this will probably have a small positive, but it could have a big negative in the form of unintended consequences.

By: David

David — Wed, 13 Feb 2008 14:38:57 +0000

Thanks for the mention, Patrick!