It’s beginning to look a lot like Christmas—in July–for distressed homeowners. IF–if–a rescue plan just voted on in the Senate by a vote of 83-9 can avoid a Bush veto and be restructured to please the White House, the Congress, the lenders and, oh yes, the homeowners! Experts making educated guesses think all that is not likely to happen till July.
So, what does the current measure offer?
What it comes down to is that borrowers whose homes are in danger of foreclosure would be eligible for provisions of the plan provided the holders of their mortgages are okay with taking a huge loss by allowing them to refinance at a lower amount.
Also, should the homeowner eventually sell the property, they would share some of any profits made with the folks in Washington.
So, is everyone happy?
Silly question. The answer is, no. Some Republicans say the measure is a sell out–this while members of the House of Representatives Black Caucus claim the plan has “glaring omissions.”
Clearly, something will and has to be done. What began as a subprime mortgage mess has spread so far and wide and deep within the American economy—world economy! And, this, of course, is a key election year with both Barack Obama and John McCain having to takes sides on how to dig the country out of the mortgage/credit debacle.
The problem is, in a haste to fashion some plan that might ease the fears of voters before November, Congress may come up with something that makes matters worse. Now I know what you are thinking. You’re thinking, “Congress. Make matters worse? Come on” But there you have it. It could, if it is bullied into a quick fix that shows its faults after the presidential election has come and, we can only hope, gone.
Unknown is how long any rescue plan might take before it really sinks in? Restructuring a mortgage, even in the best of times, is no fun task. Restructuring a mortgage in the middle of a crisis and using an untested Congressional rescue plan is bound to be a ton of laughs!
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Article Author:
Charles FeldmanCharles has written 147 articles for us.
Visit Charles's Website: http://www.thefeldmanblog.com
Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog.
Joshua Dorkin
Charles Feldman
Ted Karsch.
{ 5 comments… read them below or add one }
I think this would be an easy thing to deal with for investors. We can create some sort of creative solution for the homeowner in a Subject To format that is a better offer for future profits than what the government will offer.
do you think lenders will be willing to participate? does that mean that they anticipate that the market is likely to push prices below the deal the government is offering?
is this the best way to repopulate houses? is that the goal that needs to be first addressed?
sorry for the multitude of questions, but am interested in these types of issues.
thanks!
I have to agree with Terry. With this business, better yet, in any business, being creative pays off dividends. Real Estate Investors are very creative people and will make this work.
Peter
The whole idea is just a political shambles. How can it ever be fair and reasonable to the millions who paid their mortgages on time, despite hardship in some cases, if their tax dollars go to those who didn’t? Whatever happened to personal responsibility?
I really think the only true way to fix this mess…is to allow the mortgage market correct itself.
A lot of homes were/are overappraised, financed by greedy bankers, and taken on by uneducated buyers who didn’t have a hint of what they were getting themselves into.
Oh, and I do believe that one of these big U.S. banks will fail by the end of 2008.