Democrats to Temper Mortgage Relief Bill

[Pirate Smile]

Source: Washington Post

By Renae Merle
Washington Post Staff Writer
Wednesday, March 4, 2009; Page D03

House Democrats have reached an agreement to narrow the impact of legislation allowing bankruptcy judges to modify troubled mortgages.
Under the current version of the legislation, a bankruptcy judge could cut the principal balance of a homeowner's mortgage, lower the interest rate and extend the terms.

But after moderate Democrats raised objections last week, delaying a vote, Democratic leaders agreed to insert some restrictions, according to a letter circulated by some moderate Democrats in support of the legislation yesterday.

The compromise version, for example, requires that a homeowner share with the lender any profit from the eventual sale of the home if a bankruptcy judge lowers the principal balance. It also gives preference to lowering a homeowner's interest rate over cutting the principal balance.

The compromise also limits homeowners' ability to ask a bankruptcy judge for help if they have already received or been offered a loan modification that lowered their payments to 31 percent of their income.



Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/03/AR2009030303332.html?hpid%3Dtopnews&sub=AR

[midnight]

1. Homeowners should of asked for the don't ask any questions

clause that the banks got when they were bailed out.

[liskddksil]

2. The DLC: Where good legislation goes bad...

[Thrill]

3. Assholes took the money from the Lobbyist

[DJ13]

4. Apply the SAME rule to vacation homes

[lark]

64. Hell no

2nd homes and vacation homes should not be eligible for this relief at all.

:argh:

[No Elephants]

80. That sounds like a knee jerk desire to punish the borrower. How does your reaction

fit into saving the economy, which recovery is supposed to be about?

[Metta]

5. More betrayal of Americans by money. Happy karma, you inherit part of the suffering you cause.

Here's to you.

[Massacure]

6. I wonder how you legislate a preference

How do you encourage a cut in interest rates over a cut in principal.

I really don't object to these three limits, but that one kind of has me puzzled.

[Pirate Smile]

8. Most of them actually seem reasonable which is better then I expected once they

started down this road. I was afraid they would neuter it. I don't think they did (hopefully).

I'm not sure - I suppose the legislation will require the Judge to attempt to lower the interest rate enough first before moving to cram-down the principal if necessary.

The question now - what the hell is the Senate going to do to this legislation? ugggghhhh

Let's just get it passed quickly, please, people!

[Mojorabbit]

12. Everything but the bankruptcy

limitations. If the homeowner loses his job a year down the road he is screwed with that one.

[No Elephants]

75. Judges follow directions to give one thing preference over another all the time.

[Robbien]

7. What a wimpy word Temper. Blue Dogs gutted the thing

and turned it into another bailout for the banks.

Meanwhile the Blue Dogs will go home to their voters and lie about how they helped people.

[PSPS]

9. Actually, I applaud this modification of the bill

If someone is offered terms that consume 31% of their income with the mortgage payment, there's nothing wrong with that. In fact, that's the traditional DTI ratio.

I strongly oppose anything that allows a judge to lower a principal balance by fiat because that just props up what's left of the bubble price for a little longer, further harming the real estate market. So inserting a clause to require sharing any profit derived from such a giveaway at least makes it more palatible and protects taxpayers a little.

As for giving preference to lowering interest rates over principle, this is also the right thing to do. Lowering principle is actually the same as above, making it a bad idea. Lowering interest makes the lender take the bite more than the borrower. And if lowering the interest rate can't get the payment to the 31% DTI, they should lose the house because they bought far beyond their means anyway, probably with a NINJA liar's loan.

So, all in all, these changes to the bill were the right thing to do. The last thing I want is my tax money buying someone's $750K McMansion for them that they bought, despite their $40K/year income, with a no-doc option ARM.

[WriteDown]

10. Good points....

Sounds reasonable.

[No Elephants]

78. LOL. You agree with PSPS. What a coincidence.

[Psephos]

98. LOL. You disagree with WriteDown. Another coincidence.

Look, having a range of opinions here on DU is a GOOD thing. Diversity and all that. The tolerance thing. Stimulation of critical thinking. Discourse. The whole enchilada.

Jehovah's Witnesses purge dissent. The Taliban purges dissent. The John Birch Society purges dissent. You get my drift?



"The essence of the Liberal outlook lies not in what opinions are held, but in how they are held: instead of being held
dogmatically, they are held tentatively, and with a consciousness that new evidence may at any moment lead to their abandonment."
- Bertrand Russell

[Bluebear]

11. Because everyone affected is spending your tax money on $750,000 houses.

[PSPS]

13. The rule is simple: If they can't handle 31% DTI, they should be renting.

It's always the way it's been and it should continue to be that way.

The only people who won't like this plan are those who fear having to disclose their inadequate income for the house they had no business buying in the first place.

[depakid]

17. Seems to me a bankruptcy judge ought to have the discretion to make such decisions

based on the facts and circumstances in the case at hand.

[Fire_Medic_Dave]

89. They will within the parameters that congress sets.

[Skip Intro]

34. Reading this morning that the 31% is for first mortgage. Many have seconds.

From what I've read today, it appears that someone like me, with a first and second, only the first will can be modified to equal 31% of gross monthly income. The second mortgage is not taken into account at all in this calculation. The result of this is that the total monthly payment on both mortgages would be greater than 31%. I know many are in this situation and your argument, and Obama's plan, both fail to address us.

I am hopeful a bankruptcy judge would be able to modify the loans so that the total mortgage payment is less than 31% of gross income.

[w4rma]

57. No offence, but that sounds like a good policy. (nt)

[No Elephants]

83. Canada?

[ProudDad]

69. So by your reasoning

everyone who gets laid off, downsized, forced into early retirement (like me) should also be thrown out of their homes...

How democratic of you...

[No Elephants]

77. For borrowers, we have simple rules. For lenders, we have bailouts. I don't

have many problems with the modifications of the bill, at least not at first glance. But I have problems with your rhetoric.

[Lucky Luciano]

14. Agreed - very reasonable.

Some of these people will get to stay in their homes and in the event there is a realized profit from the sale of the home, the bank gets a piece of it to make up for the principal they wrotedown. This makes it a good deal more fair for those who are current on their mortgages.

[sandnsea]

16. It used to be 25%

And at some points in time was as low as 20% on average. They raised the 31% DTI rate to keep up with the real estate booms. Why shouldn't they lower it to what it used to be.

And I would really challenge you to find one real family who got a $750,000 house on a $40,000 income. That is just such a load of bullshit and it isn't the problem anyway. They can fix all these mortgages and guess what, the derivatives and credit default swaps have already blown up and can't be fixed. They were rated and traded way beyond the value of the mortgages and that problem has absolutely nothing to do with people trying to raise their family in a skyrocketing housing market.

[earcandle]

20. maybe so.

[jkappy]

36. Many big city renters pay over 50% of their income on rent n/t

[ozu]

37. This is true

but a single person spending that much of a percentage should really get a roommate or two. Living in Brooklyn by myself would have been unfeasible without one 5 years ago, especially if we're talking net income.

Obviously this can't really apply to those with families.

[sandnsea]

38. A lot on $1600 incomes too

All over the country. Just pointing out that things that are considered normal these days, are anything but.

[No Elephants]

81. Rent ing presents entirely different issues.

[Gormy Cuss]

95. Renters aren't the issue here

but even among renters you'll find that in most professionally managed properties they won't accept tenants who have a rent to income ratio of 1:2.

[jmowreader]

52. $750,000 houses aren't the problem...

That was probably an exaggeration to prove a point.

OTOH, even if I counted in binary there aren't enough fingers on both my hands to enumerate the mid-grade enlisted I have sold building materials to, who bought $250,000 homes using VA-backed ARMs. Mid-grade enlisted means specialists, corporals, sergeants and staff sergeants--. And THEN they turn around and open $15,000 Home Depot or Lowe's charge cards so they can "afford" to finish the bonus room. Admittedly, a staff sergeant's $1274/month nontaxable housing allowance makes a $250,000 home more affordable, but when does it end?

[sandnsea]

54. They shouldn't own a home?

I'm not sure what you're complaining about.

If you hadn't reduced the interest, the price would have come down, and we wouldn't be having this discussion.

The lenders, at the highest levels, created and sold this market. 100%.

And now they're going around to the pre-foreclosures and "helping" people walk away from their houses so they can list them and write new mortgages.

There are very few homebuyers at fault in this mess. Very few.

[jmowreader]

56. The soldiers aren't who I'm complaining about

This one is all about the vultures who call themselves realtors in this God-forsaken shithole. Those fuckers will take a staff sergeant (a troop who, if you count ALL his allowances, makes around $40k/year) directly to the $250,000 houses. They won't be shown the perfectly good $130,000 new homes. They won't be shown the $85,000 one-owner specials that are in nice shape. No, the realtors will show the poor bastards ONLY the expensive homes, and SELL those expensive homes, because of course that's "all there are in this town." And then the guy drives from his McMansion past Williamsburg Plantation--"New Homes from $165k" or past one of the developments with new homes for $135k.

And you want to hear the sickest part? When the soldier's ARM adjusts and prices him out of the house, the soldier moves into a rental but the lender doesn't get hurt at all--that guy is protected by the VA!

Y'know, you'd think for two hundred fifty bills they could at least drywall the attic instead of calling it an "unfinished bonus room." You'd also think they would insulate the fucking ceiling, but I am the undisputed king of calculating insulation for bonus rooms. I STILL make money doing it.

[sandnsea]

59. Ah, okay, we're saying the same thing

You know what happened today? One of the bigger realtors in town has someone going to all the homes with people behind in payments, and literally telling them to walk away from the home. This realtor used one of those down payment programs to get people into ARM's, advised the interest only because "they aren't going to be in this starter home long" -- and now he's telling those same people to move out so he can "help" with a quick sale and get the commission off the new listing. And he is very very well respected. This is just "business". Not his fault housing doubled here in 5 years. :grr:

[Carni]

97. That's really criminal that what you said is being pulled

Makes me sick!

[No Elephants]

84. Exaggeration to prove a point, or RW meme You pays your money and you takes your choice.

[Bo]

53. We gave loans up to 55 DTI.....Sigh ...how stupid we were

CLTV %100 and 55 DTI

[lark]

65. drank the kool-aid one time too many?

[earcandle]

19. makes sense to me.

[jayfish]

24. You're Going To Applaud People Right Out Of Their Homes.

APR's and monthly payments are only a part of the problem. You're leaving out a good chunk of owners who are simply going to walk away from their homes because they're upside down. Under your punitive plan, instead of making some portion of their money back the mortgage holder is still going to own a glut of property they cannot unload and paper they cannot collect on. Also, drop the RW talking points. The choice is not foreclosure v. a free house.

Jay

[karynnj]

25. I agree that these changes preserve the intent of the plan,

but improve it - giving us something to counter the RW talking points. In many cases, it may take years for the house to appreciate higher than the level the principle is set at, but when it does they should be grateful to share the gain with the government that enabled them to stay in their house. (In fact, had a family member paid down the principle to that level - I would suspect the deal would be to pay some or all back when the house was later sold. If you could see a richer version of yourself asking that of someone close to you, this is fair.)

Though I agree that it would be wrong to keep someone in a house that they are far from affording - this is not necessarily true - "And if lowering the interest rate can't get the payment to the 31% DTI, they should lose the house because they bought far beyond their means anyway, probably with a NINJA liar's loan." They MIGHT have been in a position to afford the house then - because both spouses had really high paying jobs - say on Wall Street - and now both don't and may not have that level of income any time soon. They still can't afford that house.

[ProudDad]

70. You might want to check the numbers

Last I saw the RW was about 18% of the population.

Not worth worrying about -- fuck 'em...

[No Elephants]

87. From your mouth to God's ears. (Well, not the last two words, but you know what I mean.)

[No Elephants]

82. Do what's right and sell it. Worrying about countering RW talking points is a losing game. And

those who sold no income verification and no documentation loans knew EXACTLY what they were doing. They pimped, er, I mean, marketed those loans aggressively in the hope and prayer that borrowers who could not really afford the loans would lie to get them, much like the serpent offering fruit of the forbidden tree to Adam. Now the serpents, er, I mean lenders, are complaining about liar loans. What a joke.

Funny how some people see only one side of that.

[Lost in CT]

31. Thank you I to am surprised by the objections

to common sense modifications...

If you get your principle lowered you should be able to flip the property a few years later and keep all the profit.

[No Elephants]

86. I don't think I have any objections to the modifications, but posters supporting them are

not making common sense points. The posts supporting this so far (not yours) have been a lot of RW judgmental, punitive bull. If they argued social policy and the economy, the responses would probably be a lot different.

[jsamuel]

42. one problem

"And if lowering the interest rate can't get the payment to the 31% DTI, they should lose the house because they bought far beyond their means anyway, probably with a NINJA liar's loan."

If someone lost their job, lowing the interest rate may not be able to get them to 31% by itself. However, the revision simply puts the interest rate as a priority, which I agree with.

[JerseygirlCT]

63. That makes sense, thanks. nt

[No Elephants]

76. Lenders who offered no doc loans knew EXACTLY what they were doing. They made

their money already. Institutions who bought these loans knew EXACTLY what they were buying. But, sure, let's blame it all on the plumber who took the loan marketed to him or her.

[depakid]

15. Way to go corrupt Dems!

You've done it yet again. A great victory for your banker buddies at the expense of ordinary Americans (and common sense).

[rpannier]

18. ...after moderate Democrats ...

Should be ...after corporate shill Democrats...

[earcandle]

21. and where do the authentic Democrats fit in?

Democracy, A Leonard Cohen Cover by The Blame

[nolabels]

22. If i was upside down with my mortgage i would be giving it back to bank

Some people are way out of whack and yet they still want to keep the place. It just seems so stupid to me, why do people want to do it that way :shrug:

[Demit]

23. Because it's their home? It's where they've been living?

[karynnj]

26. It might be they either can't sell the house because of the slow

market or they can't sell it for more than the mortgage.

[PSPS]

27. Because they're bums

They bought beyond their means with their liar's loan and now they want you to gift them the house. The large majority of option ARM loand being recae now through 2012 are just this kind of loan (no-doc NINJA.)

[Lucky Luciano]

28. Come on dude - I agreed with your point above in post #9, but

this is incorrect. A lot of people did buy within their means and then lost their jobs because of things that are far beyond their control.

[Lance_Boyle]

32. yes, there is some hard fortune involved, amidst some scamming

but historically hard fortune does not yield free or reduced-price homes for those it hits. That's why it's called "hard fortune," and not "looks like it's gonna be hard fortune but then taxpayers buy half your house for you."

[Lucky Luciano]

50. I was only commenting on his notion that anyone with hard fortune is a bum. nt

[Telly Savalas]

67. And right now hard fortune has a historically high 1 out of 12 homeowners

behind in their payments or in default, which is snowballing into more hard fortune across our economy. If we just sit back and try to let the market sort itself out, the foreclosure rate will skyrocket.

But yeah, the restrictions inserted by Congress are pretty sensible.

[ProudDad]

72. Your house too

Foreclosures bring down EVERYONE'S property values.

Or are you also a renter and have yet another reason to say "Am I my brother's Keeper?"

[No Elephants]

90. Please see Post # 76,. Homeowners are being given relief bc of the economy, not bc of

hard fortune However, there was much more scamming by lenders than there was by borrowers.

Lenders marketed these loans aggressively, knowingthat the borrowers might well default. Lenders did not care about defaults then bc they MORE than made their money back on the fees and on selling the mortgages, probably to someone who also knew default was likely and therefore paid peanuts for the bundle of mortgages.

I don't think a lot of borrowers took these loans with the intention of defaulting.

Besides, you are simply assuming that "liar loans" are the majority of the defaulting loans. I doubt that. Job losses probably are a much greater factor.

And the crd's made money for everyone but the borrowers and the taxpayers. That has a good deal to do with collapse of the economy, and not only in this country. The crd's were sold to foreigners and are screwing up their economies too. So, we bailout the lenders and other financial institutions, but get really punitive when it comes to the borrowers. We are giving mortgage relief to save the economy, not to bailout borrowers.


At DU, I expect to see fewer RW memes unsupported by facts. Silly me, I guess.

[Donnachaidh]

43. the large majority? Of course you have LINKS to back up this bloviation?

We'll wait.

[ProudDad]

71. Bums, eh?

So being upside down on the loan, as I am now that I've lost my 20% down payment and another $50,000 on top of that when the greatest real estate bubble of all time burst right after buying the home...

I should also just give up my home now?

How very white of you...

[No Elephants]

85. Please see post #76. If you don't get that the bums in this scenario are the lenders who

all but stood on their heads to get people to lie in order to get these loans, you're probably posting on the wrong board.

And I would REALLY like to see a link from a credible source saying the problem with most of these loans is the borrower's lie, not the collapse of the housing market, job losses or the lender's overreaching zeal to make loans.

[ozu]

29. Because they bought it as a home to raise a family?

If the terms and purchase price were agreeable to them, and they plan on settling there, there's no reason to walk away if they can still afford the payments.

Willingly trashing your ability to ever get another decent loan/mortgage just because you're upside down is extremely short sighted.

[Romulox]

35. How would you pay the deficiency judgment??? nt

[nolabels]

51. I would go bk

"A mortgage deficiency is an unsecured debt and therefore dischargeable in a bankruptcy filing"
http://www.lawguru.com/cgi/bbs/message.php?i=164797463&view=a


Of course that might also mean renting for four or five years instead buying any real estate but a good lawyer would be needed at any rate.

[Romulox]

61. OK, but that's not "giving the house back", it's SURRENDERING the home in BK.

As you may or may not know, bankruptcy is a bit more involving than that.

[nolabels]

62. It's a matter of symantics to the term of to 'giving the house back'

I filed a Bk about ten years ago it worked out okay me. As for credit rating wise i was better off in just three years. I am not really sure if giving the house back (foreclosure) is the same a short sale as far as obligations go. At any rate though, paying for a dead horse that is already half buried makes no sense to me

[No Elephants]

92. Home mortgage loans are nonrecourse.

[No Elephants]

91. These are nonrecourse loans.

[dysfunctional press]

44. if it's meant to be a person's home that they intend to live in- what difference does it make...?

as far as whether or not they're "upside-down" on the mortgage? except possibly that they couldn't use it as a piggy-bank for taking out home equity loans...? and is that really so bad? :shrug:

[No Elephants]

88. Some don't even realize that is an option, let alone that it may well be their best economic bet.

[AnneD]

30. Again the desperate Middle Class....

is stabbed in the back by the people that are suppose to represent us.

I just can't wait for more legislation to help us-like that usless credit card reform that won't go into effect until NEXT year. has the GOP drug the DEMs so far to the right that this weak assed crap passes for reform?

[JPZenger]

33. $730,000 Max for Federal Mortgage Help is too high

The revised plan for Federal assistance in mortgages proposes to provide help to people with houses worth up to $730,000.

http://www.msnbc.msn.com/

I think this high a limit plays into the hands of people who are upset about people getting bailed out for buying more house than they could afford.

I would prefer a lower limit across most of the country, and then maybe a higher limit only in a few areas with exceptionally high housing prices (such as the SF Bay Area).

[DiverDave]

55. 730 K??

My house is worth less then 90K, and since my wife got laid off, I'm having trouble paying our bills.
Where is MY help?
No where, thats where, since I bought a house I Used to be able to affoed the payments on.

Bah, another time I get screwed for being honest.

[ProudDad]

74. You might want to check into it.

If you're paying more than 31% of your income for housing, you qualify.

[ProudDad]

73. It's because

$730,000 wouldn't buy you shit in California near the end of the bubble...

It should be a sliding scale by real estate market to be really fair.

[newtothegame]

39. I really don't understand the outrage...

The compromise version, for example, requires that a homeowner share with the lender any profit from the eventual sale of the home if a bankruptcy judge lowers the principal balance. It also gives preference to lowering a homeowner's interest rate over cutting the principal balance.

First, I don't understand why the principal needs to be lowered? If this is about keeping people in their homes, lowering the interest rate to make the payment a certain percentage of their income, and extending the terms, accomplishes that. Lowering the principal seems weird; how can you change the price of a house after the fact? Doesn't it make sense that lowering the interest rate would take preference over cutting the principal?

I don't understand the outrage...:shrug:

[Laelth]

46. What if buyer needs to sell the house, or just wants to sell the house and start renting?

Let's say buyer bought house for $500K and bank loaned $475K. Because of the housing crash, fair market value of house is now $350K, and buyer still owes $450K on the loan. Buyer, when selling the house, has to pay $100K just to give up the house and get out. It's just not possible, and I don't care whether the interest is lowered to 1% and the payments extended over 100 years. Only cramming down the principal (reducing the amount owed to $350K) can get the poor buyer out of the house.

I can't understand people who insist that buyer must pay an extra $100K just to get out of this loan so that he or she can start renting. It was the bank that made the bad decision to loan $475K on a house that's only worth $350K. Why should the unsophisticated buyer be on the hook for the bank's bad decision?

The DLC (or New Democrats, or whatever the corporate pawns are calling themseleves now) have gutted theis bill. Cramming-down the principal is the only solution that really works in most of these cases.

-Laelth

[newtothegame]

47. Yeah, but if that's the point of the bill, then we're being lied to by this administration just....

like the last one. Obama's stated purpose for this bill was to help people KEEP their homes and not be FORECLOSED on, not to be able to sell their homes without taking a loss.

My parents took a loss when they sold their home FOUR years ago. It happens.

[Laelth]

49. The administration proposed cram-down of the principal.

I'm not sure it's fair to say the administration is "lying" about that. The "centrist" democrats, on the other hand, will undoubtedly "lie" and say their "revised" bill is helpful, when it's not.

:dem:

-Laelth

[No Elephants]

79. I agree, but lowering the principal may be the better solution for the lender, as well as the

borrower. If the principal amount of the mortgage is a lot higher than the actual value of the home, the borrower/homeowner is likely to simply back up a moving van and leave. The borrower is better off, but the lender is up the creek, and so are the neighbors. And the economy.

[BlueJac]

40. The problems Dems show up again............

no wonder we aren't getting anywhere fast!

[starroute]

41. That sure turns the meaning of "temper" on its head

http://www.dictionary.net/temper

To soften; to mollify; to assuage; to soothe; to calm.

Puritan austerity was so tempered by Dutch indifference, that mercy itself could not have dictated a milder system. --Bancroft.

[dysfunctional press]

45. i disagree STRONGLY with reducing the principle balance on people's home loans...

rather than doing that, i support adjusting/lowering the interest rate, and then re-writing the term/length of the loan for as long as it would take to pay it off at the lowered rate- even if it's 100 years- the mortgage could be passed on as part of the person's estate- with no additional penalties/fees for the heir(s) that get the home and the mortgage.

[w4rma]

58. It's either that or the homeowner walks away from the house that isn't worth nearly as much. (nt)

[leveymg]

48. This is actually great news, if this can be required for all Fannie Mae/Freddie Mac mortgages

without bankruptcy. See, Tue Mar-03-09 02:41 PM
Original message
As China Dumps U.S. Assets, Wall Street Insists on Continuing Bailout of AIG

[lumberjack_jeff]

60. The word "moderate" gives me diaharrea. n/t

[Romulox]

66. Most of the "moderate" (rightwing) Dem's proposals are unworkable.

[ProudDad]

68. I wish they'd stop calling the blue dogs "moderate"

They're the worst kind of mealy-mouthed DINOs in the pea patch.

I'm screwed by 2 blocks -- I'm in one of their districts.

She makes me want to :puke:

2 lousy blocks away from a member of the Progressive Caucus...

It's painful after decades of having George Miller and then Barbara Lee represent ME!



And I'm under water in my house so I can't move even if I could afford to move...

[No Elephants]

93. You probably can afford to move. Read your mortgage. The lender has recourse only to your home. If

you personally guaranteed the mortgage with anything but your home, that would be highly unusual.

[No Elephants]

94. I don't like this, but I have to predict that we are soon going to see people

having to guarantee their home loans with their other assets, so that walking away from a home that is worth a lot less than the mortgage does not remain an option for borrowers.

Requiring borrowers to put down a good chunk of money and to limit their PIT payments to a reasonable percentage of their incomes protected borrowers as much as, or more than, they protected lenders. For the sake of borrowers, their neighbors and the economy, we ought to resurrect those sound financial practices.

[liberalsince1968]

96. Fuck the repugs. Fuck the dems. All congresspeople listen to money. Not the people.

[yurbud]

99. this is a good argument for not calling them ''moderate'' anymore--they are corporate owned whores

nothing more or less.