[Money-matters] Money Matters

Wed Jan 27 15:06:51 UTC 2010

Just out this Morning. The "principal reduction" program I mentioned over
the last year has finally dawned on them. I am NOT in favor of this nor
should you be.
THIS program will be massive and another give away of your money.
Write your representative now. Here it the article>

Jan. 27 (Bloomberg) -- The Obama administration's $300 billion Hope for
Homeowners program may be retooled to help the growing number of Americans
who owe more than their properties are worth as current anti-foreclosure
<http://www.bloomberg.com/apps/quote?ticker=FORLSUBP%3AIND>  efforts fail to
account for these "underwater" borrowers. 
The changes would be at least the third lease on life for the program, which
began in October 2008 during the Bush administration and has so far helped
just 96 of the 400,000 homeowners originally
<http://www.bloomberg.com/apps/quote?ticker=FORLTOSD%3AIND>  targeted. 
The U.S. Federal Housing Administration is considering ways to make the
program more effective, Commissioner David
<http://search.bloomberg.com/search?q=David+Stevens&site=wnews&client=wnews&
proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields
=wnnis&sort=date:D:S:d1>  Stevens said in an interview. While he wasn't
specific about any changes, he said Hope for Homeowners could be expanded to
more directly help borrowers with negative
<http://www.bloomberg.com/apps/quote?ticker=ETSLMP%3AIND>  equity. 
"The Hope for Homeowners program is unique in that it involves equity
writedowns, principal balance reductions to help the underwater borrower,"
Stevens said. "We're going to look at that program very closely to make sure
it can be as effective as possible, because that's another segment of the
population that needs to be addressed." 
With home prices <http://www.bloomberg.com/apps/quote?ticker=SPCS20SA%3AIND>
down as much as 30 percent from their peak in April 2006, more borrowers are
walking away from their homes even if they can afford the payments,
administration officials and analysts have said. The Treasury Department is
looking for a solution for the more than 10 million underwater
<http://www.bloomberg.com/apps/quote?ticker=DLQTDLQT%3AIND>  homeowners that
analysts estimate may willingly let their mortgages slip into default, which
would push home prices even lower and hamper the economic recovery. 
Walking Away 
"When negative equity gets very, very high, when people are very underwater,
that starts to have a much larger impact on people leaving their homes,"
Michael
<http://search.bloomberg.com/search?q=Michael+Barr&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1>  Barr, the assistant Treasury Department secretary
for financial institutions, said in a Jan. 15 conference call with
reporters. "And the question then is which of those people is it fair and
appropriate to help." 
Hope for Homeowners was intended to help borrowers with loans of less than
$550,440, according to the original terms of the program listed on FHA's Web
site. 
The decline in home prices has left 15 million borrowers owing more than
their homes were worth in the third quarter, according to Loan Value Group
<http://www.loanvaluegroup.com/> , an advisory firm in Rumson, New Jersey.
It says 10 million of those loans are at risk of so-called strategic
default, citing data on mortgages that have loan-to-value ratios higher than
115 percent and where the borrower can afford the payment. 
"Strategic default is a rational decision," Frank
<http://search.bloomberg.com/search?q=Frank+Pallotta&site=wnews&client=wnews
&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfield
s=wnnis&sort=date:D:S:d1>  Pallotta, a managing partner of Loan Value Group,
said in an interview. "Are you going to pay a $500,000 mortgage when the
house is worth $250,000?" 
"Walking away is money in your own pocket," he said. "If you're not getting
money from the government, it's your own self- stimulus for borrowers." 
HAMP a 'Failure' 
President Barack Obama's primary anti-foreclosure plan, the Home Affordable
Modification Program, or HAMP, has helped fewer than 10,000 underwater
borrowers cut their outstanding principal. HAMP is separate from FHA's Hope
for Homeowners program, 
HAMP has been a "failure" so far at converting temporary repayment plans
into permanent loan reductions, said Bose
<http://search.bloomberg.com/search?q=Bose+George&site=wnews&client=wnews&pr
oxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=w
nnis&sort=date:D:S:d1>  George, an equity analyst at Keefe Bruyette & Woods
in New York. Of the 787,231 trial modification plans, 66,465 have been
approved for permanent repayment through December, according to Treasury
data. 
HAMP is designed to lower monthly mortgage payments by reducing interest,
lengthening repayment terms and deferring principal repayments for up to
five years. Less than 10 percent of the trial modifications through December
actually cut outstanding principle as opposed to deferring interest charges
on it, according to Treasury officials. 
"It looks like that's not enough for many of these borrowers, especially the
ones with significant negative equity," George said in an interview. 
More Ahead 
In helping people with negative equity, Barr said "you have to be very
careful not to design a program that would change people's fundamental
behavior across the country in a destabilizing way or would be widely
perceived as unfair to people who are continuing to pay." 
There will have to be more efforts to reduce mortgage principals, as 42
percent of borrowers may be underwater by the end of the year, said Karen
<http://search.bloomberg.com/search?q=Karen+Weaver&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1>  Weaver, the global head of securitization research
at Deutsche Bank Securities Inc. in New York. 
"At the end of the day we'll see more of it, because the government's
attempt -- through modifications and the schemes and paradigms that have
been in place -- I think anyone has to conclude has been a failure," Weaver
said in a Bloomberg Television interview. 
"I don't think we've seen the last of government policy trying to address
this." 
To contact the reporter on this story: Dawn
<http://search.bloomberg.com/search?q=Dawn+Kopecki&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1>  Kopecki in Washington at dkopecki at bloomberg.net;
Theo
<http://search.bloomberg.com/search?q=Theo+Francis&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1>  Francis in Washington at tfrancis14 at bloomberg.net. 
Last Updated: January 27, 2010 00:00 EST 

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