In Housing Bailout, Look At The Fine Print

By: Declan McCullagh
Topics: Housing Crisis

(CBS)

When President Obama announces his administration's plan to limit future foreclosures on Wednesday afternoon, he's expected to encourage lenders to lower monthly payments perhaps through lower interest rates and principal reductions.

The goal of this plan -- call it the Housing Bailout of 2009 -- appears to be to use money already approved by Congress as part of last October's Troubled Assets Relief Program to slow the pace of housing foreclosures.

"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," Mr. Obama said on Tuesday.

The fine print is what really matters. It's one thing to say that borrowers whose house prices are underwater or lost their jobs through no fault of their own should receive taxpayer aid -- but another thing to write the regulations in a way that helps the innocent while rejecting those who fibbed about their salary or bought more home than they could actually afford. (For the apotheosis of such speculators, see the case of Sacramento's Casey Serin.)

Another point to keep in mind is that not all metro areas have experienced a housing bubble. The S&P/Case-Shiller Home Price Indices show that for the decade ending August 2008, house prices in the New York and Washington, D.C. metro areas leapt by around 2.2 times, while non-bubbly areas like Cleveland saw an increase of a mere 1.17 times.

Any housing bailout of coastal properties raises the obvious question: Should taxpayers in the non-bubbly heartland be required to bail out those living in coastal states? And is it fair for renters or those who lived within their means to bail out those who didn't?

Mr. Obama may not divulge enough detail on Wednesday to let these questions be answered; the details may not be released until later. When that happens, be sure to read the fine print.

Declan McCullagh is the chief political correspondent for CNET. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
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by truthdragon March 27, 2009 8:43 PM EDT: Common sense: I'm looking at this as though loaning is an easy thing. So bare with the thoughts.
If an owner and or a CEO of a company started hearing of foreclosures happening why didn't become hands on involved? All they had to do was start calling people who were in jeopardy of being foreclosed bring them in and talk with the home owners to find out what is happening and how they can help. Second, say the home was sold on the market to another firm who was doing bets on the home. The original lender could buy it back, drop the finance rates, and fix the loan rate so it won't change. Yes, this is a lot of work on the original lender, but so what if it takes the home owner another 10 years to pay off the loan at a lower fixed rate and drop the adjustable rate. There was no law saying all homes must be on the adjustable rate mortgage. Its a plus situation. Why? They don't lose the loan. They keep the customer paying off the loan. They stop a huge melt down one by one and won't need to get the bail out from the Government thus having a black eye and broken set of knees which is what they all have now. Finally, it keeps people in their homes and the housing market operating.

Last set of thoughts: All home owners can force a renegotiation package with their lenders. You can make it as ugly as you want. Remember this is your life you are paying for and it is their job to help keep you in your home not take it away from you. If you can prove you can make small payments demand the court to help force a fixed rate refinance. Remember we the tax payers now own the financial institutions and make this new situation work to your advantage. Don't let them decide for you. You demand they work for you and you lay down the terms. I'm totally astonished that no one has demanded this under law and using current circumstances to make it happen.; Reply to this comment


by alk892 March 7, 2009 8:01 PM EST: Thank you for bring this to the attention of americans. I recently applied to refinace with
Chase Bank. I have a credit score above 750, my home value was well over
75% of loan. I lost my job due to lymphoma cancer given only two mos. to live.
That was four yrs. ago. I have never missed a payment. I am 62 yrs old a veitnam
veteran. If I can't get credit who can. There is more to this story if your interested. Thank you. Brian; Reply to this comment


by Aaronius9er February 25, 2009 10:54 PM EST: Where's the personal responsibility? It seems like proponents of the bailouts always use the argument, "But if you don't bail out the people who are being foreclosed, it will hurt your own home's value!" I UNDERSTAND. Yes, my own home's value may decrease, but I would rather have it cut in half than degrade the value of personal responsibility.

http://aaronhardy.com/life-in-general/the-bailout-blame-game/

http://aaronhardy.com/life-in-general/thank-you-for-sharing/; Reply to this comment


by hmmm8 February 18, 2009 9:57 PM EST: ptyoungthang, where is all this anger coming from? Who said I wanted to be on the republican side? I think anybody who defines themself by party needs help. Look, the politicians are not on anybody''s side but their own. Everybody wake up and stop pointing fingers at the "other" side. Just be honest and go to work...and stop waiting for Washington to fleece us so they can "help" us. Govt never made anything better. Everything they touch tanks. Don''t let them touch your life! Say no to handouts! Get out and work!!! And hold the politicians feet to the fire!; Reply to this comment


by ptyoungthang February 18, 2009 9:43 PM EST: Rockdl -. My hostility IS warranted and hardly childish. The Bush/repug are liars and hypocrites who are destroying this country by playing politics with the truth.

BTW- I challenged your intellect because you pointed to the Glass-Stegal Act as a cause for the collapse.

WRONG - the Gramm-Leach-Bliley Act, which repealed the important portions of the Glass-Steagall Act, which is a piece of legislation from the era of the Great Depression, that imposed a number of regulations on financial institutions. This enabled them to engage in highly predatory lending practices. Even though it was a bipartisan bill - the application was ALL repug bad economic practices of %u201Cno-gvt influence in biz%u201D. Idiots!

Want to take ANOTHER look at repug hypocrisy? How many of the socalled %u201Coutraged%u201D senators will take money from the stimulus for their states? If they really felt the packages were so bad for the country, then they should be willing to forgo their portion for their states for the sake of preventing %u201Cgenerational theft%u201D

Let%u2019s see if they actually do that! Where are the good old republican principles now?
Where the %u201Coutrage%u201D as Obama funnels hundreds of millions in their bankrupt states? Where are the calls from the %u201Coutraged%u201D public citizens not to take the money???

Repugs are full of ***!; Reply to this comment


by ptyoungthang February 18, 2009 8:44 PM EST: robert2237

About as jacked up as it feels to pay for 2 wars, nearly 5 trillion in debt racked up by GWB/repugs.

Obama came into office with 10trillion indebt. where was your fiscal conservatism then?

At least with his plan AMERICANS benefit!; Reply to this comment


by ptyoungthang February 18, 2009 8:38 PM EST: WiccaOne - At least Obama isnt responsible for the death of 1.5 million Iraqi and over 6000 allied troops - including over 4000 AMERICANS and war that should have never been fought!

If we are being robbed ist because of the DOUBLING of the national debt by repug. Where was you concern about the generations being robbed then. With the stimulus, we will have infrastructure, jobs, tax income and provide stability...what did the repug policies of the last 8 years get us????

Why werent you calling for "gawd" then? Useless hypocrite.; Reply to this comment


by ptyoungthang February 18, 2009 8:33 PM EST: Credibility2- stupidity is what happens when you apply "flawed philosophy" to fix a reality - the biggest problem with the republican %u201Cdo nothing/let %u2019em%u2019 fail policy.

The %u201Cminority morons%u201D that you describe being %u201Centitled to something without being qualified or deserving%u201D were told by banking experts that they were entitled.

Loan officers, bank executives who are EXPERTS at assessing risk are mostly to blame with the help of republican deregulators.If you go to a bank, apply for a loan, the bank tells you because of the low interest rates, you can afford your dream home at ___ payment that you can afford giving you and your family a better life, who wouldn%u2019t take it? If was explained to these so-called %u201Cminority morons%u201D that their mortgages would double even triple in a few years and they would lose their life savings- I am pretty sure they would not have gone for it.

The banks knew EXACLTY how much income these people made and you are not stupid enough to believe that they didn%u2019t have the means to verify income. Banks structured the loans on the back end, did not fully explain the ramification and destroyed the saving of hardworking AMERICANS!

Now I know the republicans don%u2019t care about anybody but white christians but geesh!

Oh- that%u2019s right - republicans would rather spend trillions on a unnecessary war and tax cuts that yields no return rather than HELP the families who will be homeless.; Reply to this comment


by rockdl February 18, 2009 8:16 PM EST: Dear ptyoungthang,

Wow such anger. I am neither stupid nor a moron and for you to use such hosility is immature. Secondly I am not sure what you mean by ,"Fixed News" as I have never watched a program with that name. For continuing input and education, I usually read Barrons, The Economist, and Fortune Magazines on a weekly basis. What I was referring to was in President Obama''s own words from this morning when he said that he needs to stop home prices from falling. My point is that they must fall until they reach there historical everage price. They are still way to high! There is an affordabililty index that we look at and it needs to come down another 10 %. I agree that there were bad lenders but please do not let off the hook those who set aside rational thinking and their own integrity and signed for loans they could never afford. Please look up the Glass-Stegal Act and you will see that it prohibited the banks from doing investment banking and trading. That is the deregulation signed by Mr. Clinton, that got the banks into such trouble and stupid mistakes and greed. Also I thing you need to let go of your anger over Bush. I did not like him either and he was truely one of our worst presidents. He was to insecure and always tried to over simplify problems. I do enjoy Pres Obama''s intellect and ability to understand thoroughly and communicate so well and so easily. Lets all try and find solutions and set aside politics and move forward.; Reply to this comment


by ptyoungthang February 18, 2009 7:51 PM EST: Kate1149 - you are so correct! The republicans are playing politics with our future to gain power and it is not cool.

But there is a light at the end of the tunnel if you go into the liberal blogs/radio the strategy is to let them talk. Notice that no Dems are coming out hard against the repugs? Wonder why? The economy is going to turn around right before the elections - all the experts say and the libs want the repug soundbites for the 2010 elections.

All the republicans who have been running off at the mouth showing up on TV against the stimulus have forgotten what they said before, after and during the campaigns, contradicting themselves for the sake of politics. But what is funny is they will get a chance to see themselves again - during the campaign in some of the funniest attack ads I have ever seen. I mean they are hysterical..

Its hard to contradict %u2026yourself. The Geriatrics Opposition Party will be in for quite the surprise. They are taking the %u201Coutraged%u201D posturing against wasteful spending in 2008 and comparing it to what they said about the war 2006. It is hilarious!

They actually have the Bonehead Boehner Timeline where he changes his position 6 times on the same issue over 9 years -. I can%u2019t wait for 2010!; Reply to this comment