WASHINGTON, Aug. 31, 2007
Bush Moves Against Home Financing Crisis
Plan Would Help Homeowners Facing Foreclosure Refinance Their Loans, But Not Sub-Prime Borrowers
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Play CBS Video Video Bush On Subprime Lending
CBS News RAW: President Bush spoke about the state of the U.S.economy, saying a government bailout in the subprime mortgage market would do little to remedy the problem.
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Harry Smith speaks with financial expert Ray Martin about how to manage money during the mortgage market crisis.
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Video Bush Steps In On Mortgages
President Bush stepped in to help struggling homeowners refinance federally insured mortgages, but not subprime ones. Anthony Mason reports that Mr. Bush also urged lenders to give customers a break.
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President Bush, center, accompanied by Treasury Secretary Henry Paulson, right, and Housing Secretary Alphonso Jackson. (AP Photo/Ron Edmonds)
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Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next. Steep penalties for prepaying mortgages have added to some homeowners' headaches. (AP Photo)
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"I'm workings weekends. I'm a nurse, I make good money and I feel like it's all going to the house," she told CBS News correspondent Anthony Mason.
With the payments of her adjustable rate mortgage about to adjust hundreds of dollars higher, she's had to put that house on the market.
"If it takes the president to get involved, I agree with that," Calciano said.
President Bush did step in on Friday, offering a plan that would allow families in default because of rising payments to refinance into mortgages insured by the government.
The president outlined ways to help homeowners facing foreclosure; it's the administration's first effort to deal with an expected wave of defaults fueled by the mortgage crisis.
The initiatives, which are not aimed at bailing out lenders or speculators, are designed to help homeowners with risky mortgages keep their houses. In remarks in the Rose Garden, Mr. Bush also discussed efforts to keep the problems from arising in the future.
"The government's got a role to play, but it is limited," Mr. Bush said. "A federal bailout of lenders would only encourage a recurrence of the problem."
The president insisted that the U.S. economy was strong and could weather recent turbulence in the financial markets. He said the mortgage market, especially the subprime sector, has shown particular strain. One of the most troubling developments has been an increase in adjustable-rate mortgages, which start out with low interest rates, then reset to higher rates after a few years.
"This has led some homeowners to take out loans larger than they could afford based on overly optimistic assumptions about the future performance of the housing market," Mr. Bush said. "Others may have been confused by the terms of their loan, or misled by irresponsible lenders. Whatever the reason they chose this kind of mortgage, some borrowers are now unable to make their monthly payments, or facing foreclosure."
The White House says this could help nearly a quarter of a million homeowners. But they must have strong credit histories. It would not include any sub-prime borrowers … borrowers like Calciano:
"It's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford," Mr. Bush said.
Earlier this month, Mr. Bush predicted that the ongoing decline in the housing market wouldn't become precipitous, but would result in a "soft landing."
He rejected any direct government aid to homeowners losing their houses to foreclosures, saying he only supported federal government help that would encourage refinancing and educate prospective home buyers about risky mortgage terms
"Anybody who loses their home is somebody with whom we must show enormous empathy," the president said at an Aug. 9 news conference. "The word `bailout,' I'm not exactly sure what you mean. If you mean direct grants to homeowners, the answer would be no, I don't support that."
On Friday, Mr. Bush:
Federal Reserve Chairman Ben Bernanke also sent a message on Friday, repeating, in a speech, his pledge that the Fed is ready to "act as needed" to ensure the mortgage crisis doesn't infect the entire economy.
But even as Bernanke vowed Fed action, he sought to temper investors' expectations:
"It is not the responsibility of the Federal Reserve nor would it be appropriate to protect lenders and investors from the consequences of their financial decisions," Bernanke said. "But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy."
"The principal actors have told us, 'We're on the job, we're paying attention, and if anything bad happens we will take care of it,'" Bill Cheney, chief economist at John Hancock, told Mason. "That's good enough."
It was good enough for the markets today - the Dow staged a triple-digit rally.
Peter Dunay of Leeb Capital says Bernanke's next moves will be crucial.
"He does not want to come in and be a brand new Fed chairman that puts us into a very, very bad recession," he told Mason.
That's why the Fed is widely expected to cut its key rate next month. It would be the first cut in four years and would offer some interest rate relief for mortgage buyers, but too late for Calciano, who's learning how much a slumping housing market can hurt. She's reduced the price of her house by more than $100,000.
© MMVII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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See all 185 CommentsI hope that the issue of predatory lending law enforcement comes up during the confirmation hearings for the new AG and that whoever the noinee is has this as a top priority for their agenda as well.
There are private agnecies that can assist people facing foreclosure with developing a debt management plan and then negotiating a compromise repayment plan with the mortgage companies. The bottom line is that the companies who utilized predatory lending practices should be required to lower their rates of return where necessary to make repayment affordable for homeowners. It''s in their interest to keep people in their homes and to not have to take back houses that will be difficult to turn in a soft market.
sorry if it sounds rude... suck it up... can''t afford your home... SELL!... get a smaller place... RENT!... life sucks and people need to take responsibility for themselves rather than blame everyone else for their lot in life...
Part of the blame for this is not the homeowner, but preadotry lenders who knowlingly give loans to high risk clients. These so called subprime loans have a higher interest rate, and are usualy offered to people with bad credit histories.
Whut this country needs is a commanist revolushun!! Baa, Baa, Baa
Everbudy knows their is no god !!! Baa, Baa, Baa
WE all know that it takes a villuge!!! Baa, Baa, Baa
And Bush is the devil!!! Baa, Baa, Baa
And we hate everbudy who disugrees with us, because we''re tolerent!!! Baa, Baa, Baa
And everbudy else is intolerent,,, except us!!! Baa, Baa, Baa.
LOL
.
Whut this country needs is a commanist revolushun!! Baa, Baa, Baa
Everbudy knows their is no god !!! Baa, Baa, Baa
WE all know that it takes a villuge!!! Baa, Baa, Baa
And Bush is the devil!!! Baa, Baa, Baa
And we hate everbudy who disugrees with us, because we''re tolerent!!! Baa, Baa, Baa
And everbudy else is intolerent,,, except us!!! Baa, Baa, Baa.
LOL
.
Bush is going to help the Average American????
Has He Lost His Mind????
Wait, does this also help the Mortgage Companies?
Isn''t there any way he can help the Mortgage Companies while avoiding the creation of a middle class entitlement?
How can he get this plan to also help illegal aliens?
This is a very complicated issue;
How can he change this from "doing the right thing" to "doing the GOP thing"?
Part of the blame for this is not the homeowner, but preadotry lenders who knowlingly give loans to high risk clients. These so called subprime loans have a higher interest rate, and are usualy offered to people with bad credit histories.
Posted by nolalou at 09:29 AM : Aug 31, 2007
CBS news last week had a piece on a lady in Atlanta that was buying a house for $180,000 on a $30,000 / year income. It''s both the predatory lenders AND the stupid people that can''t manage their own money that are the problem. How did she realistically expect to make a $1400 / month payment?
You can''t solve the problem of stupidity. Just look at the White House. Everything in this article is either "work on an initiative", "pledge to work with Congress", "urge Congress", or "call for". Nothing of action - only promises to talk about the problem, so it has the appearance of action. Why bother? Just go back to your tiddly-winks Mr. President.
Unfortunately, the damage is done.
A lot of people got rich doing this, and the American taxpayer is going to pay for it.
Don''t tell me Corporate America doesn''t need regulation.
There''s a couple of rather serious problems with the "moral imperative" argument you''re making.
The first has been mentioned by others that the lenders were also at fault. Actually, they were more at fault because they aren''t supposed to be making predatory loans. Notice in the discussion of the President''s proposal, it doesn''t say that we need to stregtnen the pre lending laws, it says we need to strengthen the enforcement of those laws. The Banks and mortgage companies got us into this mess by violating the law; there should be no bailout for them,in fact they need to help to bail out the "stupid people" they victimized.
Secondly, there''s also a moral imperative in not allowing this crisis brought on by the lenders to sink the entire economy. If the foreclosures are allowed to proceed and over a million homes are allowed to hit the market and a million people with no credit are left looking for somewhere else to live, the housing market will need a decade to recover. That can''t be allowed to happen and that''s why Bush is taking action.
WWW.ZEITGEITMOVIE.COM
I''d be happy if they just required the credit card issuers to print the initial rate offers and the rest of the terms in the same print; no large or small.
Who is entitled to government assistence over this?
Only those who are truly victims of predatory lending practices. If that be the case, then the violating lenders can reconstruct an appropriate loan and everyone is fine.
The rest of the borrowers need to feel the pain of taking large financial risks. Thousands of greedy, deceiving scumbags lied on the mortgage applications, made risky decisions, and broke every rule of prudence. Let them sink!
While there are thousands of homes probably going into foreclosure, they will be purchased by people who had the wisdom to avoid the bubble, and now it''s their turn to make sound envestments. The situation will solve itself, financially ruining those who deserve to be ruined. So be it.
If Bush wants to jump on something that is in dire need, why not shut the border, build the promised fence, deport the illegals?
This is about helping his corporate buddies who might be losing some money. He doesn''t care one bit about the citizenry of this country.
Why does Bush seem to always want to help those who don''t deserve it and ignore the ones who do?
but that is the typical response...
I could have bought a much bigger house at a low interest rate... but i knew that five years down the road rates would go up... thus so would my payment... simple math...
just because someone offers you something doesn''t mean you should take it... if you over spend it is your own fault... sell get something smaller... but people are to near sighted and don''t look at the big picture...
we teach our kids not to take candy from strangers... maybe we need to teach those same rules to adults...
victums of this.. no one made them sign those papers... it was their own ego that made the sign them...
it is simple math... rates go up you pay more... and it was going to happen that they go up...
plus we are not dealing with people who are just poor and going to loss their home... this is much bigger... this is about people in the 300 to 500 k range.. that over spent to keep up with the jones...
my point was simply.. people have to take responsibilty for their own actions.. and while yes banks make a lot of money... there are options in dealing with your finances...
yes you are right companies do build this idea that people can afford a home... but lets be honest here... if you make only $30,000 income annually... are you really going to be able to afford a $180,000... i mean beyond the simple house payment... lad tax... lawyers... general upkeep... i mean that alone would eat the $30,000 in no time...
my point is just people have to take responsibilty for what they purchase... hey we had some good times economically... but people went a little over board... newhome, car, big LCD... other toys... then when rates go up they get mad....
Posted by sandmanwv at 10:44 AM : Aug 31, 2007
The only way I''ve found to screw the credit card companies is to refuse to get any.
Evidence of their displeasure is found in the piles of Credit Card offers I get in the mail.
I''m not discounting your point. I''m on the Board of a nonprofit which instructs High School kids on financial literacy and I hope that the next generation will do better.
I think the solution is pretty simple actually. The lenders broke the law and the President and Congress should immediately halt foreclosures on those still making monthly payments(as opposed to those actually defaulting on payment). The lenders should be required to offer a debt management repayment plan that will allow borrowers to continue making payments at a fixed rate. If the loss of the foregone accelerated payments causes mortgage companies to go belly up, so be it.
There will be some negative effect on the economy if lenders start going bankrupt due to the resulting unemployment, but less than if you had millions of people losing their homes when these rates shoot up. Mortgage funds and credit standards will be tighter but that will be a good thing.
We can retain a certain moral imperative and make the borrowers pay for making poor financial decisions by including a reasonable balloon penalty I don''t think millions of people who could afford their houses at the intro rates should be forced out so that the lenders can make their expected profits on illegal loans.
to be paid at the end of the loan, say $5,000.
Would you let a doctor off the hook if he prescribed medicine for you to give your child and it killed your child?
Would you let a policeman off the hook if he directed you into traffic and you got T-boned because unbeknownst to you he''d also directed somebody else into the intersection?
Would you let a forward observer off the hook because he gave you coordinates that resulted in you firing for effect into a friendly base camp?
But if you are a lender you get a free ride?
Why the heck do we waste the taxpayer''s money prosecuting loan sharks, then? Because they''re not a member of the U.S. Chamber of Commerce?
that is a good point... and i agree with what you said... i agree that yes if these companies break the law, they should be held accoutnable and make restitution...
my only concern is the government, for lack of a better expression, just throwing money to people to pay for this...
they would have to regulate and deal with these situations... so if someone was going to loss their home lets say next week... that a it would not be taken until the problem is investigated and solved...
and your right... if people with homes in the $300,000 start to loss then yes their is going to be a serious problem with the economy...
thanks for the debate... it is nice to have someone talk about these issues without name calling or other dumb comments...
The government housing will have around the clock survelliance and security (provided by the emperor''s private army, Blackwater) including high, manned towers, 12 foot high barbed wire electrified fences (to protect those inside from "terrrrorists") and a slogan over the entrance which states "Work makes you free"!
SIG HEIL, BUSH!!!
So you are going to divert my money [my tax dollars] to these people.
MY REWARD FOR SAVING AND BUDGETING, AND LIVING WITHIN MY MEANS----you are going to give my money away, without so much as asking me or giving me a kiss before I am screwed.
*** this sounds like something the GOP would label as a democratic idea.
SUBAR.
I clued one poor sucker in when I joked I was NOT wealthy enough to worry about investments but since the EUROPEAN BANKERS got socked for a couple hundred BILLION to bail out the market''s free-fall there would be a LOT of "surprised" people. Depression here we come. HA HA I''m already there. He looked up his fund value and after the shock of HOW MUCH it had already dropped and asking what to do about it ( I really can''t answer that) has said very little to me since.
This is a more complex problem.
The people who made the money are brokers and lenders who are long gone and you can''t penolize them. The Sr managers have pocketed their money and the shady brokers are long gone. These companies incented the loan officers and agents to tack on prepayment penalties.
The people suffering are the 10s of thousands of people who supported a mortgage transaction- processors, underwriters, clerks and all the support functions.
A majority of the people that took these loans knew what they were getting. The current documents required by law are pretty straight forward regarding rates, prepayments and payment options. These customers took ARMS and Neg AM loans becuase they knew they couldn''t afford a higher payment and they need to consolidate the bills they ran up to buy stuff to keep up with the "Jones''s" of America and they needed cash to buy more.
The OTS and OCC should be investigated becuase they weren''t correctly monitoring lending practices and joint venture activity. A lot of kickbacks were going on with ABAs and lenders and those agencies never zeroed in on that. So either the Regulators or incompetent or were a part of that corruption.
Bush''s cabinet needs to find some creative ways to get these people qualified under FHA programs and a lot of these people are upside down (mtg is more than FMV of house)
Lenders are sales people just like stock brokers. The only thing they are experts at is deceit and manipulation for personal gain. Wake up and smell the coffee.
Ironically, that puts me in the most despised category by the bankers. Probably because they quickly find they can''t make money off me too easily.
I''ve taught teens financial responsibility (personal, corporate and governmental) and consider NOT teaching that subject to be the BIGGEST FAILURE of the public education system along with NOT teaching civil responsibility and world affairs awareness.
This country is reaping what it sowed - If we teach DRIVEL rather than REALITY our children become the PERFECT SUCKERS for every financial conman on Earth.
Interest is the greatest cost of a home for most buyers--and it is created literally at the stroke of a pen.
The same function could be carried out without interest--only a fee to cover the cost of the transaction and the processing of repayments.
The mortgage banker is like a privateer--just a thief sanctioned by the government.
The outstanding amount owed should be linked to an honest index of the cost of living and inflation, so that inflationary policies would gain the borrower nothing.
Its time to end the banking scam in this country--and drive Usury from this world.
Whut this country needs is a commanist revolushun!! Baa, Baa, Baa
Everbudy knows their is no god !!! Baa, Baa, Baa
WE all know that it takes a villuge!!! Baa, Baa, Baa
And Bush is the devil!!! Baa, Baa, Baa
And we hate everbudy who disugrees with us, because we''re tolerent!!! Baa, Baa, Baa
And everbudy else is intolerent,,, except us!!! Baa, Baa, Baa.
LOL
.
Whut this country needs is a commanist revolushun!! Baa, Baa, Baa
Everbudy knows their is no god !!! Baa, Baa, Baa
WE all know that it takes a villuge!!! Baa, Baa, Baa
And Bush is the devil!!! Baa, Baa, Baa
And we hate everbudy who disugrees with us, because we''re tolerent!!! Baa, Baa, Baa
And everbudy else is intolerent,,, except us!!! Baa, Baa, Baa.
LOL
.
ID thief and troll alert!
Pick some other more appropriate name rather than imitate a legitimate poster on this site.
non muslims of the world unite... fight against the tyranny of the fascist nazi terrorslam imperialist empire of the darkside...
I was a fanatic...I know their thinking, says former radical Islamist
By blaming the Government for our actions, those who pushed this "Blair''s bombs" line did our propaganda work for us.
More important, they also helped to draw away any critical examination from the real engine of our violence: Islamic theology.
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=465570&in_page_id=1770
Bless the Beasts and Children
Fascist nazi terrorslam kills every man woman and child in the village again%u2026 typical mo for terrorslam%u2026
http://www.michaelyon-online.com/wp/bless-the-beasts-and-children.htm
Our Prophet commanded us to fight the kaafirs when we are able and to attack them in their homelands and to give them three choices before we enter their lands: either they become Muslim and be like us, sharing our rights and duties; or they pay the jizyah (poll tax) and feel themselves subdued; or they fight, in which case their wealth, women, children and homes become permissible as booty for the Muslims.
http://islamqa.com/index.php?ref=13759&ln=eng&txt=before%20islam%20arabia%20pagan
the truth about fascist nazi terrorislam...
http://www.terrorismawareness.org/what-really-happened/
'' ... when i was like six or seven, i was dancing in some field with a bunch of folk, and some girl was dancing through the crowd, claiming ''tax the world is feed the world'', and promising to rid the world of naked folk and ignorant folk and lazy profane blemished folk, and to replace all the free food and free medicine crowds with free gun and free bomb buttons, and, when she touched my hand, i felt all warm and fuzzy inside, and i''ve always wondered what happened to her ... i wonder if she''s still out there somewhere, trying to win ... i sooo hope so ... ''
What did he say?????
You''re right on the money about the potential for wider economic damage. It''s scary to think about the interlocking fortunes of the real estate market, the investment markets, and people''s retirement. The coming retirement boom of the baby boomers certainly jacks up the stakes too.
The best that can be done is to cut the losses, which means these "high yield" funds and all the REITs which people have retirement funds invested in our going to take a major hit regardless.
At least if homeowners are put under debt management the holders of the notes will receive the principal and not be stuck with an inventory of properties not earning zip.
Thanks for raising good points!
- Urged Congress to pass legislation that would give the Federal Housing Administration more flexibility to help mortgage holders with subprime mortgages."
Man! Is this a license to steal or what?
Let''s see...if I were a sleezy lender I would finance your home at a rate that would just about cover the costs. After about five years, jack up the rate to where you can''t afford it, and then re-possess the house. Of course, in five years the house has increased tremendously in value, if not doubled, and I could re-sell it at a tidy little profit.
Aren''t all money lenders sleezy? Or are they just typical greedy American corporations cashing in on the gullibility of the typical American sheep?
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