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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Video Mortgage Market Explained
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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Section Real Estate Buying, selling, or just trying to stay afloat? Get the latest on the housing market.
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News Tools Real Estate Glossary A glimpse at some of the terms a home buyer or seller will encounter during the process.
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Interactive U.S. Markets Are you a Bull or a Bear? Review the history of investing in America and learn key terms.
"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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Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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See all 185 CommentsWe can''t afford for the President to stay out of it because the free market isn''t self-correcting in these matters. That''s what conservative free market small government types never get.
Everyone hates the government until they get into trouble and need the government to pull their weenies out of the fire.
but screw americans that payed for that mess. and now that these same companys have made billions on americans and have been caught red handed in the cookie jar, they get rewarded to continue their pratice..
a bailout is exactly what should be allowed if this congress and president didn''t put us in this illeigal war/occupation and we didn''t have to pay the interest of 10 billion a month on the money borrow from china,japan and others the fed wouldn''t had to rise the fed rate 5% for us to pay for it..its the government responsablity to fix it and pay for it..plain and simple!!!!
everone should be calling on congress to completely bailout americans..all no exception.
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 (AS HE STATED IN HIS OWN WORDS ABOVE. SO WHY DID THE GOVENMENT BAILOUT ALL THESE LARGE CORP,CITI BANK,SAVEING AND LOANS,CRYSLER CORP,AIRPLAIN INDUSTRY,AND SO AND SO ON..BUT BAILOUT AMERICANS THAT HAVE PAYED FOR ALL THESE..NO WAY) I ASK WHY ITS OUR TAX DOLLARS.
'' ... it is not a question of will the pharoah and the congress and the nation ultimately fail, it is a question of who will they fail to: wads of girls with bouquets or tiny bundles of men with bombs, and the surest way to ensure the desirable outcome is to be the desirable outcome ... ''
Not knowing your "circumstances" I will give a generalized view. To the majority of Americans a "home" is the largest financial transaction they will ever undertake. IF one has money in a IRA that can help pay off a significant portion of the loan, and retain some "emergency savings" one is better off to pay the 10% penalty and the 15% tax on the IRA to lower their debt than to "retain" the IRA. Example: 100,000 borrowed over 30 years at 6.5% equates to a total of payments equalling $295,000. Withdrawing $50,000 cost with penalties and tax (EXCLUDING normal income)$12,500 in one tax year. The $37,500 applied to the mortgage and refinaced at the same rate saves $135,625 dollars over the life of the loan. This would also lower one payments and should allow one to "Save" money.You will have to run the numbers for yourself and see what kind of rate you are able to obtain, factor in your "earnings" for this year when calculating the total tax on your IRA. I hope this helps. It is generalized and not specific to your needs or others needs.
Yup, that''s right folks, Joe and Jane Taxpayer get stuck with the bill.
LOL
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That''s a blatant, boldfaced lie.
If the government steps in and buys your mortgage...who do you think is going to get paid?
LOL
By the way George, when your daughter gets married, and you''re watching the ceremony, are you going to think of all the parents who will never see their son or daughter get married because you sent them off to their death in the name of oil and revenge? I didn''t think so.
'''' ... she''''d let the dog free and the parrot too, and give up on having to feed the cats, and just hike away forever, but theres no get well feed world folk there, only get sick tax world: and theres nothing they wont do to keep her in her clothes and in her chair ... ''''
'''' ... lots of folk say they hate heteros and homos, but lots of folk say they dont want to get chewed up and spit out and put back together by a dinosaur, but almost everyone has done it, and almost everyone will do it again ... ''''
'''' ... more nerf bus less rolling coffin ... ''''
'''' ... pocket change is a silly porn formality, but makes the world go round as its doubly more profitable and productive to build $60,000 homes than million dollar homes: why house few folk for a million when one can house more and deflate the dollar as well? ... ''''
How about moving against all the people that became millionaires by allowing bad loans and then selling the paper to investors. You can bet they''ll stay rich.
Don''t tell me big business doesn''t need to be regulated.
Not sure of your age but perhaps this can be of some help.
http://www.financialcounsel.com/Articles/RetirementPlanning/ARTRET0000010-WithdrawingFromYourIRA.pdf
Sheesh -- before you form an opinion shouldn''t you at least try and educate yourself a little??? This way you won''t continuously sound like a moron.
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