NEW YORK, Dec. 6, 2007
A Peek At The Mortgage Relief Plan
Ray Martin Takes Early Look At Expected Changes To Help Many Homeowners In Trouble
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(CBS/iStockphoto)
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Play CBS Video Video Bush's Mortgage Rescue Plan The Bush administration is closing in on a mortgage rescue plan that would amount to the most significant federal intervention in a credit crisis since the Great Depression. Anthony Mason reports.
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Video Solving The Mortgage Meltdown As more homeowners face foreclosure, many people are wondering how they will make ends meet. Jack Hough, author and Columnist for SmartMoney.com, breaks down the logistics.
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Timeline Credit Crunch Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
Buying? Selling? Refinancing?. Get the latest right here.
A few of these specifics were leaked Wednesday, and Early Show financial adviser Ray Martin got wind of them.
Many of those losing their homes to foreclosure have adjustable, "sub-prime" mortgages. Martin says they couldn't really afford to own a home when they got their loans, and they can't make their payments once rates adjust upward.
The implications have been far-reaching, for homeowners, the housing industry and the economy, and the government is stepping in to lend a helping hand.
Paulson made it clear in a speech on Monday that the only people who will be helped are those who can currently afford their mortgages, but won't be able to when their interest rates increase.
The government proposes to "freeze" these homeowners' rates at their current, affordable levels.
Martin has learned that the freeze would be effective for five years, with loans originated Jan. 1, 2005 - July 31, 2007 and re-setting Jan. 1, 2008 - July 31, 2010
Sources also shared information with him on two other parts of the government's plan:
Obviously, Martin points out, many of the details of the government's proposal are still unknown. But it's interesting to note that much of the information that got around on Wednesday deals with helping sub-prime borrowers refinance. That makes a lot of sense to Martin, who says it's not good for anyone involved -- homeowners, lenders, or investors -- if a home goes into foreclosure.
Refinancing has the potential to turn an unaffordable, unstable home loan into an affordable, reliable one. The idea of freezing mortgage rates has gotten lots of press but, as Martin points out, that usually just puts off the inevitable: Although it's possible for people to change their lives and incomes, odds are many folks who can't afford a rate increase now won't be able to afford one in five years.
The big question for many people today is whether the plan would help them.Click Here to visit CBSNews.com's real estate section
Martin says they don't have to wait and find out. They can check out a group called Hope Now (www.hopenow.com). It's an alliance of counselors, loan servicers, investors, and other mortgage market participants. It was established by Washington in October with the goal of helping struggling homeowners. Give it a call and counselors will talk to you about your financial situation, look up your loan, and let you know in about 20 minutes which options you may have to foreclosure. Martin suspects that Hope Now will play a key role in the new relief plan.
Certainly, after Thursday afternoon's announcement, Hope Now will have all the details and be able to tell you if the plan helps you and, if not, what else you can do.
Here's a startling statistic: fifty percent of homeowners who filed for foreclosure didn't discuss possible alternatives with their lender. Martin's message: In one way or another, there is an excellent chance you don't have to be foreclosed on. So look into it, and find a way to escape the sub-prime mortgage mess.
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- Are the middle class hardworking responsible people of this country as sick and tired of I am of never getting recognized for making this whole mess work while in the meantime our own govt. makes policies against us. I''m so sick and tired of the losers, irresponsible, immature, and crummy parents getting all the breaks and freebies while the rest of us finance it for them. Give us a frigging break. Let people go broke and learn a lesson.
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- Why do we have to pay the bank any money for clossing cost in order to be able to refinanceor or buy a house?, I believe that banks make enough money with the interest rate they charge. A lot of people don''t have the cash to pay for this clossing cost at front, so they need to include this extra cost to there loan.
The clossing cost charge by lenders can go from $2,000.00 to $8,000.00.
This is UNBELIEVABLE! - Reply to this comment
- Renters shouldn''t get a deduction! Rents are income and taxed to the landlords. This provides the tax money so renters can get the low income allowances and other government benefits. The system works for the benefit of those in power and with the money. Renters should thank their lucky stars they have a place to rent!
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- Let me ... the states sell bonds ... the local taxpayer gaurantees them .. the banks/mortgage companies sell the "bad" stuff to the states at full market value ... they keep the "good" loans and get made full on their bad investments ... most of the "bad" stuff defaults ... the little investor loses everything and the institutions that made these bad loans walk away whole .. seems like a good deal to me .. again the taxpayer gets it in the shorts ... I don''t see me buying any of those "subprime" bonds ... oh by the way Goldman Sachs was shorting these loans at the same time they were selling them as AAA to investors ... they made billions off the short sale when these imploded ... I guess that after they unload these on the states they can short them too
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- Does fedupwithit1 not realize that ARM is NOT real monies? Just GREED on the Banks and Credit card companies. I am financially responsible person and I think that this ARM was a spam by BIG BUSNIESS right from the getgo. Give consumers a flat instrest rate for homes. NOT BS
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- Home prices are already so ridicoulously high that we young people don''t want home prices to go up in a few years because we can''t afford then now as it is at current prices.
- Reply to this comment
- Eliminate the mortgage deduction. It''s ridiculous that owners get a deduction and renters don''t. In fact eliminate the entire itemization and quit the social engineering that comes with.
- Reply to this comment
- Lenders set up this whole sub-prime scenario, NOT out of concern for folks unable to have homes, but to create another stream of profit. Let the duped homeowners keep the property and the greedy lenders bear ALL the cost burden.
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- I wonder how this gets passed onto those who are more financially responsible. I wish the rewards for honesty and basic responsibility were high like they are for the foolish and the ruthless.
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