New Gov't Plan Aims to Help Poor Borrowers

Program Intended to Bolster Housing Industry by Providing Credit, Loans for Prospective Homeowners

(AP)  The Obama administration is unveiling a new program to provide support to state and local housing agencies to provide help to thousands of home buyers and renters.

The administration said the new program would help to support low mortgage rates and expand resources for low and middle income borrowers who want to buy or rent a home.

The program will feature two parts - a new bond purchase program to support new lending by housing finance agencies and a temporary credit and liquidity program to improve access by housing agencies to credit sources for their existing bonds.

The new program will operate under a law that Congress passed in 2008 to bolster the housing industry, which has been battered by the worst slump in decades, a downturn that saw home sales and home prices plunge and mortgage defaults soar to record levels.

The government said the new effort was designed to provide hundreds of thousands of affordable mortgages for working families and enable the development and rehabilitation of tens of thousands of affordable rental properties.

Treasury, the Department of Housing and Urban Development and the Federal Housing Finance Agency said in a joint news release that the new program would provide temporary support to local housing financing agencies and encourage them to return to relying on market sources for their capital as quickly as possible.

The local and state housing finance agencies, which provide loans to people with low or moderate incomes, have had a hard time raising money to fund loans due to the housing crisis and credit crunch.

"This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times," Treasury Secretary Timothy Geithner said. "Through this initiative, the administration aims to help (the housing finance agencies) jump-start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs - key components in stabilizing the housing market overall."

[redcurlew]

Isn't this what got us here in the first place. IF they can't afford the house, they can't afford the house!

[stuart-johns2]

It's this kind of thinking that disturbs me about the Obama Administration.

What not just get the financial reforms in place that we need before we create any more programs and spend any more money?

Why not demand that the large banks that recieved stimulus money use that money to lend smaller banks that help small businesses, which I believe, account for 60% of the jobs in this country?

What good is it to loan money to the poor who don't have the ability to repay? What point is an afforadable mortage when you have no job?

[SocietysNightmare]

Have we learned nothing?!!! This is how this mess came about in the first place (plus the war spending of the BUSH administration). Everybody can't have the American Dream. Capitalism doesn't work that way. I don't see how clash for clunkers benefited anyone, and I really don't see much merit in this program either.

[pubsrtoast]

Juwboy, please stop watching and regurgitating what you hear on Faux news, you are making an ass of yourself.

Two Federal Reserve economists examine whether available data support critics' claims that the Community Reinvestment Act spawned the subprime mortgage crisis.
Neil Bhutta - Economist
Glenn B. Canner - Economist
March 2009
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136
CRA-related lending volume and distribution

In analyzing the available data, we consider two distinct metrics of lending activity: loan origination activity and loan performance. With respect to the first question posed above concerning loan originations, we determine which types of lending institutions made higher-priced loans, to whom those loans were made, and in what types of neighborhoods the loans were extended.3/ This analysis therefore depicts the fraction of subprime mortgage lending that could be related to the CRA.

Using loan origination data obtained pursuant to the Home Mortgage Disclosure Act (HMDA), we find that in 2005 and 2006, independent nonbank institutions?institutions not covered by the CRA?accounted for about half of all subprime originations. (See Table 1.) Also, about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods, populations not targeted by the CRA. (See Table 2.) In addition, independent nonbank institutions originated nearly half of the higher-priced loans extended to lower-income borrowers or borrowers in lower-income areas (share derived from Table 2).

In total, of all the higher-priced loans, only 6 percent were extended by CRA-regulated lenders (and their affiliates) to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas, which are the local geographies that are the primary focus for CRA evaluation purposes. The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis.

[HGOODGUY]

The Republicans have come up with a very compassionate program to provide low interest loans for the homeless.
It's title is STIMULUS PLAN TO TO PROVIDE NEW CRATES AND CARTONS!!!

[sjc_1]

Sure, let's segregate the poor into ghettos because Lord knows we do not want to lower YOUR property values! If we had decent, stable good paying jobs for everyone, we would go a long way towards not having poor people, but we can't seem to do that, so we say just get rid of them. Out of sight out of mind.

[SkirtLifter]

What happened to all the comments?

[hungry1968-16]

by brian1920 October 19, 2009 4:57 PM EDT
This is the same policy that created loans that people could not pay back. The entire financial crisis would not exist if people did not default on mortgages and tank the mortgage backed securities market. What is Obama doing? I swear is trying to destroy the country.







You're an uninformed lemming, and you obviously don't understand how the whole mess happened or what caused it.

Go read up on it, instead of swallowing the Fox News lies and BS.

Seriously, why would people KNOWINGLY take out mortgages that they couldn't afford, while committing financial suicide in the process?

[smoknmirrors]

Actually, people did take out mortgages KNOWING the payments would go up later and that they really could not afford those payments at current income and investment revenue levels. They were counting on the economy continuing to rise, paychecks to continue coming in, investments to continue increasing in value. Unfortunately, the perfect storm caught them unprepared and swamped them before they could get a handhold. The speculators kept punching more holes in their little boats, trying to recoup losses like an embezzler at the racetrack that keeps betting losers, then the banks made demands that could not be met and bingo, the whole world went down the toilet. A better question for you to ask is why would banks and mortgage companies keep loaning and underwriting loans to people when THEY knew those people could not afford those loans? I hope you are not a "twister," one who professes to believe that the government twisted their arms. When was the last time you saw a banker who loaned money when he didn't want to loan money?

[hungry1968-16]

I don't know why you guys listen to Fox News instead of reality, but there have been NUMEROUS stories in Forbes, the Wall Street Journal, CNBC, Fox Business channel, 60 minutes, etc, etc, that detailed how and why it happened.

If you want to choose to ignore reality, that's your problem. But quit repeating the lies and BS.

And rhs, Barney Frank and Chris Dodd weren't the congressional and senate banking committee chairmen when all of these garbage loans were written. Mike Oxley and Richard Shelby were. Again, facts go A LOT FARTHER than Fox News lies and BS does.

[brian1920]

This is the same policy that created loans that people could not pay back. The entire financial crisis would not exist if people did not default on mortgages and tank the mortgage backed securities market. What is Obama doing? I swear is trying to destroy the country.

[hungry1968-16]

by SkirtLifter October 19, 2009 3:35 PM EDT

I think the Obama admin is "urging" these bonuses be reigned in. Yep...urging. ain't it sompthin'






What can the Obama administration do about capitalism run amok?

The government can't unilaterally kill the contracts that guarantee these bonuses, can they?

[hungry1968-16]

There just might be something illegal in EVERY contract, EVER written, at ANY point in history.

It's not up to the government to comb through EVERY contract to see if there are any improprieties. But they DO have an obligation to investigate if a shareholder complains.

[Marc_1986]

Same idea, different program.

All they're doing is backing the program with State/Federal bonds instead of high-risk bundled securities. *Yawn*

So instead of the banks collapsing and the Gov't going into debt via a bailout, they just skip that step and go into debt on their own bonds.

[inketolstoy]

Actually, this is just another bailout. But now we call it something else because we have already pulled these fatcats' chestnuts out of the fire twice and they keep handing out bonuses out amongst each other while publicly thumbing their noses at us. And that just isn't good politics.

[jseymouriii]

Nope, it was the variable rate mortgage (of course swindled to the poor as an affordable alternative to a fixed rate loan), and the swaps on wallstreet betting that these loans would fail, and the institutions that sold the swaps did not keep capitol to pay for loses (because the mortgages would never go bad in large numbers).

[Marc_1986]

@jseymouriii

Much of what you described is exactly what would happen under this proposed plan. The difference is the Gov't can afford to go into debt and not keep capital to back its commitments; the private sector cannot.

While ARM was a problem, all it did was exacerbate the underlying problem: these people are not qualified to be getting loans in the first place!

[MPHgrad]

Excuse me Mr. Government, but this is well, a significant part of what got us into the whole financial debacle aka meltdown, in the first place. See, there is nothing wrong with renting and not everyone is meant to own a home. If you really want to empower the poor, invest in education, particularly financial education and please don't wait until the senior year in high school. Financial literacy should begin at an early age.

[mtcolquitt]

Didn't the government helping out in this fashion cause the housing problem of TODAY? What the .....

[endurorob_5]

But it is for the poor.

[Marc_1986]

@SkirtLifter

I am all for helping the poor out; that's why I pay taxes!

Unlike you, most of us don't like throwing our money down the drain. We already subsidize Medicare, Unemployment Benefits, SS, and Food Stamps. What's next? You want us to subsidize their Toyota Prius and Solar Paneled house?