The Wall Street Journal is reporting that the federal government, several state governments, and banks have reached a deal regarding the abuse in the foreclosure system since the 2008 economic downturn. Details are to be announced later today.
My opinion? It is a bunch of bullshit.
Banks will pay a fine. The money will go to the federal government and states, and people who lost their homes will get between $1,500 and $2,000. Oh, Goodie. A bunch of homeless people can now pay rent on an apartment for one full month. What then?
Evidently the agreement also allows people who are underwater on their mortgages to refinance, and requires that the banks reduce the mortgage to better reflect the decreased home values. Remember that home values decreased because as foreclosed properties hit the market and are sold at fire sales, comps on all similar properties see a corresponding decrease in value.
I haven’t seen all the details of the deal, but unless first and second mortgage holders work together on refinancing mortgages, this deal is going to mean squat to most Americans who have been keeping their loan payments current. I’ve yet to see anybody look at the fact that most Americans have both a first and second mortgage on their homes.
I’m one of them. Both of my mortgages are current. I’m underwater only because of the balance on my second mortgage. But I can’t refinance either mortgage to at a lower interest rate because the first mortgage holder will require that the second mortgage holder remain in second position. And nobody is making second mortgage holders reduce their rates.
Nobody is looking at the way that Americans actually used the equity in their homes to leverage other things. In my case, I used the equity in my Colorado home to purchase a summer home in the Black Hills of South Dakota. The good news for me is that my second home is mortgage free, so if I can’t keep making two mortgage payments with my Social Security income, I will still not be homeless. Most Americans aren’t that lucky.
Homework
WSJ Story About Bank Deal
My opinion? It is a bunch of bullshit.
Banks will pay a fine. The money will go to the federal government and states, and people who lost their homes will get between $1,500 and $2,000. Oh, Goodie. A bunch of homeless people can now pay rent on an apartment for one full month. What then?
Evidently the agreement also allows people who are underwater on their mortgages to refinance, and requires that the banks reduce the mortgage to better reflect the decreased home values. Remember that home values decreased because as foreclosed properties hit the market and are sold at fire sales, comps on all similar properties see a corresponding decrease in value.
I haven’t seen all the details of the deal, but unless first and second mortgage holders work together on refinancing mortgages, this deal is going to mean squat to most Americans who have been keeping their loan payments current. I’ve yet to see anybody look at the fact that most Americans have both a first and second mortgage on their homes.
I’m one of them. Both of my mortgages are current. I’m underwater only because of the balance on my second mortgage. But I can’t refinance either mortgage to at a lower interest rate because the first mortgage holder will require that the second mortgage holder remain in second position. And nobody is making second mortgage holders reduce their rates.
Nobody is looking at the way that Americans actually used the equity in their homes to leverage other things. In my case, I used the equity in my Colorado home to purchase a summer home in the Black Hills of South Dakota. The good news for me is that my second home is mortgage free, so if I can’t keep making two mortgage payments with my Social Security income, I will still not be homeless. Most Americans aren’t that lucky.
Homework
WSJ Story About Bank Deal
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