Obamaville

Two main categories of people are finding themselves in mortgage trouble.

The first are the ones who took the subprime mortgages, those who took adjustable rate mortgages on houses they really couldn't afford and then began running into trouble when those adjustable rates adjusted up from, say, 4 or 5 % to 10 or 11%. Having once been in the real estate business I can assure you that it makes a significant difference in your monthly payment. The banksters who suckered folks in with these loans likely never offered them information on how bad it could get, how high it could go. That, of course, does not relieve the buyers of culpability. They should have done their homework on these things. Caveat emptor and all that.

Still, "bailouts" were created for them. Under the HAMP program. Which has turned out to be a colossal train wreck. I say that with first hand knowledge, having tried to go through that process a year ago, though I don't have an ARM, and then bailing out after five months of being jerked around.

Fuck Citimortgage.

Of course cheap loans meant that the home prices could be pushed higher, inflated to far more than their worth, simply because it was easier for people to get loans at the time.

When those loans started defaulting, the prices started falling, and haven't stopped yet.

Then there is the other group of people. People like my wife and I, who bought a house reasonably priced for what it was, put a normal amount down and got a good rate 30 year fixed mortgage. We refinanced along the way as the rates dropped but it was still a 30 year fixed mortgage. And our end of the county is one of the very few areas where the home values have pretty much held.

Still, after 3 years of unemployment between my wife and I, through no fault of our own (downsizing, outsourcing, position elimination etc) we are finding it very difficult to keep up, although we have managed to do so, and it is only getting worse.

The way it is for millions of other American families.

But there is very little help for us.I don't want a bailout. And I don't think my loan is actually unreasonable.

So why not a program where, say, for the length of unemployment they let you defer your mortgage payments, tack them on at the end of the loan, month for month. No penalty. If necessary put a limit on the number of months that can be deferred. They do it with student loans now.

And could we keep the government out of it as much as possible. They've proven they don't have a clue on how to fix the mess we're in.

The banks would have to do it voluntarily, and if they care at all what happens to the American economy they'd come up with something.

Sure it may cause them a bit of pain now, but they need to ask themselves is it better to collect fifty or sixty cents on the dollar now or wait a few months, let the money start trickling more and more back in as people get themselves back on their feet and then they can collect dollar for dollar.

Because if we don't fix the housing situation, nothing else is going to get fixed. Vacant houses do not a strong economy make. And if people are being foreclosed on, who's going to buy the overabundant inventory?

New York Times:

For jobless, little US help on foreclosures
Already plagued by delays, poor participation, programs not designed to fully address unemployment
By ANDREW MARTIN
The New York Times

The Obama administration’s main program to keep distressed homeowners from falling into foreclosure has been aimed at those who took out subprime loans or other risky mortgages during the heady days of the housing boom. But these days, the primary cause of foreclosures is unemployment.

As a result, there is a mismatch between the homeowner program’s design and the country’s economic realities — and a new round of finger-pointing about how best to fix it.

Bad housing market hurting job prospects
The administration’s housing effort does include programs to help unemployed homeowners, but they have been plagued by delays, dubious benefits and abysmal participation. For example, a Treasury Department effort started in early 2010 allows the jobless to postpone mortgage payments for three months, but the average length of unemployment is now nine months. As of March 31, there were only 7,397 participants.

“So far, I think the public record will show that programs to help unemployed homeowners have not been very successful,” said Jeffrey C. Fuhrer, an executive vice president of the Federal Reserve Bank of Boston.

Data released last week suggests that the administration’s task is only growing more difficult as the problems created by unemployment and housing persist. New job growth in May was anemic, and unemployment inched up to 9.1 percent, the Labor Department reported Friday.

Prices drop
Earlier in the week, a widely watched index found that housing prices had dropped to their lowest level in nearly a decade. And while the rate of homes falling into foreclosure has slowed, the reason is delays in processing foreclosures, not a housing recovery, according to RealtyTrac, a company that tracks foreclosures. There were 219,258 foreclosure filings in April, the latest month available.

Critics of the Obama administration’s approach to preventing foreclosures have pressed for two years to get officials to focus more of their attention on unemployed homeowners, with meager results. As part of the bank bailout, the Treasury Department was given $46 billion to spend on keeping homeowners in their houses; to date, the agency has spent about $1.85 billion.

Morris A. Davis, a former Federal Reserve economist, estimates that as many as a million homeowners slipped into foreclosure because of insufficient help for the unemployed.

“The money was there and they didn’t spend it,” said Mr. Davis, an associate real estate professor at the University of Wisconsin. “I don’t mean to sound outraged, but I am pretty outraged.”

Administration officials said their programs have had a positive impact, albeit not as large as they had hoped. But they say that the problems of unemployment and negative equity on homes are not easily solved. They also say programs to curb foreclosure are voluntary, so they are limited in how far they can push mortgage servicers and investors, who often make more from foreclosures than from offering aid.

“We are trying to be careful in designing programs that at the end of the day aren’t just about spending money but getting people back on their feet,” said James Parrott, a senior adviser at the White House’s National Economic Council.

White House scramble
President Obama has been scrambling to curb the number of foreclosures ever since he arrived at the White House.

At the start of 2009, the administration announced its primary foreclosure prevention initiative, the Home Affordable Modification Program. It provides incentives to banks to modify mortgages, reducing monthly payments for eligible homeowners.

The administration said the program would help three million to four million homeowners, but so far, only 670,000 homeowners have received permanent modifications. In addition, the program was primarily meant for homeowners with risky mortgages; jobless owners are often ineligible because some payment, albeit reduced, is required.

Administration officials said the program was helping homeowners whose income had been reduced. Sixty-one percent of homeowners who received permanent modifications listed “curtailment of income” as their reason for applying, though it is not known how many of them are unemployed or simply had their hours or pay reduced.

The Department of Housing and Urban Development received $1 billion as part of the financial regulatory reforms that passed last year to help unemployed homeowners. That money will be used to provide government loans to unemployed homeowners for up to 24 months.

Though the program was announced last fall, so far applications are being accepted in only five states; the others are delayed because of “implementation challenges,” a HUD spokeswoman said.

A bright spot
Critics do acknowledge one bright spot — the Hardest Hit Fund, a federal program that will provide $7.6 billion so that some states can administer their own programs for struggling homeowners. Of that, 70 percent will be directed to unemployed homeowners, said Andrea Risotto, a Treasury spokeswoman.

So far, $455 million has been spent. Over the last several years, academics, housing groups and government economists offered proposals to Treasury officials to help the unemployed avoid foreclosure.

One, which Mr. Fuhrer of the Boston Fed helped write, called on the government to provide loans, or grants, to unemployed or underemployed homeowners to make up for the amount of income they lost. The loan would have to be repaid once the homeowner found a new job.

Another proposal, by a non-profit group called the PICO National Network, a coalition of faith-based community organizations, would have allowed unemployed homeowners to postpone much or all of their mortgage payments for a year or more.

But administration officials have balked, arguing that regulators and “other industry stakeholders expressed strong reservations” about allowing unemployed homeowners to extend payments for longer terms, according to a Dec. 23 letter that Treasury Secretary Timothy F. Geithner sent to Representative Barney Frank, Democrat of Massachusetts, who had pressed for measures that would more directly aid the unemployed.

The debate is playing out on the sidelines of partisan Washington politics, since Republican lawmakers have made clear they would like to get rid of anti-foreclosure programs altogether, and would block any new programs. Instead, it is setting homeowner advocates against administration officials over how to spend money already appropriated.

Administration officials maintain that the decision on whether to offer mortgage relief to homeowners ultimately was up to mortgage servicers and investors, not the government, which can provide incentives but not compel action.

“We as an administration have limited levers,” Mr. Parrot said. “We can push them on the margins.”

But Lewis Finfer, a PICO organizer, said he could not understand why the administration had not been more receptive given the extent of unemployment.

“We have a program to deal with this,” he said.

Many unemployed or underemployed homeowners said they would welcome an extended break in mortgage payments.

Mary Ernest, 51, of Blackstone, Mass., lost her job as a school aide and said she had been “reduced to begging, more or less,” to keep her home. Adam Heyman, 41, of Chelsea, Mass., scraped together enough money to pay the mortgage on his condominium for about 18 months. Though he finally got another full-time job, his bank had already foreclosed on his condo.

“If I had a way to slow down the process or stop it for a while, that would have been nice,” Mr. Heyman said, adding, “Now I can certainly afford to pay.”