Friday, October 03, 2008

Oh yeah, that other bailout!

In case everyone forgot, Congress already enacted one bailout months ago:
Amidst all the chaos surrounding the $700 billion Wall Street bailout plan, the federal government's other housing rescue program quietly opened for business Wednesday.

But will any mortgage servicers come knocking?

The Federal Housing Administration unveiled its $300 billion Hope for Homeowners program, which allows struggling borrowers to refinance into more affordable mortgages backed by the federal government. The legislation, which was signed into law in late July, was hotly debated for months on Capitol Hill with Democrats supporting it and Republicans opposed.

Before the so-called Wall Street bailout emerged, this FHA program was the federal government's answer to the mortgage crisis. It was seen as a primary means to stemming the foreclosure tide and stabilizing the housing market. ...

Banks, however, didn't receive the program's details from the FHA until Wednesday, and say it will likely be weeks before they can offer it to their customers.

Even then, lenders probably won't rush to participate in the program, which is voluntary, since it requires them to take a pretty significant losses on the loan principal in most cases. Instead, banks have said that they'd prefer to use their own mortgage modification programs where they can better control the terms. ...

The problem is that the Hope for Homeowners program requires banks to reduce the loan's principal to 90% of a home's current appraised value, which is likely to be much less than the owner paid for it. Lenders prefer to freeze or cut interest rates so they can at least recover the original amount of the loan, said Tom Kelly, spokesman for JPMorgan Chase...

"You lock in your loss," Kelly said, by reducing loan principal.

Banks might turn to Hope for Homeownership if they feel the loan is hopeless and just want to get rid of it, he continued.

Lenders also won't be pleased with the new home appraisals, which will show them just how underwater their borrowers are, said James Gaines, research economist at the Real Estate center at Texas A&M University.

He doesn't see a lot of lenders flocking to the program.


  1. Constituent Response TeamOctober 03, 2008 3:40 PM

    As you may have heard, filling the bailout bill full of pork worked just as the Senate predicted. The House just passed it.

    Despite that fact that millions of Americans wrote and called to say No!, the traitorous Senate and House (and soon to be President) said Yes!

    It is time for a housecleaning! Time to show them that they work for Main Street, not Wall Street.

    Based on quick analysis, it looks like there are 2-4 Senators who voted Yes who are in tight races, and 3 or 4 more who are vulnerable. In the House, the analysis is similar, 7 or 8 vulnerable races where a little bit of influence might make all the difference. Perhaps many more considering the switchers.

    Targeting these so-called "representatives of the people," with print and radio ads highlighting their betrayal, could really make an impact on their chances for re-election -- and put the fear of constituency back into the Washington elite.

    Are you interested in making it happen? There isn't much time before the election, so it will take funds and effort. Can you participate by offering time, skills or funds? Please make a pledge to un-elect these traitors.

    Contact the Constituent Response Team at

  2. The stupidity of comments like these. I only wish that this thing had not passed, you all lost your operating line of credit and couldnt function, ahh the irony!

    Interesting comments from Kruman - Bush hater #1, Nobel prize economist Joe Stiglitz, and Nouriel Roubini - every bubble heads lord and liege. The decision was unanimous - pass this turd in a box and then fix it.

    We were playing with fire here people - thank god we came to our collective senses. Had this not passed today, that 1.2trillion dollar loss in the stock market could have looked like childs play.

    So sleep well tonight, we did the right thing. We live to fight another day.

  3. James - the comment above is not directed at you, its to these idiots at constituent response. Your coverage of this thing has been top notch!

  4. Dried mushrooms is a remedy. Also few hundred pounds of sugar and a pack of dried yeast. Do not ask ME.

  5. *

    Recently an insurance company nearly wind up....

    A bank is nearly bankrupt......filing chapter 11 protection.

    How it affect you? Did you buy insurance? Did you buy mini note or bonds?

    Who fault?

    They bailout trouble finance company, but they will not bail out your credit card bills……You got no choice, and no point pointing finger but you can prevent similar things from happen again……

    The top management of the Public listed company ( belong to "public" ) salary should be tied a portion of it to the shares price ( IPO or ave 5 years ).... so when the shares price drop, it don't just penalise the investors, but those who don't take care of the company.....If this rule is pass on, without any need of further regulation, all industries ( as long as it is public listed ) will be self regulated......because the top management will be concern about their own pay check……
    Meanwhile if company was being acquired, there will be a great movement in terms of staff……eventually staff suffer also.
    Some might feel that it sound stupid….. as there is long and Short position…but in reality there is still many different caliber CEO… there is still long and short…..They can ban short selling definitely they can do something about this.......

    Are you a partisan?

    Sign a petition to your favourite president candidate, congress member, House of representative again and ask for their views to comment on this, and what regulations they are going to raise for implementation.....If you agree on my point, please share with many people as possible.... Finance and Media are the two only industries can shaken politics ( Maybe Hackers can ), please help to highlight also...