Ed Henry is not alone. Particularly in the area of the real estate crisis few White House correspondents have any idea what they’re talking about. As a group these folks are notoriously under-informed. Watch a few sessions on C-Span. They’re lucky they’re protected by the first amendment.

Any anything Henry is likely to get is from idiots like Lawrence Yun(of NAR fame). And guys like Yun don’t have a clue either, because his propaganda is so obliviously awful.

I must be just as stupid as Ed Henry then because Donovan’s answer basically says that the underwater homeowner is getting a new $300,000 loan to pay off the current $300,000 loan on a house that’s lost $50,000 of value and is now worth $250,000. Why would any reasonably intelligent homeowner do something that stupid?

I want to be sure I’ve got this: The FHA will write a loan for the the current balance owed on the existing mortgage, but at a significantly lower rate, based exclusively on the homeowners’ loan payment performance?
Because it’s that peek at the rest of the homeowners’ credit situation that may be causing the banks to hold off. And if the FHA is going to skip that, then they’re playing the game a little different.

YOU may be doomed, David. I’M building a rocket ship.

Because they go from 7% to 4% and their payment is now doable.

Well, irrespective of the homeowner’s strategy, you’d have to find an equally not-intelligent lender to loan $300K on a house worth only $250K. Is the FHA gonna DO THAT with MY money??????

They also will get the new loan for the amount currently owed, not the original amount. The securitization should be unwound and make sure that they will pay the balance to the correct mortgage holder or they will lose the house anyway.

Fox News’ Ed Henry Doesn’t Know How Home Loans Work Anything

Fixed the headline for ya.

But, but, but, that means they will STILL have $300K tied up in a house only worth $250K. I see the 7 versus 4 “pros”. But this appears to me to be a “get out while you’re behind” moment. UNless, of course, you really like THAT house.

I used to give persons applying for a job a test. The last question on the test was:

Is it further to Los Angeles than it is by train? (Exact verbiage-not a misprint.)

Only about 1 in 5 got the correct answer. Betcha Ed wouldn’t.

LOL … Excellent !

Ignorance is a prerequisite, as Ed, Chip, Major and their ilk readily display.

My father’s fave was to ask: Is it the yolk of an egg IS white or the yolk of an egg ARE white.

Got almost 100% to fall for it.

Yes, they will be paying too much for the house, but they have to have some place to live and selling the house will require straightening out the mortgage situation. This whole thing is just more stealing, but it looks like home owners will get no real relief as long as the banksters are protected by this new settlement coming down the pike. So, I think that they should take the best deal they can get and save a little money.

Heyya Petro. Hope you are doing well.

Very well, thank you … did you get any part of that winter blast Monday night ?

I was going to type that all this trying to figure out the specifics was a waste of time. The general principle is that if the O admin comes up with the scheme and the banksters agree to it, the homeowner is getting screwed. Just a matter of how much. The details are irrelevant.

I am FOR the government bailing SOME of these deserving people out, a “little bit”. But let’s not go overboard. If people were stupid and b ought way more house than they could afford or didn’t perform their “due diligence” on the value of the home in a “sinking market”, I say, let them and the mortgage company “suck it up”.

NOBODY should be eligible if their house it aas it more than 120% of the median home price. I ain’t payin for nobody’s mansion on a hill or their “dream house”.

We did get a day or so of frigid, but got up to 60 yesterday and into the 40s today. Ain’t complaining.

The mortgage corp is being bailed out by the taxpayers.

How does a Title Insurance Company insure title on a refi like this?

Then I want a lifetime supply of ball point pens and scrath pads. And nice wall-size scenic calendars…..TWO OF THEM.

The other aspect to this is that they can use the savings on lowering their interest rate to pay down equity. In fact the Administration is encouraging that by picking up closing costs if borrowers make that choice.

This is an inferior option to just getting a principal write-down, which the Admin is trying to do through HAMP (hint: their plan won’t work). But in this case, these are borrowers who are current on their loans and have shown they can handle the payment. It’s a way to give them a break, though I don’t think it’s really a housing strategy, but a stimulus strategy. If they use the break to gather equity, it could become a housing policy.

As for “get out while you’re behind,” people don’t strategically default. The evidence shows that. People just don’t want to do it. They’d rather stay in their home and their community. So this is a way to help with that.

All of this is irrelevant to Ed Henry being thuddingly stupid.

In the 25-40 pages some people initialed were terms material to the contract that unsophisticated borrowers would not understand even if they read them. Many mortgage brokers were unscrupulous and many banks and appraisers were in on it. When the docs were signed everyone but the buyer knew the buyer couldn’t afford the payments in one, two, or three years. Bubble bursts prices go down and here we are.

If you’re really lucky, you’ll get a toaster.

I am very honored. You have never addressed me “personally” before. I se all the compliments I have been throwing your way have worked. :-)

Irrespective of all this, I’ll pay “my share” in taxes to help out. BUT, if I find one of those damn loan officers staying at the Bellagio in Las Vegas while I’m at Treasure Island, I’m gonna kick some ass.

David, you are correct that the questions showed him to be beyond repair, but that only takes one or two comments. Moving on to peripheral but important q & a is more rewarding.

I understand. But EVERYBODY got their year end bonuses for exceeding sales quotas. RIGHT???

P.s. Better be a 4 slicer.

This program is designed to get Barry re-elected, help as few folks as possible, and not hurt any of his donors. Period. It’s a fucking farce.

Jason Linkins at Huffington shoulders Dave’s (and Donovan’s) load for a while. Here’s the key, maybe. (And note that the new, refinanced loan is for the same principal amount that was still owed on the old one)

And Donovan’s new program just means the government will allow a broader class of the loans on its books to be paid off. And the government will encourage this by telling all the “new banks” out there that if their customers don’t pay back their loans, the government will shield the bank from losses.

This is how the vast majority of the housing market has worked for decades. All Donovan wants to do is let more borrowers do this — specifically, borrowers whose home values are now lower than the loan they took out during the housing bubble.

That guarantee against nonpayment at the end of the first paragraph is the same as points on the interest rate, from the bank’s perspective, which is why they might be inclined to make the loan a little bit quicker (am I ever in the no-big-deal camp on this program, compared to the size and nature of the problem) than otherwise; they get the same interest rate, effectively, as your finance company alternative, but get your business because with the FHA guarantee tacked on they can charge you less.

Jack Guttentag is more or less in an advisory business to lenders, but he also really is a “Mortgage Professor” (emeritus, Wharton), so I often check him when lost in Loanland. Here’s his recent article on refinancing and the HARP program.

Good lord, only one person here gets it?
Ed Henry is exactly right. Govt will force lenders to write loans on property that isn’t worth the amount lent. What’s next? Forcing banks to lend money to anyone politically connected? Giving out credit cards to the homeless?
This is something the mafia would do.

I imagine that what Ed Henry doesn’t know would fill an entire block of warehouses.

It’s not that great a deal for the “homeowner” who clearly owns nothing. He is still under water but he has a lower interest rate. When the house is worth 200k he will probably walk and stick the tax payer with the house. BUT THE BANKER GETS $300k! That’s the point of the exercise. It’s another convoluted way for the taxpayer to prop up the still deflating housing market so the banks won’t have to admit they are insolvent.

“It’s a fucking farce.”
——
I disagree……It’s a “hat trick”.

Key Linkins graph:

Finally, while this refi plan is a modest goal that will save some mortgage holders a few thousand dollars in paying off their existing mortgage, it doesn’t alter the larger problem — these homeowners are still under water, chucking their income into a sinkhole. So, in many instances, it still might be smarter for these homeowners to simply strategically default.

Hint: Banks already did that on their own.

As for “get out while you’re behind,” people don’t strategically default. The evidence shows that.

Bullshit.

No doubt, which I have done throughout and continue to do in other posts. And hopefully I’ve answered the question.

I observe that appreciation of sunk cost concept is pretty low.

Hmph! It’s a really shitty illusion then. It only works when people are distracted by the color burnt orange.

I’m in Houston. DUring the “oil bust” and the S&L fiasco of the 80′s. my neighbord were “walkin” on mortgages left and right. Of the 1204 homes in our neighborhood (I was on the BOD of the HOA), we had 87 foreclosures.

Jingle mail.

I think I should be insulted. But, I’m not totally sure……..:-)

When you’re mortgage payment is $3,000, you have negative equity, and the house across the street — with one more bedroom — just rented for $1,500 per month, you become an expert in sunk cost.

As your ass puckers up.

Isn’t that when you exploit the disadvantages of aluminum wiring???

I remember entire subdivisions of homes in various stages of completion being abandoned by the builders. Sure there were some foreclosures but mostly it seemed like the investors were walking away. I haven’t been to Houstopolis since 2006 but I lived there from 1960-1985 and then from 1991-1999 and as far as I know there are still plots of land in which if you look under the weeds you’ll find streets, sewers, fire hydrants and in some cases home slabs and driveways. All abandoned by the builders, not by the homeowners. Just my 0.02.

The ole tightened sphincter reflex.

Sunk cost is undoubtedly more greatly appreciated by real people than by POTUSes & SoSs who have no budget constraints.

Nope. No insult intended.

Haven’t noticed any empty homes in my neighborhood
but there are tons of empty stores in the county.

They’re building new houses in my area, more’s the pity.

It is true the FOX is run by bunch of morons with stupid mentality. However, I don’t see any purpose of refi in this scenario if a 300K loan on a house is only worth 250K and the homeowner can’t afford it. Refinancing will provide the homeowner with 300K to payback the existing loan to the bank. Bank will walk away happily with the full amount, courtesy of Obama administration. But the home owner will still be on hook for inflated price of $300K. Basically, in this scenario, Obama’s proposal is ANOTHER BAILOUT FOR BANKS that issued the bad loan. The homeowners can only benefit if the banks (lenders) are forced to modify and reduce the principal loan amount to current market value of the property.

I’m amazed that anyone is building homes at this time. I certainly would not.

I hate it. The area is exurb/rural. Still a lot of farms, though only 85 miles from midtown Manhattan. Economy has no visible means of support. Working age people I know are all into funky consulting, artsy-fartsy, fuzzy biz development, working from home type stuff.

We are not talking major developments, just a home here and a home there. Still with 5 acre zoning, that eats up open space at an alarming rate.

It’s a mystery.

The taxpayer already owns tens of thousands of homes. What is a few more among friends?/s

HUD itself had around 10,000 homes collectively a month or two ago.

The banking industry seemed to not “get” how home loans worked either. So I find it unsurprising that some random media personality would be confused on housing market lending works.

Because the homeowner can afford it. This deal is only opened up to people current on their mortgages. I didn’t provide the full context of this because I was merely interested in showing how stupid Ed Henry is with this particular post. But this, as I said yesterday, is largely a stimulus measure to get people current on their homes who are locked into high interest rates to achieve the same kind of interest rate benefit that banks do, by virtue of the Fed’s ZIRP. That’s what we’re talking about. The purpose is to give more money to people in this situation, so they can enjoy the refi advantages of a borrower who is not underwater.

Now, if you believe that negative equity is a strong predictor of eventual foreclosure, because it puts the borrower one bad event away from the brink, then maybe you think this is also a housing policy. And there’s also the option of putting the savings into rebuilding equity. I didn’t add full context because I didn’t think it crucial to illustrate my point. Go here.

http://news.firedoglake.com/2012/02/01/refi-plan-more-about-stimulus-than-housing/

Whatever. The data clearly show that strategic defaulting is a myth. I wish that weren’t the case, actually, but them’s the facts. You can provide all the anecdata you wish, but it just doesn’t happen all that often, sadly enough.

http://rortybomb.wordpress.com/2011/01/11/strategic-default-watch-elites-freak-out-to-the-trend-that-isnt-happening/

You would do it because right now you owe 300,000 on a 250,000 house at say 9%. No regular bank will refi 300,000 because your collateral is only now worth 250,000. This program allows you to refi the whole nut (amount of loan) at a much lower interest rate. You are still screwed on being underwater, but the payments become more manageable due to the new interest rate. The hope being if you stay in the house it will eventually go back up in value. The monthly difference could for many people be the difference between staying in your home or defaulting.

Margaret, we were in Houston 1977-1986, living inside the 610 loop. For us it was a great place to live. We could decide at 6:00 PM that we wanted to go to a play or symphony and go eat, park on the street downtown near Jones Hall, and get tickets without having to hurry. Did you watch KUHT? My wife worked there both on camera and off.