Remember Peggy Joseph the enthusiastic Obama supporter who was thrilled to have him in office because he would pay her mortgage and she’d never have to put gas in her car?? Peggy might be out of luck on the free fill up but she’s onto something about the mortgage.
Late yesterday the President took a giant step in paying Peggy’s mortgage–and millions more like her.
“Under the plan, homeowners suffering under previously negotiated high rates will be able to refinance under the current rock-bottom rates near 4 percent. The plan comes as about 1 in 4 homeowners owe more than their homes are worth. Advocates believe the plan could help ease the underwater mortgage problem and help generate consumer spending by lowering mortgage payments
But Bove said the $85 billion in estimated savings for homeowners would translate to costs for taxpayers who subsidize government-sponsored agencies such as Fannie Mae, and to banks which will lose that much revenue with the refinancing. The estimate comes from a New York Times report on the program that cited sources familiar with the plan.”
So now let’s see, based on this article and a reduction in rates from 6% to 4%,
an underwater homeowner, paying on a $250,000 mortgage, pays about $1,500/month under their existing loan. Under this plan that payment declines to $1,195 per month. Undoubtedly the taxpayer will be on the hook for the $305/month difference for the next 10 – 30 years for every homeowner taking part in the proposed program.
The above homeowner enters the new program (assuming 6 months to finalize) and since they are still under water will likely stop paying anyway in the first six months of the new program. They then enter the HAMP or Hope Now Program, ultimately to be turned away after 6 months (or perhaps approved staving off foreclosure for another 12 – 18 months).
Now at least 18 months has elapsed and they enter foreclosure. Since foreclosures are taking 18 months (or longer in places like Nevada , Florida and California ), the homeowner can live in the home for say the next 36 months while making payments for only the first six to nine months. Sounds like cheap rent to me.
Oh and since they are getting lower payments do you suppose that the IRS will tax them on the debt forgiveness under the Obama plan?
Sounds like the financial industry and the taxpayers will be shelling out $ Billions more.
Anaylst Dick Bove says this is outrageous:
“The point that neither the administration, the Treasury nor the Fed can seem to understand is that they have strangled bank lending with their capital and liquidity rules and their price fixing requirements,” he wrote. “This was a core reason why bank lending did not open up to facilitate a refinancing boom.”
Tell ’em where you saw it. Http://www.victoriataft.com