Housing Good News

Here’s a piece of good news about the foreclosure mess and the overall bad housing market. Good news in this arena is as rare as snowmen in the summer, so I wanted to pass it along right away.

An acquaintance called me some days ago to tell me he successfully got his mortgage company to renegotiate his mortgage loan terms.  Woot! Woot!

The Original Mortgage

• Taken out in 2003
• 5 year ARM, Interest Only payments at 5.875%
• Payments of 882.32 per month (interest only, not touching principle)

The New Mortgage

• 3.875% fixed rate for 40 years
• about $400 payment needed to start the new plan

This is phenomenal news! On your average $200,000 mortgage, this renegotiation brings the payment down from about $1183/month to $820/month.

Congratulations Tom!

The homeowner in this case had suffered both a medical disability and a job loss. Both these events are typically “qualifying events” for almost every mortgage company. Experiencing a qualifying event means you’re eligible for the mortgage company’s renegotiation plans.

Haven’t had a job loss or medical disability? It’s still worth contacting your lender if you’re struggling to make the current payment, or if you know you soon will struggle when the adustable rate (ARM) adjusts in the future.

.

Further good news on the credit card front –

Another friend of mine fell 2 months behind on credit card payments. He had a 5 to 15 year good payment history on the various cards. He’s 100% commission in a profession related to the housing industry, so times are tight.

Bank of America contacted him and offered their “Hardship Program” –

Old Payments

• Card 1 — $382.00 per month at 28.99%, payoff time about 40 years
• Card 2 — $213.00 per month at 15.22%, same

New Payments under B of A’s “Hardship Program”

• Card 1 — $200 per month at 4.75%, payoff time 60 months
• Card 2 — $168 per month at 4.50%, same

If you’re falling behind on or struggling to pay any of your consumer debt, call the servicing company today! They’re as scared of the word “recession” as we all are, and they’re agreeing to reduced payment plans to avoid writing off the bad debt entirely.

“It’s All Fannie and Freddie’s Fault.” – Really?

I know I promised no politics. But I’m tired of hearing people in the media repeat the Republican party line that our current financial troubles are all the fault of Fannie and Freddie. The Two F’s are wrapped up in our troubles, but they didn’t cause them.

From the a series in the New York Times:

Fannie never actually made loans. It was essentially a mortgage insurance company, buying mortgages, keeping some but reselling most to investors and, for a fee, promising to pay off a loan if the borrower defaulted.

…

Dozens of interviews, most from people who requested anonymity to avoid legal repercussions, offer an inside account of the…. pressure from Wall Street firms, Congress and company shareholders, [which caused Fannie's CEO Daniel Mudd to take] additional risks that pushed the company, and, in turn, a large part of the nation’s financial health, to the brink.

…

Shortly after he became chief executive [8 years ago], [Fannie CEO Daniel] Mudd traveled to the California offices of Angelo R. Mozilo, the head of Countrywide Financial, then the nation’s largest mortgage lender. Fannie had a longstanding and lucrative relationship with Countrywide, which sold more loans to Fannie than anyone else.

But at that meeting, Mr. Mozilo … threatened to upend their partnership unless Fannie started buying Countrywide’s riskier loans. [Mozilo said] that Countrywide had other options. For example, Wall Street had recently jumped into the market for risky mortgages. Firms like Bear Stearns, Lehman Brothers and Goldman Sachs had started bundling home loans and selling them to investors — bypassing Fannie and dealing with Countrywide directly.

“You’re becoming irrelevant,” Mr. Mozilo told Mr. Mudd.

Indeed, Fannie’s share of the mortgage reselling marketplace had plunged by more than half in the year before the Mozilo-Mudd meeting. Adding to the pressure, Capitol Hill demanded Fannie buy more mortgages made to low-income and other risky borrowers. Fannie complied, purchasing more than 3 times as many risky loans between 2005 and 2007 as they previously had.

By the middle of 2007, it all added up to a toxic mess as homeowners started defaulting on their mortgages in droves. Fear of unknown toxicity sitting on banks’ books trickled up through the credit markets, eventually freezing the short-term bank-to-bank and bank-to-business credit cycle.

The rest is (recent) history, as Treasury Secretary Paulson took over both Fannie and Freddie, then oversaw the FDIC bailout of IndyMac, orchestrated the Bank of America buyout of Merrill Lynch, watched as Lehman Brothers imploded, stepped in to bail out AIG and oversaw the WaMu seizure as well. Friday saw the passage of a landmark $700 billion “rescue plan”.

In this campaign season, the Republican spin-meisters have a loose association with fact. It makes a good soundbite to lay the blame at Fannie and Freddie’s feet, whereas it takes a little time, a little digging and a little nuance to explain what The Two F’s actually did. Doggone it, we can’t be bothered with nuance at a time of crisis like this. The American people just want government to get out of the way and cut their taxes. It’s all about job creation, Katie. <wink> You betcha!

Related Post – An Economist Backs Up This Post with Nifty Charts

I Can’t Pay the Mortgage, Part 2

This is a continuation of a recent post on this topic, and a followup to a post many months ago about what to do if you get a Notice of Trustee’s Sale.

Remember from Part 1 of this series that (1) I’m not an attorney and I’m not giving legal advice, (2) you don’t need to pay someone to help you out if you’re struggling to pay the mortgage, (3) there are many reputable organizations that offer help to homeowners who can’t pay their mortgage, and (4) a Notice of Trustee’s Sale is not a foreclosure action in and of itself but will result in a foreclosure if the homeowner doesn’t do something within 90 days of receiving the Notice in the mail. Read Part 1.

There are a couple of other things that you can do; these are items I tell folks who call me to talk about their options when they can’t make the mortgage payment.

1. Approach your lender about a workout plan, a forbearance program, or a repayment plan. “Workout plan” is a generic description of the process of changing the terms of your mortgage. Forbearance allows homeowners to temporarily stop paying the mortgage and catch up later. Repayment plans typically involve sending in your monthly payment with an extra payment to catch up on missed past payments. See also number 3 below.

But realize that these are options best suited for folks with a temporary inability to pay the mortgage. If you’ve been sick, been in an accident, been laid off, or have experienced some other situation such that you can’t pay the mortgage now but (realistically) expect to catch up in the next 6 to 12 months, these options might work for you. See definitions on the HUD site, in the right hand sidebar.

2. If you’re in the military, know that there are special programs for you. Tell your lender about your service details and ask for their help.

3. Ask for a loan modification. This is when the lender and homeowner agree to change the terms of the original mortgage. Maybe the bank will write down some of your principal. Maybe they’ll extend the payoff timeline. Maybe they’ll lower the interest rate. You should definitely consult a real estate attorney and maybe even a financial planner if you’re considering these options and get to the stage of looking at documents from your lender. Note that many lenders still aren’t offering meaningful help: NewsDay recently reported that 8 out of 10 homeowners who requested lender help with their mortgage arrangements weren’t getting it. Don’t let that stop you from asking though. A very wise person I know often reminds me, “You never get anything if you don’t ask.” Hat tip SJN.

4. Get the rest of your financial house in order. Banks do not like accepting short sales. They lose a lot of money and in return, they ding your credit but hard.  If you need to refinance anything (car, student loan, etc), do it now. If your old car won’t make it another 2 to 4 years, consider buying another now. After the short sale is over, you’ll be living a cash-only lifestyle for several years. Much of your immediate future will be a case of if you can’t pay for it in cash, you can’t buy it.

5. Consult a credit counseling service. Many homeowners struggling with mortgage payments are also over extended on credit cards. A reputable credit counseling service can help you consolidate your credit card debt, negotiate for lower payments or lower interest rates or both. Reputable credit counseling services do not charge an up-front fee for their services although they may charge a small monthly processing fee. Most are non-profit or not-for-profit entities. If you’re having trouble paying your mortgage and/or credit card bills, there’s no doubt you’re in a rough spot in your life.  A good credit counselor will help you draft a responsible monthly budget that you can realistically stick to over the long haul.

6. Continue paying your HOA dues whenever possible. This one is not really required by law or even by lending standards. But it’s just a good karma sort of thing to do. HOAs are usually left holding a lot of bad debt when homeowners default on their mortgages. Sometimes it’s several hundreds of dollars, sometimes it can be thousands. Your neighborhood’s budget needs for pool care, landscaping, capital improvements, staff salaries and the like don’t decrease over the years. If you’ve moved out of the home and left it vacant, your neighbors’ cost to maintain your home might actually increase. Don’t stiff your neighbors if you can possibly avoid it.

7. Make sure you’ve got a good shot at getting the short sale approved. You can do this by gathering the documents noted below, and using them to prove that you can’t continue paying the mortgage. Banks will not approve a short sale just because you don’t want to continue paying the mortgage. You must prove the payments are beyond your means. You’ll need these docs to request help from your lender:

• At least 2 years’ of completed tax returns
• A couple of month’s worth of bank statements
• At least a month of paycheck stubs
• The amount of your monthly income including wages, tips, interest income, stock dividends, and alimony payments
• A list of any other assets such as 401k’s, IRA’s and cash left in any other bank accounts
• A complete list of your monthly bills
• The amount spent monthly for medicine and medical insurance payments
• Foreclosure Notice or Notice of Trustee’s Sale if applicable
• Letter to lender explaining the reason you can’t afford the mortgage
• It’s a great idea to have an attorney and/or accountant help you with this stuff. The bank(s) who hold your mortgage(s) have attorneys on staff to protect their interests. You should too. Need a referral? Call or email me.

8. You can try to sell your home before the foreclosure takes place. Often this results in a “short sale” because today’s sale price won’t completely payoff your mortgage. Short sales are time consuming and lots of work but can buy you another 6 to 8 months to live in the home while you try to sell. Recently I had a successful short sale that took 13 months from list date to closing date.  Short sales are ugly but the one silver lining is you’ll have several months when you’re not paying the mortgage and can use that money to get the rest of your finances in order.

This isn’t a good time to go For Sale By Owner by the way. If your lender eventually agrees to a short sale, they’ll also agree to a Realtor’s commission for the work involved in selling. If you put your home up for sale, interview several Realtors before choosing one. Ask about their recent statistics with short sales. How many short sales listed? How many closed successfully? How long did each take? Were those sellers’ situations similar to yours? The Realtors can’t reveal other clients’ confidential finances but they can indicate whether you are like the other successful short sale owners they’ve worked with. I can’t tell you the “right” answers to these questions. But I can assure you that successfully closing 2 or 3 short sales is better than listing 50 but not closing any. That’s just common sense, of course!

I hope these points have been helpful if you’re having trouble paying your mortgage. Again, I’m going to stress that I’m not an attorney and this is not legal advice. Please don’t take these two articles as a recipe for a do-it-yourself fix. You’re almost certainly going to need professionals to help you – these might include an attorney, a CPA/accountant or financial planner, and/or a Realtor. Not being able to pay your mortgage can be an extraordinarily stressful time; you might find that talking with a therapist or your pastor/priest/rabbi helps too.

Please call or email me if you’d like to talk about your situation.

Related Posts

1. I Got A Notice of Trustee’s Sale, Now What?
2. I Can’t Pay the Mortgage, Part 1
3. REO, short sale, lender-owned, foreclosure – what do they all mean?

Lehman Bros Files Bankruptcy

Updating my last post, Lehman Brothers couldn’t find a buyout/bailout partner and the US government held firm in their “No”, so the 158 year old firm filed for bankruptcy this morning. Lehman was the fourth largest US investment bank and had lost billions in the US mortgage market.

World stock markets reacted by dropping sharply. The Dow Jones dropped a little over 300 points in the first 10 minutes of trading. The S&P fell 1.9%. The FTSE 100 in London was down 5% by early afternoon trading and Paris and Berlin saw similar drops in the first hours of trading. Lehman’s stock was down 90% in the first few minutes after the announcement.

In somewhat related events, Merrill Lynch brokered a $50 billion all-stock takeover by Bank of America. Merrill’s website already has a press release up, linked from a huge headline on the landing page. According to Merrill, the decision has been approved by directors of both companies and is subject to shareholder votes and the standard regulatory process. The deal is expected to close in early 2009.

Resources:

1. The BBC News Online
2. New York Times
3. Financial Times US

Hank’s Busy Sunday

Hank Paulson works weekends. Our Treasury Secretary is hard at it again this weekend, negotiating the sale of Lehman Brothers. Barclay’s Bank of London is the suspected purchaser of the ‘good bank’ side of Lehman’s business, or the performing side.

A group of 10 to 15 Wall Street firms would buy the ‘bad bank’ side of Lehman, or the nonperforming side with all the bad loan debts. Each firm would provide a portion of the estimated $30 billion to underwrite Lehman’s mortgage related losses. That’s the same amount guaranteed by the US government in their bailout of Bear Stearns, by the way.

Expect an announcement some time today, before the US markets open Monday morning.

Update, 12:43pm Phoenix time – Barclays pulled out of the talks. Lehman needs a new buyer by Monday’s market opening bell or they’ll probably be declaring Chapter 11 bankruptcy. Yikers!

Real Estate Road Signs – “We Pay Off, You Keep”

I’m noticing an uptick in the number of roadside cardboard signs that have something to do with real estate lately. You know the kind – here in Phoenix they’re usually hand-inked, on cardboard or oak tag, stuck in the ground with a stake.

Surely it’s a function of the bad economy, the looming recession, the credit crisis and the housing ‘bubble’.  Whatever, I figured it would make a good blog post or two. Here’s today’s Real Estate Road Sign:

I didn’t call to find out exactly what scam they’re peddling, but rest assured it isn’t as good as it sounds. No one is going to pay off your mortgage out of the goodness of their heart and not expect something for it. Either they’ll refinance you under their own (probably dubious) terms, or they’ll pay off the mortgage and let you stay in it, as a tenant.

There are some instances where it might be beneficial to let someone buy your home from you and then arrange to stay in it as a tenant. But contact a trusted Realtor or mortgage lender to do it. Placing your single largest financial asset into the hands of someone who advertises on roadsides with hand lettered cardboard signs is not in your best interests.

If this is a refinancing “plan” it probably involves people who look and sound a lot like the Sopranos and there are a lot of other, better options for refinancing if you’re facing foreclosure.

If it’s a plan to buy your home and rent it back to you, be very careful. There are a lot of scams out there now that start out this way, and then whack you with huge penalties if your rent is even an hour late. Worse, some of those rent back to owner schemes allow the company you’re dealing with the evict you from your home without notice if you pay late.

If you’re having financial troubles large enough to even think about calling the number on this sign, you’re probably better off contacting someone about a refinance or a short sale.

Related Posts

1. Real Estate Road Signs – Buy A House with $500 Down
2. Hire a Professional Lender, Not Your Buddy Who Does Mortgages Part Time
3. How Your FICO Score Determines Your Mortgage Interest Rate by the XBroker (not light reading but highly worth your time)
4. The AZ Mortgage Guru updates the status of the federal housing assistance bill
5. Try the federal Hope Now campaign designed to help you stay in your home

FDIC Shuts Down IndyMac Bank

Today it was announced that the FDIC (Federal Deposit Insurance Co) shut down IndyMac Bank after an old-fashioned ‘run on the bank’. IndyMac customers withdrew $1.3B from IndyMac branches since a June 26 letter written by Senator Schumer (D-NY) that said the bank posed “significant risks to taxpayers and borrowers” was leaked to the public.

What Happened to the Money?
There’ll be a name change, and a management change. For insured depositors (most average folk), their money isn’t going anywhere. They’ll still have have access to their money through the new name – IndyMac Federal Bank – and the new managment, courtesy of the FDIC.

From an InmanNews story: Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks.

Uninsured depositors will be contacted by the FDIC to meet with their claims people. The FDIC typically insures bank deposits up to $100,000.

The FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m.

Or visit the FDIC website: http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

Housing Bill Not Signed

You can read and hear the story of the latest Congressional foul up over the housing bill here, on National Public Radio’s show Marketplace or over at Reuters.

• See Bloomberg’s take on the story
• And see the New York Times article yesterday for background on the bill, which has a 3-pronged plan to:

1. Help homeowners facing foreclosure by assisting them with a refinance, or getting banks to write down some loan balances,
2. Offer incentives to first time home buyers who want to buy currently vacant homes (many foreclosure properties sit vacant and risk becoming blight in the community), and
3. Implement some new regulatons on Fannie Mae and Freddie Mac, the government regulated lending behemoths

Apparently, our US Senators have not signed this bill today as originally thought and intended. Instead, they spent the day haggling over whether to add energy tax breaks to the bill. Democratic Senate Majority Leader Harry Reid wanted the bill passed today (and most sources say it would have), but Republican Senator John Ensign wouldn’t let the bill go to a vote without the addition of his pet project, $7 billion in renewable energy tax cuts.

Encouraging the use of renewable energy sources is a laudable, noble goal. But what has it to do with the foreclosure crisis? Nothing. Senator Ensign is trying to tack his tax credit bill onto the foreclosure assistance bill simply because he knows foreclosure assistance will pass, and his tax credits plan likely wouldn’t, unless it is attached to a popular, will-pass measure.

American homeowners are hurting, and badly in many places. I don’t often like to sound like I’m commenting on politics here. It isn’t the place. But this is just truly depressing news. It seems our elected officials still don’t get it. Some of them would still rather wrangle and scrap over pet projects with little chance of success than get behind a much-needed bill that was sure to pass anyway and will help tens of thousands of truly hurting Americans. 

By the time the Senate returns from the Independence Day holiday to deal with this bill again, tens of thousands more Americans will have received a foreclosure notice on their home. The bill will almost certainly pass, even with Ensign’s tack-on tax credits. For shame, Senators. I wonder which of Ensign’s ‘close friends’ and business associates stand to benefit from the $7 billion he’s going to hand out for renewable energy sources?

Related Posts on The North Phoenix Agent Blog

1. Definitions of REO, Foreclosure, Short Sale and Bank Owned
2. Mosquito Eating Fish for Green Pools?
3. Countrywide Offers Assistance to Struggling Homeowners
4. I Got a Notice of Trustee’s Sale. What Now?

WSJ Says Housing Crisis OVER

The Wall Street Journal says the US housing crisis is over. They actually say we hit the bottom in April.

Of course, all real estate is local. Your neighborhood may be doing worse or better than the national average. Outlying areas like Queen Creek, Surprise and Buckeye are still experiencing severe downward pricing pressure as the foreclosure wave continues. Established neighborhoods close to central Phoenix and central Scottsdale aren’t faring so badly.

You can check out local real estate statistics by ZIP code at Jay Thompson’s Phoenix Real Estate Home. 

Mortgage Lender Sued, Pocketed $44 Million

From Inman News, here’s an excerpt from an article they ran today about a mortgage lender getting sued for shenanigans.

Leib Pinter, 64, is accused of fraud in connection with the alleged theft of $44 million in proceeds from refinance loans funded by Fannie Mae.

According to an indictment filed by the United States Attorney for the Eastern District of New York, Pinter’s company Olympia Mortgage Corp originated and serviced mortgage loans owned by Fannie Mae. Some of those loans were refinanced through Olympia, with Fannie Mae wiring money to an Olympia account.

Instead of paying off the underlying mortgage loan by remitting the outstanding balance to Fannie Mae, Pinter is accused of pocketing the proceeds. By the time the scheme was discovered, Fannie Mae held nearly $44 million in unpaid, but refinanced, mortgage loans from Olympia, prosecutors said.

Yikes! Maybe in addition to a terrorist watch list, we need a lender fraud watchlist. It might help solve the problem we seem to be having, where most folks want to help homeowners who got duped into a loan they couldn’t afford, but nobody wants to help guys like Pinter and homeowners who knowingly took out a mortgage they couldn’t afford.

Mortgage Terms Defined

Thinking about buying a home? Have questions, need info, but aren’t ready to speak with a lender yet? Have a fear that a pushy salesperson will bug you till you sign?

See this awesome glossary of mortgage terms compiled by Jack M. Guttentag. Jack is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, and founder of GHR Systems, Inc., a mortgage technology company. He contributes to InmanNews.com where I get my daily fix of real estate news. You can see excerpts of Inman headlines on my main website, the NorthPhoenixAgent.com.

Related Entries:

• PMI Defined
• What’s an 80/20 Loan?
• How Much Earnest Money is Enough?
• See all entries in the FAQ files here

UK Bank Says Credit Crisis Overstated

The UK Bank released a statement today that says the worldwide credit crisis is being overstated, and the financial market will gain strength in coming months as investors realize the impact of the subprime mortgage crisis wasn’t as bad as we all thought it was.

I’m no expert on the worldwide financial markets, but being in sales does give you the chance to hone your people watching skills. The UK Bank’s statement seems logical. Pendulums swing, and then swing back, before settling into the new normal.

Overreaction in the residential mortgage market was bound to happen, given the easy lending standards that prevailed over the past couple five or six years. For a while there you could get a mortgage as long as you could fog a mirror. Lenders are waaaay more restrictive these days. That’s not to say you can’t get a mortgage. You can. Just be prepared to provide documentation in the form of tax returns, pay stubs, bank account statements and the like. If your income comes from anything other than W-2 wages, you could have a difficult time getting a home loan right now.

But I think the UK Bank is right, if only because they’re describing a typical human reaction: overreaction, followed by settling down.

Why Lenders Aren’t “In To” Fixing Foreclosures

From Inman News, I got a eblast news update that gave me a little more insight into why lenders maybe aren’t so eager to modify loan terms for homeowners facing the possibility of foreclosure.

“On mortgages carrying mortgage insurance that go to foreclosure, investors are protected up to the maximum coverage of the policy, which is usually enough to cover all or most of the loss. This discourages modifications. Why do a modification for $15,000 if the $40,000 foreclosure cost is going to be paid by the mortgage insurer?”  So says Jack Guttentag, professor emeritus of finance at The Wharton School at the University of Pennsylvania. (I found Jack’s comments at Inman.com and I think the site requires a free registration to view the article)

Unlike my last post proposing a “fix” for the foreclosure mess, I’ve got no advice or ideas on this one. I assume it’s the investors who bought the loans from the original lender who are getting payouts from the insurance funds. The bulk of today’s foreclosures are loans carrying private mortgage insurance, since many of them were exotic 80/20 and 80/15/5 loans which left homeowners with little or no equity in the property. Since the news is filled with stories of big banks announcing big losses due to their involvement in the mortgage meltdown, I guess it’s just the banks and the homeowners who are paying the price. Investors (apparently) have their losses covered by insurance.

How To Fix The Foreclosure Mess

Being a political junkie, I’m fascinated by the various “fixes” offered by The Big 3 to help American homeowners out of the foreclosure mess. Hillary proposed a moratorium on foreclosures. Congress was debating allowing judges to renegotiate loan terms. Obama …. well, I like him lots but I forget what he proposed. And McCain just yesterday offered a plan whereby homeowners could “go to any post office” and fill out a simple form to apply for a new home loan.

Being in the trenches myself, so to speak, I’m not thrilled by any of these plans. Barack, I don’t remember what you proposed to help homeowners but I still like your inspirational change message. Most economists say Presidents don’t impact the national economy one whit, so I’d rather have someone inspiring sitting idle in the Oval. Billary: a moratorium is helpful only if the homeowner can resume making the payments at the end of the term.

John, I respectfully submit that most American facing foreclosure aren’t having trouble applying for a new loan; they’re having trouble getting one. Why? Because they can’t afford the current payments, they frequently owe more on the house than it’s currently worth, and to rub salt in the wound, they’ve dinged up their credit score badly by missing a few mortgage payments they can’t afford.

My Plan To Fix The Foreclosure Problem (and maybe enter the presidential race)

• A moratorium on foreclosures for 6 months
• Sellers must attend counseling and sign an agreement to save their usual mortgage payment for the 6 months of the moratorium
• Congress directs lenders to do the following: (1) write down principal, (2) lower interest rates and use fixed (not adjustable) rates, (3) lengthen loan terms, and (4) use the homeowners’ credit score from before they missed their first mortgage payment to calculate the refinance terms

If done properly, both homeowners and lenders can win. It won’t be easy but it’s going to be awfully difficult to ride this out without doing anything. Under this plan, homeowners will build a little savings account to guard against future emergencies, and come out of it with a future mortgage payment they can afford.  Lenders get to charge & collect more interest over the life of the new, longer loan and write down a heckuva lot less in losses through principal write downs than through out and out foreclosure. (Some of the out of work mortgage lenders could get a new, temporary job as mortgage & credit counselers too, although they make a easy scapegoat in this crisis so that might be a hard sell on Capitol Hill.)

Handy Example - Homeowner owes $250,000 on a home currently worth $215,000 and struggles to make the monthly payment on their post-adjustment-period ARM loan, which began with a teaser rate of 5.125% but is now at 7.25%.

• $250,000 loan at 7.250% for 30 years = $1705 a month, principal & interest
• $225,000 loan at 6.000% for 45 years = $1206 a month, pricinpal & interest

While the homeowners are probably rejoicing at their $500 a month savings, notice that the lender wasn’t forced to write down the entire pricinpal loss. The home is worth only $215,000 but the homeowner refinances $225,000. This should prevent the talking heads from ranting that we rewarded folks who knowingly got in over their heads. Importantly, this should help more Americans facing foreclosure actually stay in their house and keep making mortgage payments they can afford long into the future. Finally, fewer foreclosures equals less downward pressure on home values.

Sure, some homeowners won’t save the money they’d normally spend on mortgage payments. Sure, some lenders won’t write down the principal and/or interest enough to make a difference to the homeowner. Sure, some homeowners will still be so angry and (dare I use the word?) bitter that they’ll still choose to walk away from their abode, stripping it bare on the way out the door. But I think it’s better to try than to do nothing.

I’m sure there are other problems with my plan, holes I didn’t see and issues I didn’t think of. I’d like to know what readers think. I’m a relative guppie in the blogging world compared to some of the big fish who (graciously) read me. Want to leave your 2 cents? Please do! 

 This post inspired by my Dad, the Original Political Junkie. He’s got a steel trap mind for everything that happened in the political arena since about 1954, and he should have been making millions in Washington as a policy wonk or a Senior Advisor on anything. He chose instead to quietly step in to help a formerly single Mom raise her 2 kids. I’d be lost without him.

AmeriDream Continues Building Dreams

A few days late with the update, but it seems that February 28, 2008 brought another, final ruling from District Court that AmeriDream is OK to continue funding dreams by providing buyers with a down payment for the purchase of a home. Yay!

Related Posts: 
How AmeriDream Works

HUD Smacked Down By District Judge

AmeriDream Continues Funding Dreams

“Subprime” Defined