Foreclouser - bailout is going to be dead-on-arrival

 

According to the The Associated Press (Alan Zibel 03/02/08). The word bailout isn’t popular in Washington, D.C., these days, so the efforts by both political parties to clean up the housing mess are all skirting the issue.

"Anything that can be described as a bailout is going to be dead-on-arrival, so how these proposals are framed is critical to whether or not they even have a chance at enactment," says Jaret Seiberg, a financial services policy analyst with Stanford Group. "It has to be framed as a short-term rescue for the housing market and the economy and not as a way to help individual lenders or investors."

Here are the five most prominent plans for propping up, rescuing, freezing, and throwing a lifeline to the housing market:

Rep. Barney Frank: Give the Federal Housing Administration $15 billion to buy up loans and refinance them at lower rates, and give state and local governments $10 billion in grants to buy up foreclosed properties.
Sen. Christopher Dodd: Create a new Federal Homeownership Preservation Corp., funded with up to $20 billion, to purchase distressed loans and help struggling home owners to refinance.
Treasury Secretary Henry Paulson: Encourage the banking industry to freeze interest rates for five years for some borrowers, and give some home owners a 30-day reprieve from foreclosures.
Senate Majority Leader Harry Reid and other democrats: Let bankruptcy judges reduce the obligations of borrowers unable to pay their mortgages, and spend $4 billion to buy and fix up foreclosed homes.
Office of Thrift Supervision: Allow about 8 million home owners who owe more than their homes are worth to refinance into government-backed loans, giving lenders the ability to share some of the gains if the home is eventually sold at a higher price.

Meanwhile OFHEO Director James B. Lockhart announced agreements with OFHEO, New York State Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac (the Enterprises) to strengthen the independence of the appraisal process. For mortgages the Enterprises buy or guarantee, the agreements seek to enhance appraisal and evaluation services that are critical to the residential mortgage process. Flawed appraisals artificially inflate home prices and are often a sign of mortgage fraud and undue influence on appraisers.

There are many significant provisions in the agreements that are designed to strengthen the independence of appraisers, including eliminating broker-ordered appraisals, prohibiting appraiser coercion, and reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages. The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.

The parties also agreed to establish and the Enterprises fund an Independent Valuation Protection Institute designed to supplement current efforts to provide an appraisal complaint process, mediation of appraisal disputes, and mortgage fraud reporting. The agreement seeks the comments and concurrence of the federal banking agencies and solicits the comments of market participants that will be considered in making amendments to the Code during the implementation process.

View the Home Valuation Code of Conduct here

And the FDIC, in observance of National Consumer Protection Week (NCPW) March 2-8 launched an updated and expanded computer-based instruction (CBI) version of the Money Smart financial education program. Money Smart is a financial education curriculum for instructor-led classes or self-paced online use. The new CBI version features improvements in areas such as shopping for a mortgage, avoiding identity theft and saving money for the future. To access the new version, go to www.fdic.gov/consumers/consumer/moneysmart/mscbi/mscbi.html.

The Fall 2007 issue of the quarterly newsletter FDIC Consumer News at www.fdic.gov/consumers/consumer/news/cnfall07 reports that while credit may be tougher to get, good loan programs are still available, and it offers advice for borrowers about restructuring or refinancing their existing mortgages if they face the prospect of losing their homes because of rising monthly payments. In addition, borrowers having difficulty reaching their mortgage servicer can call the FDIC Call Center at 1-877-ASK-FDIC (1-877-275-3342). Although borrowers will need to discuss their particular situation with their servicer, the FDIC can help them contact their servicer or the appropriate state or federal regulator.