Obama's ReFi plan

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it seems easy enough to implement, but how does one practically refinance while under water without banks assuming an inordinate amount of risk?

'You have a note with me for 6.5%, you want me to give you a new note for 3.5%, but the collateral hasn't change and actually has much less value than the note i'm already trying to collect.'

The other problem with this specific proposal is another one that allows banks to buy sovereign debt without having cash on hand to back that debt. You couple that, with this new plan and I think we'll see a lot more failing banks when people realize that there are still going to be foreclosures under this new plan.

I like the spirit here, but I think that's just yet another time bomb.
 
Agree with Reikoshea. The ship is sinking, and it's not taking my money with it.

BLOAT: Buy Lots Of Ammo Today.
 
reikoshea said:
it seems easy enough to implement, but how does one practically refinance while under water without banks assuming an inordinate amount of risk?

'You have a note with me for 6.5%, you want me to give you a new note for 3.5%, but the collateral hasn't change and actually has much less value than the note i'm already trying to collect.'

The other problem with this specific proposal is another one that allows banks to buy sovereign debt without having cash on hand to back that debt. You couple that, with this new plan and I think we'll see a lot more failing banks when people realize that there are still going to be foreclosures under this new plan.

I like the spirit here, but I think that's just yet another time bomb.
Click to expand...

It will work because for millions, the other option is people just walking away and not paying their mortgages and banks spending $100,000,000's in the forclosure process, Banks can't loose money if they go from 6.5% to 3.5%, they are still making interest on the loan.
 
That's not entirely accurate. If you have a 250,000 loan you want to refi, from 5% to 3.75% (for the pure sake of argument).

On your 250k loan, the bank is being paid a total of 233,139.46, on a 30 year note, in interest. Lets say banks are nice and they gave you that rate when the prime was 4.8%. They're making 10,940.64 in profit. Lets see what happens if the prime drops to 3.55% (its even lower in reality) and they're still only charging you an extra .2%.

Original

250,000
233,139.46 @ 5%
222,198.82 @ 4.8%
10940.64 profit

New:

166,804.03 @ 3.75%
156.656.34 @ 3.55%
10117.69 profit

8% loss in profit

Now granted these numbers are small. The margin in reality is closer to a half a percent over prime, and the banks will likely make back some of that money in closing costs, but ultimately, in an apples to apples comparison, banks lose on this deal. With the current foreclosure rate, it may break even if it keeps people out of foreclosure, but assuming it doesn't help anyone, banks are definitely losing money on this, AND the fed is trying to entice them into covering more of the national debt in a way that will likely lead to more failed banks.
 
reikoshea said:
That's not entirely accurate. If you have a 250,000 loan you want to refi, from 5% to 3.75% (for the pure sake of argument).

On your 250k loan, the bank is being paid a total of 233,139.46, on a 30 year note, in interest. Lets say banks are nice and they gave you that rate when the prime was 4.8%. They're making 10,940.64 in profit. Lets see what happens if the prime drops to 3.55% (its even lower in reality) and they're still only charging you an extra .2%.

Original

250,000
233,139.46 @ 5%
222,198.82 @ 4.8%
10940.64 profit

New:

166,804.03 @ 3.75%
156.656.34 @ 3.55%
10117.69 profit

8% loss in profit

Now granted these numbers are small. The margin in reality is closer to a half a percent over prime, and the banks will likely make back some of that money in closing costs, but ultimately, in an apples to apples comparison, banks lose on this deal. With the current foreclosure rate, it may break even if it keeps people out of foreclosure, but assuming it doesn't help anyone, banks are definitely losing money on this, AND the fed is trying to entice them into covering more of the national debt in a way that will likely lead to more failed banks.
Click to expand...


your forgetting all the money they made on the 5% interest they collected from you over the first 4-7 years...again, they don't loose money, they just don't make as much, it's not a loss
 
see, the thing is, the house, as it sits, is ALREADY an under the water risk. Changing the interest percentage rate doesn't change that. If anything, it improves (err, decreases) the risk of someone missing payments as their bills are lower.
 
I can understand a bank not wanting to buy a loan out. But as b said, wouldn't a bank that already holds the loan to a house, rather lower the rate and keep the loan, rather than keep the rate high and watching the loan go bust. Then they have to pay someone to go into the house, clean it up and sell it. or sell it as is at a much bigger loss.
 
My mortage rate is higher, and the principal is at least 3x your loans.... and i'd hazzard a guess that more people own houses than have student loans.
 
B said:
I agree with this because it rewards me for my bad investment.
Click to expand...

Weren't you critical of the bank bailouts? This is more of the same horseshit, and it won't ever pass unless the banks come out ahead in the long run, because Congress is bought and paid for.
 
klyph said:
Weren't you critical of the bank bailouts? This is more of the same horseshit, and it won't ever pass unless the banks come out ahead in the long run, because Congress is bought and paid for.
Click to expand...

Not everyone that bought a house made a bad investment, many were doing just fine until the market dumped and all of a sudden their good investment wasn't worth shit due to no fault fo their own.
 
^ exactly.

I haven't defaulted.
I'm 100% up to date on all payments.

I'm not trying to re-negotiate what owe on the house. All I want is the oppertunity to be able to re-fi based on my credit worthiness, not because the gov't said that banks can't lend to me, because of the value to debt ratio exceeding 90%.
 
where is the talks of investment, besides your posts? it's irrelevant to the conversation.
 
personally, i would probably never view real estate as an investment.

i want to buy only because in my area, buying is cheaper than renting.
even after the cost of ownership (repairs, property tax, etc) its still cheaper.

i personally think that anybody that buys a house to live in, and views it as an investment, has already lost. unless the house needs major repairs/renovation, there isnt any money to be had.
most people, especially my generation, think "oh, i can buy this house for 100k and sell it 3 to 5 years from now for 125k, its an investment, im going to make money"

after putting in the taxes, the repairs, the yearly upkeep, interest, etc etc etc, you will be damn lucky to walk away breaking even.
nobody takes that into account. and most of the time a house "gains value" it hasnt really gained value, its more or less because the dollar has lost value.
 
meh.

its still a losing investment to me.

or a very small return in the long run.
 
reikoshea said:
it seems easy enough to implement, but how does one practically refinance while under water without banks assuming an inordinate amount of risk?
Click to expand...

Since no one answered your question, I will.

The risk will be mitigated with subsidies and incentives. I didn't watch the video so they may have mentioned that, but I doubt they did.

So the short version is, .gov will cover, probably only partially, the losses on rate reductions and write-downs, or, will provide major tax breaks to lenders who offer write downs. Either way it will yield an expenditure/loss of tax revenue.

They may also offer actual dollar amount incentives to lenders who provide refis/mods...like, $1500 per completed refi. I was working at Merrill Lynch the first time Making Home Affordable broke out and I recall that the cash incentive was supposed to get lenders on board. In reality, it doesn't come close to even covering the labor costs involved with processing.

It's all fuckin horseshit. More tampering is only and has only prolonged what is an otherwise natural phenomenon. Let it fuckin die already. Let everyone dump their houses and move into apartments.

This is what...the fourth iteration of the same government mandated refi/mod program? It never really worked and it still won't.
 
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