President Barack Obama’s magic has just amazed the country. Im waiting for the Masked Magician to reveal his secrets. The illusions Obama has performed has taken the country by surprise, and we sit and wait for the next trick as the Obama administration prepare us for another ‘watch me pull a rabbit out this hat’ trick.
While we were focused at the stimulus bill last week, Obama pull a quick $275 billion housing rescue program from the Magician’s Hat. The administration has dubbed this the “Making Home Affordable” initiative. The idea is not to prevent all foreclosures, but to push aside those the government deems “unnecessary,” loans to responsible borrowers trying to keep their home during rough economic times.
This program has two main parts. The first part, called “Home Affordable Refinance,” is aimed at homeowners whose property has lost value. This is open only to borrowers with conforming loans backed by Fannie Mae and Freddie Mac, it would waive the requirement that the borrower have 20 percent equity in the home. The second program, called “Home Affordable Modification,” is aimed at borrowers whose payments have become unaffordable, because of a hardship such as job loss or illness, or because the interest rate has been reset higher on an adjustable-rate mortgage. The government would provide cash payments and financial subsidies to help the lender lower the monthly payment to as much as 31 percent of the borrower’s gross monthly income.
Both programs are limited to borrowers who live in their homes, owe no more than $729,750 and fully document their incomes. The plan’s came a day before the House of Representatives was expected to pass legislation giving bankruptcy judges power that they now lack to modify the terms of certain mortgages. Now lenders has to modify mortgages instead of moving to foreclosure. The Obama Administration thinks the plan can help up to 9 million homeowners. Housing may be more affordable now than at any recent time, thanks to lower prices and falling mortgage rates. The National Association of Realtors has an “affordability index” that estimates the family income needed to buy a median-price house, assuming a 20 percent down payment and monthly mortgage payments equal to 25 percent of income.
The Obama plan offers $200 billion to provide refinancing for some homeowners who owe more than their homes are now worth. 5 million of them must have their mortgages in the hands of Fannie Mae or Freddie Mac. Who did we just give money to? Another $75 billion in incentives to 4 million, this is to help prevent foreclosures in cases in which the homeowners are about to lose their homes. The money comes from the $700 billion bailout fund approved last October. What will be pulled out he hat next week, CAR LOANS ?