Merkley proposes plan to help underwater homeowners resurface
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PORTLAND, Ore. – U.S. Sen. Jeff Merkley, D-Oregon, has introduced an ambitious plan to help people who are underwater on their homes.
To be "underwater" homeowners owe more than what their homes are worth.
His proposal would set up a type of a government agency to offer people three different options. One lets people who are current on their mortgages refinance to a lower rate of 4 percent. Another plan would keep monthly payments roughly constant but shortens the life of the mortgage. The third option cuts monthly payments a lot, in effect extending the life of a loan.
"Many folks have asked me, 'Why now? Aren't we about done with this crisis?' And the answer is unfortunately we are not," Merkley said Friday.
Many people want to refinance but can't. Some say if they could get that lower rate they could get lower monthly payments and possibly save their homes from foreclosure.
Merkley says eight million people across the country are underwater on their mortgages and helping them helps the economy overall.
Fredi Jackson is a local homeowner in need of help. She hosted Merkley's press conference outside her home in Northeast Portland. She and homeowner Lake Boggan, who also joined the news conference, told about their struggles to save their homes. They hope the refinance plan could help stop the suffering.
"This is my home," Jackson said. "At my age I am not looking to buy another home. I don't know what to do, but I pray a lot."
Boggan said, "It's a very serious circumstance, and I have no idea what it’s going to look like if things don't happen quickly. Where will we stack our bodies? Where will we live?"
Both women say they tried to get loan modifications but the banks have not been helpful.
But how will the government pay for the plan? Merkley says the government can borrow money at a very low rate – 2 percent – and do the refinances at a higher rate – 4 to 5 percent – and the difference will pay for the program.
Can the senator promise the program won't flop and cost taxpayers a lot of money?
"I can tell you this: Under very conservative assumptions, in terms of appreciation, in terms of foreclosure rates, this will return a profit," he said. "I cannot tell you that there isn't the possibility in this world of a perfect storm, with a European collapse and worldwide depression that would change that, but everything that in the range of reasonable expectations to very conservative expectations, this will return a profit to the government."
For those who aren't underwater, they can most likely refinance already and at a lower rate than the 4 to 5 percent.
Merkley said he wants to get a pilot program started as soon as possible.
Merkley explains his plan in the below video:
What a bunch of hooey! Jeff Merkley doesn't care about anything or anyone but Jeff Merkley. He is the newest member of Washingtons good ol' boys club. This is all for show, and nothing will ever come of it.
Perhaps a little perspective will help this debate...
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"The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012.[1] On December 30, 2008 the Case-Shiller home price index reported its largest price drop in its history.[2]
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Increased foreclosure rates in 2006â2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets.[3] In October 2007, the U.S. Secretary of the Treasury called the bursting housing bubble "the most significant risk to our economy."[4]
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Any collapse of the U.S. Housing Bubble has a direct impact not only on home valuations, but the nation's mortgage markets, home builders, real estate, home supply retail outlets, Wall Street hedge funds held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession.[5][6][7][8] Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts.[9]
In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the US housing bubble..."
@criticalreason ........you forgot to mention the roles of Fannie Mae & Freddie Mac and the social engineering embarked upon by these agencies and supported by the federal government that homeownership was an American dream and a right. Now that dream, the way it was concocted, is stagnating this economy.
 @Rob C  @criticalreason Please allow me to further educate you, it was the PRIVATE lenders that caused to crisis by pumping the market full of sub-prime mortgage loans and then selling them as financial products (mortgage backed securities).Â
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http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
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Federal Reserve Board data show that:
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More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
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Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
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The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday. Read more here: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#storylink=cpy
 @Rob C  @criticalreason Okay, buh bye. I don't feel the need to compare my resume to yours to prove my point, other than to say I've been there too. If you truly believe the govt. is to blame for the bad behavior and greed of Goldman and the like than I can't help you. Lastly, my internet resources were cited facts, not my opinion.
@criticalreason ......nice chatting with you and you're apparently satisfied with your Internet sources of information to support your position. That's fine. I'll rely on my 30 years of experience in banking and finance and how I saw CDO's and the mortgage underwriting process be given the tacit approval by the Feds by them accepting and allowing the practice to happen. You can believe that if you want. But believe me the lending practices were sanctioned by the FDIC, Comptrollers of the Currency and the Treasury.
 @Rob C  @criticalreason Your question implies they were doing something illegal, they weren't. But, not all things that are legal are a good idea. And, I believe it should have been stopped. Another way to answer your question is there is a fundamental problem in our society were often regulators are hired from the industry they are supposed to watch, which is generally a bad idea. See, they simply turn an blind eye to things like lowered underwriting standards. Yet another way to answer your question is private institutions created very very complex NEW financial instruments that were hard to regulate by very nature. Of course I am sort of glossing over a lot of details for the sake of brevity. This conversation is rather complex. I would offer Elizabeth Warren as a shining beacon for reforming financial regulation...
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http://www.examiner.com/article/financial-regulation-needs-a-champion
@criticalreason .......I hope you weren't inferring I was "ignorant". But let me ask you this: since the banks are regulated by the FDIC, and Fannie & Freddie are government agencies, if the securitization process was not in compliance with lending guidelines, why didn't this heavily regulated industry get stopped?
 @Rob C  @criticalreason I never said, or meant to imply, I was an authority. For starters you can refer to my screen name. I reason things out by critically scrutinizing information. Take the information I've provided, it's all public information. Anyone who has access to the Internet and has a healthy amount of skepticism can research such things. In other words, it's not really a secret why the big banks failed, unless one willfully wants to be ignorant. On the other hand, people can sit back and have information spoon fed to them and then implicate those who feed them new information in scandals.
@criticalreason .....just thought someone who is such an authority on the mortgage market, sub-prime lending and mortgage backed securities might share how they came by this wisdom
 @Rob C  @criticalreason Too long, but this issue isn't about me.
@criticalreason .......don't be troubled. How long we're you in banking and government finance?
 @Rob C  @criticalreason They bought some loans but were not the cause of the problem. The PRIVATE lenders lessened their requirements and as such Freddie and Fannie didn't buy as much (lost market share to private companies). Your failure to see the cause of the problem troubles me.
@criticalreason .........so someone as intelligent as you knows that those subprime loans were being bought by Fannie & Frddie.
"""""and the difference will pay for the program.""""
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Thanks for the laugh of the day, a govt. progarm paying for itself.... ya right, if the program paid for itself, the private sector would be all over it.
@kramr It said pay for itself, not allow for millions in profits. That's why the private sector isn't interested.
Is it just me, the top image Smirkly kind of looks like a gray haired Fred Armisen of Portlandia :)
that is the Democrats answer to every problem start yet another government agency to over see yet another program doomed to fail from the start.
@onceagain I prefer this plan to the republican plan of "let them go homeless." But I guess they're not obscenely wealthy, so the GOP believes that's where they belong, right? The same GOP that seems to pride itself on its Christian values yet never actually follows them except when it's relevant to their argument.
What a total idiot, who is going to pay for this wrack job idea, the US tax payer , that is who. If you are underwater on your home just keep making the payments. Most likely your payments have not changed, just the valve of your house. So why is it so  hard to make your payments if you were doing it before you should be able to keep making them.
 @onceagain Reading this article, that was my thought exactly. Nothing has changed, except what you see on paper.
Why yes, lets trust the government to get us out of the problem that they created...... brilliant {rolleyes}
 @kramr How exactly did the government create the problem? I thought the banking industry created the problem and the government, under Bush, bailed them out?!
@criticalreason  Long story short,  the GOVT. started encouraging subprime loans back in the Carter admin, during the clintion years the govt ramped it up to where it was pretty much forcing lenders to make loans to those who basically had no chance of paying the loan back and continued thru most of the bush years. IIRC, bush wanted to have Fannie Mae audited about the solvency of the loans but Barney Frank and some other high up Dems strongly discouraged it saying all was fine.
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FYI, if you look at mortages made by banks from the 1960's and prior (i.e. before the feds became involved in loans)  the foreclosure rate was but a very small fraction of what it is today because when the feds were not involved, the banks were very interested in the borrowers ability to pay it back and obviously would not loan to high risk borrowers.
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Basically it was the feds lending polices that forced banks/lenders to do what they did. And with Fannie and Freddie backing the loans, the banks really didn't care if the borrowers couldn't pay.
 @kramr This speaks more to your incorrect assertion...
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"Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac â who in turn pressured banks and other lenders â to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."
Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.
What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
Read more here: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#storylink=cpy"
 @kramr Those are pretty bold assertions, not based up by actual facts. Government policy did not force banks to do anything, they got greedy.   Perhaps you should read up on what really happened...
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This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.
To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.
But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
During those same explosive three years, private investment banks â not Fannie and Freddie â dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.
Read more here: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#storylink=cpy
 @kramr  Why yes . .  If you go to the US Dept of Commerace http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1&acrdn=2 and start graphing consumer spending (70% of todays economy), the GNP, Import/export, govt income and expenses, you'll discover that is when (the mid- late '60's and early '70's) all hell broke loose. Public debt came into being to balance it all.  Yes it was 'out of wack' in the '40's as we went to war in WWII, but it was 'tamed'.  We were the Saudi Arabia of oil once.  The interactive graphs are appalling and shocking.Â
Government displaying it's ignorance again? Just who do they think is going to pay for this? People that have played by the rules will pay for those that have not! A typical Democrat party mentality!
 @Freedom1267 More like a typical capitalist mentally, privatize profits (in the form of lending to anyone) and then publicize losses (forcing the taxpayer to bail them out) when the mortgage industry crashes.
@criticalreason @Freedom1267 Ann corporate socialism at it's finest. Socialism is ok for e ultra wealthy but not for anyone else.
 @Motorhead79  @criticalreason  @Freedom1267 Exactly!
 @Freedom1267 "It's ignorance"
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You do realize that an impersonal pronoun has no apostrophe when made possessive?
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You see, that is you displaying your ignorance.
@nobody ......ah, English teacher.
How can one be skeptical about a new government agency that is going to use redistributed wealth to pay those who chose not to pay their debt. It is perfect plan - government uses my money to pay them, they teach their kids (all 12 of them) how to 'work the system' and all the neighborhood votes Democrat. Does my vote counts? Not really because there will ALWAYS be more people who want just 'redistribute' my money than people who would choose to work and make living.
 @Julie Did you read the article before you regurgitated your Fox talking points? You're not even arguing about the right thing?! This program isn't for people who are in default, it's to help them refinance. They are victims of the housing bubble that was caused by greedy banks.
Merkley is driving the Clown Car at the head of the Doofus Parade.We don't need more government 'help' as that is what's gotten us into this mess.
Ghesus Krust!!!
I wonder if politicians read these comments? Not one of you has said "Good idea Jeff"! I would venture to guess that this is a bad idea, and only the most gullible would look at it as a good choice. The only payments I have toward my house is property tax, and utilities..... plus maintenance... paid it off years ago instead of buying a boat, or ATVs, Corvette....etc. No it's not worth as much now as it was a few years ago, but I don't care, because I'm not borrowing against it and I don't plan to sell so it doesn't really matter what someone else thinks it's worth.... I think it's worth a million bucks and it's mine (Unless I don;t pay my pound of flesh to Big Brother.).
 Sell your Lexus, and Jet Ski.... ATV... Dirt Bike.... what ever and take that money you save and put that towards your mortgage. Suck it up, and pay for the house you got burned on... we all make bad choices at times, but we learn from them and pay the price ( I still have a BetaMax that I keep just to remind me to think twice before buying...).Â
 @Razor1 You're completely right, that woman should sell her Corvette.
Another government agency eh Jeff? And that agency will get involved unwinding contracts to save homeowners that borrowed more than they could repay? Let's list a few of the other governmental endeavors that have worked so well: Amtrak, U.S. Post office, dept. of Energy, Dept. of Education, Freddie Mac & Fannie Mae, the U.S governments budge deficits. Just to name a few. So, Jeff........go set up another bureacracy that will save people from themselves.
 @Rob C Oh that ridiculous Post Office! We should just get rid of it and that darn Department of Education too! That way, all the kids growing up can be just as stupid as you are.
@nobody So if you can't intentionally express an opinion your choice is to attack other people and name call. Very pathetic on your part.
I'm not convienced it can pay for itself. And 'option three' is another disaster being sold under the guise of 'help'. This could blow up very quickly. [A decade or less.] [All the options have problems to overcome - think regulators overseeing the banks.]  But option three takes the cake.
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"The third option cuts monthly payments a lot, in effect extending the life of a loan."Â Â
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This means that the payments may (most likely) no longer even pay the interest on the loan, so it adds to the principle and starts to mushroom. It's not just a matter of "extending the life of the loan", it's making the mortage holders rich; interest on interest, compounding away.
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If the owners lives long enough, they'll have a balloon payment; if they don't live to the end of the 'extension', there'll be no equity left for heirs. [These may be fine, but let's be up front on what is going on here.]
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The so-called (book) 'value' of the loan could double every 7 to 10 years - and it is already more than the value of the property. Which do you think is going to gain more?  One written into a 'contract', the other ties to the market.
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If they need to sell - for example, their care - there is no money or even the option to get out.
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It's a winfall for the banks; sell it for the 'loan value', or take a 'loss' against other profits.
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You know the old saying, if it sounds too good to be true . . . . .  Hi,  I'm from the government, I'm here to help . . . .
I wish I had been smart enough to buy a house back when I couldn't afford one.
Merkley has no idea about finances.
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What happens when these folks default on the refinance and the taxpayers are stuck with a bunch of homes that no one wants to buy? When they default is the government going to go in and evict them so the house can be resold to recoup the cost of the loan?
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Plus this really got my attention. "Both women say they tried to get loan modifications but the banks have not been helpful."
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Banks are not helpful. If you are a problem case they will just ignore you. All banks want is easy money. Those who can pay their bills on time and don't keep bringing up problems that cost the banks money. Once people understand banks they will never do business with them again and go find a credit union.
When robbing from Peter to pay Paul, you can always count on the support of Paul.
Just more taking from those who make good choices and giving to those that didn't. This country has lost its way.
 @2012 Hope and Change That's not the total picture though. We bought our house in 2007 and can and do pay for our house. The value of my house has dropped by half!!!!!  We weren't part of the "can't afford" group but we are still paying the price.... there is no option for us? Banks don't re-negotiate on principle. My friends who bought in the lates 90's still have a little equity. We feel like we got screwed.
 @back4more I'm in the same boat. We bought a house we can afford in 2007 like you. Our home value dropped and now valued at more than $70,000 less that what we paid. We make our payments on time, every time, without fail, we have credit scores over 800 but we can't get the banks or anyone else to refinance. However, start skipping payments and they'll take care of you. People like you and me are getting penalized for doing the right thing. It makes no sense.
These people ( many) are upside down because of poor financial decisions.. Many say " this is my home" and lived there for years, nice, then don't borrow on it..  One other consideration, what do we do for renters ? And, when the prices go up up up, do they then have to pay this back if they sell ?
the last thing the gov't needs to do is borrow more money