link: http://money.cnn.com/2009/03/04/news/economy/guidelines/index.htm?postversion=2009030409 so basically if i am a janitor and: 1) bought a 700k house on some crap interest only adjustable mortgage 2) document my income to be $2000 a month 3) my mortgage payment can be no more than (2000*0.3=)$600 a month is this correct? not looking for any bullshit debate/obama bashing. Just want to discuss the facts of this bailout please. So in the end, I, the janitor get to live in a 700k house and basically pay a "rent" of $600 (plus property tax etc..). correct?
As usual with liberal handouts, you also have to show a hardship. So maybe a janitor who aquired a drug habbit, for example.
It is not clear if housing expenses include property and school taxes or insurance. These could be a hardship re change in "expenses". It might be better to wait a year or two and see if municipal taxes increase and you could get even better terms.
nope, that janitor won't qualify because their DTI ratio is too high. i think the limit is 31 or 38%.
well wait a minute. I thought the new plan was for the bank to take it in the ass on the property, reducing the principal to the point where the payment is no more than 31% of the janitors income???
Well, you can't refi unless you're current...so that kills a lot of people's chances right there. But also, households that don't qualify include those under "jumbo" mortgages and those whose property values have dropped "too much." (who knows what that qualifies, but I'd say a good 25-30+% probably). Let's see, modifications... You're behind on your mortgage payments...the mortgage is on your primary residence...and if your monthly mortgage payment is more than 38% of your monthly gross income. So, interest rates gets knocked down to where payments can equal <38% down to 31%, but the rate itself can't be <2%. Rest is subsidized. Rate stays in effect for 5 years. Not going to help those with job losses entirely (since unemployment is probably FAR less then many payments were) right now. Oh and you get one shot at this. Fall behind again, no more mods, back to square one I bet and all bets are off. Stay current (struggle) for 5 years? Great. 1% increase per year back to the original rate you had or prevailing rate whichever is lower. Could benefit, could not. Depends on how they classify the option/sub-prime rates many got. Not saying the rate goes sky high in 5 years, but one never knows at this point. Can also knock up to $5K off as well in principal (not much in the overall picture if you owe a lot). Can't drop the payments to 31%? Could extend the term to 40 years or do a forbearance of sorts by shifting some of the principal off to the end @ no interest. Oh wait, there's a catch! "Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify." Of course, it'll also take several weeks to implement all of this...anyone who's going to FC in the next 2-4 months IMO won't get helped either. Add to it any typical bureaucracies/waits when they are able to get the stuff sent off and well, who knows? Hmmmmmm....don't expect many silver linings on this. It's still not going to help a lot of people in the whole picture. Some, maybe. But the problem is just going to stay pretty big and get bigger.
there is no principal reduction unless the bank agrees to it. it is voluntary and not part of the plan. the new plan only reduces the interest rate or extends the loan duration. as others have pointed out, few will qualify because they must go through the process as if they're refinancing a prime loan with full doc. many of these losers have such bad credit scores or spotty employment history that they won't qualify.