Emergency Rescue Package – The Devil’s in The Details
Is this a mess or what?
You live in a San Diego new housing development where all homes were sold out in 2004. You and your neighbor paid $750,000 for your identical homes. You have been paying your mortgage on time, but your neighbor is facing foreclosure. As we all know, most San Diego home values are way down from their 2005 highs. So, let's say the homes in this example are now worth $525,000 each. What happens when your neighbor gets his loan modified to $525,000 simply because he can’t afford his house?
Actual clause in the government rescue package:
Sec. 109. Foreclosure Mitigation Efforts
CONSENT TO REASONABLE LOAN MODIFICATION REQUESTS – Upon any request arising under existing investment contracts, the Secretary shall consent, where appropriate, and considering net present value to the tax-payer, to reasonable requests for loss mitigation measures including term extensions, rate reductions, principal write downs, increases in proportion of loans within a trust or other structure allowed to be modified, or removal of other limitation on modifications.
Also, be sure to read these related posts:
Are the Rating Agencies at The Cause of Our Financial Mess?
Housing Bailout – The Real Cause?
The Paulson Plan – Still Wrong
Government Bail-Out – Risk & Reward
Housing Bail-Out … Pass or Depression