Housing bill: the fine print

[tagryn]

I have a feeling that we're going to start seeing grief stories in the media in about a year or so from homeowners facing foreclosure who're taking the bailout offered by the housing rescue bill. Why? Because if they didn't read the details on the ARMs they signed on to in the first place, what are the odds they're paying attention this time around to things like this:

...the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually. Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

Plus, they'll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs. After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

Yes, I can hear it now: "The government promised me I could keep my house, but now they're trying to STEAL AWAY MY HARD-EARNED PROFIT now that I'm ready to sell! We need a bailout to help those of us who need our home profits for retirement!"

Comments

[foomf.livejournal.com]

Yeah, it looks like they managed to get that poison-pill in there to keep people from wanting to use the bill. Typical.

There are people just looking at their mortgages, at the market values falling to (reasonable) half-what-they-owe, and walking away. Because they can afford to do that, and don't care about their responsibility.

The bailout should be protecting people from losing their home and thereby becoming homeless, it should be making a way out for people who should never have been offered ridiculous loans they could never pay by people who were only interested in short-term profits and not the soundness of the loan.

This, however, doesn't look like it will do either.