However, there’s a key aspect to the loan-mod plan that few have picked up on. It’s not only about whether a foreclosure is “more profitable” to a bank than a loan mod, though that certainly matters (especially now). What the Post article doesn’t mention is that under the Making Homes Affordable plan, loan mods should be made with as little cost to the government — which means we taxpayers — as possible (PDF):

Protecting Taxpayers: To protect taxpayers, the Homeowner Stability Initiative will focus on sound modifications. If the total expected cost of a modification for a lender taking into account the government payments is expected to be higher than the direct costs of putting the homeowner through foreclosure, that borrower will not be eligible.

Lenders participating in the MHA loan-mod program are required to use a cost-benefit analysis to determine whether a given borrower is eligible for a taxpayer-funded loan modification. While it might be nice to modify everyone’s loan, as noted above, that’s just not cost-effective — and might even be a little cruel in holding out false hope to some homeowners.

DO NOT UNDER ANY SERCOMSTANCES, REFINANCE YOUR MORTGAGE!!!
We just re-fi-ed because the rates were so low, never late on any payments, credit score of 819 and for some reason the bank SOLD our mortgage to Fannie Mae! Now Uncle Sam owns our mortgage and we are stuck on the plantation till our home is paid off!!

I’m Pi$$ed!

Bicyea on July 28, 2009 at 3:13 PM

It doesn’t really matter if you refinanced or not. My mortgage was sold to Fannie Mae too. My mom’s reverse mortgage was also sold to the the government, last month.

Unfortunately, we bought two new Dodge trucks in January. If I could take it back I would, my money would go to Ford.

TXMomof3 on July 28, 2009 at 7:04 PM

This would have been my sentiment exactly, were it not for the UAW.

I just got off of the phone with a car salesman after he called me two hours after he said he would. He apologized for the lateness and said that the “Cash for Clunkers” really has him hopping. The only problem is that he isn’t selling anything.

If you have a clunker, there is a reason that you haven’t (and can’t) bought a new car yet.

Harpoon on July 28, 2009 at 5:01 PM

Haven’t bought a new car since 1980, but just bought one today from a large dealership that (they tell me) normally sells 1,600 cars per month…but not long ago the salesmen were having trouble keeping busy.

They sold 100 cars under the clunkers program the first 2 days (last Fri & Sat). Two different salesmen and the service manager told me that they thought the money might run out by the end of the month, which is this Friday.

The clunker was a 1986 Mercedes 300E I bought in 2002 for $4,000. Got the $4,500 clunker allowance plus $2,000 maanufacturer rebate. Out-the-door price was $13,375 for a car with MSRP just under $18,000.

Nope, didn’t buy an American car.

How about a new clunker from Chrysler where they offer the Democrat Promise warranty?

seven on July 28, 2009 at 5:15 PM

lol

If you have a clunker, there is a reason that you haven’t (and can’t) bought a new car yet.

Bought well within means, paid it off. Why should I pay in taxes because someone greedy threw the dice and came up craps.

Jeff from WI on July 28, 2009 at 4:11 PM

But, but, Jeff…they were just pursuing the American Dream!

I remember when my grandma used to tell me about that American Dream:

“Gun,” she said, “when you grow up you’ll be able to buy a huge freakin’ house with a 3-story atrium and a fully-finished basement and leverage that sucker up to the hilt and do 3,4 even 5 cash-out refinances so you and your children can buy lots of flashy consumer crap. And a pony.”

“Remember, Gun,” she said, her eyes going all dreamy, “it’s not shelter. It’s a freaking ATM.”

Too many of our fellow Americans have forgotten/never learned the word “NO”. It is sad, but true.

but Obama is the “smart” guy, its Sarah Palin who is an idiot

jp on July 28, 2009 at 3:28 PM

Would that be 57 state Obama that’s so smart?

guntotinglibertarian on July 28, 2009 at 3:48 PM

Like contracts mean anything with the Obama Clownage in charge?

Just ask GM/Chrysler investors about what contract are worth now.

Screw ‘em.

guntotinglibertarian on July 28, 2009 at 4:03 PM

Exactly

Bought well within means, paid it off. Why should I pay in taxes because someone greedy threw the dice and came up craps.

If you can’t do the math, don’t blame those who profited from your ignorance.

Jaynie59 on July 28, 2009 at 3:52 PM

In many, many cases, it was worse than ignorance, it was greed.

There were scads of “trade-up” buyers during the boom who thought they would profit from leverage on a bigger house.

Their thinking went like this: housing values will continue to rise at 15% or 20% per year. On my current $300,000 house that means I gain $45,000 or $60,000.

But, if I take out one of these fancy new mortages, I can buy a million dollar house and then I’ll be racking up profits of $150,000 or $200,000 a year.

They thought they were sophisticated investors.

Screw ‘em.

rockmom on July 28, 2009 at 3:24 PM

Your argument is just one more example of stupidity.

If you can’t figure out how much you can comfortably pay for your mortgage every month you are a moron. That’s an editorial “you”. Mortgage brokers having been telling people they can afford more house than they can really pay for forever. That is nothing new. Why? Because mortgage brokers make money on the closing costs. They don’t care if you repay the loan because they sell your mortgage to someone else. Probably before your first payment.

I’ve bought three houses in my life and not one of my mortgage payments went to the mortgage company who wrote my loan. They were all sold before the first payment was due.

Two of them, interestingly enough, ended up with Washington Mutual. Soon to be Chase since WMU got bailed out. Or went belly up, or whatever. My loans were at the top of the bucket.

If you can’t do the math, don’t blame those who profited from your ignorance.

Fannie Mae! Now Uncle Sam owns our mortgage and we are stuck on the plantation till our home is paid off!!

I’m Pi$$ed!

Bicyea on July 28, 2009 at 3:13 PM

Doesn’t matter who bought your paper. You have contractural right to pay it off early, unless you signed a mortgage with pre-payment penalties.

DO NOT UNDER ANY CIRCUMSTANCES, REFINANCE YOUR MORTGAGE!!!

We just re-fi-ed because the rates were so low, never late on any payments, credit score of 819 and for some reason the bank SOLD our mortgage to Fannie Mae! Now Uncle Sam owns our mortgage and we are stuck on the plantation till our home is paid off!!

I’m Pi$$ed!

Bicyea on July 28, 2009 at 3:13 PM

Refi through a smaller bank or a credit union. They hold their own paper.

Most of us watched from the sidelines, or waited until we had enough down payment to get a decent fixed rate. Patience is still a virtue.

Vashta.Nerada on July 28, 2009 at 3:29 PM

Yep. As earlier noted, when my wife’s financial adviser suggested we should buy a house in 2005, I fired his ass.

People made decisions based on the facts in front of them at the time and the advice of lenders they trusted. I get tired of conservatives blaming “stupid people” as much as I get tired of liberals blaming “greedy lenders and Wall Street fatcats.”

People

rockmom on July 28, 2009 at 3:24 PM

It’s simple, rockmom:

1. Don’t buy something you know goddamned well is above your means.

2. Bubbles always burst.

A couple who was making, say, $80,000, knew perfectly well that they couldn’t really afford a million-dollar home.

But they gambled on ever-increasing price appreciation to bail them out.

Now they whine that they didn’t know what they were getting into because the bank made it so easy.

The gambled. The lost. Screw ‘em.

People made decisions based on the facts in front of them at the time and the advice of lenders they trusted. I get tired of conservatives blaming “stupid people” as much as I get tired of liberals blaming “greedy lenders and Wall Street fatcats.”

People

rockmom on July 28, 2009 at 3:24 PM

I understand where you are coming from, but anyone getting an ARM with no money down, expecting to refi or sell before the rates reset was playing with fire, if not outright stupid. Most of us watched from the sidelines, or waited until we had enough down payment to get a decent fixed rate. Patience is still a virtue.