Video: Obama releases new housing program

posted at 2:30 pm on February 1, 2012 by Ed Morrissey

We got a big hint of this new proposal from Barack Obama in last week’s State of the Union message, and now Obama has rolled out his proposal to accelerate mortgage refinancing to bolster the housing market. However, it has at least one poison pill that will make it nearly impossible to get Congress to budge, and its reach is significantly limited. Here is Obama, speaking earlier today, of his attempt to help “responsible homeowners” and not the people who walked away from their obligations:

CNBC reports that FHA will indeed be the vehicle for this new program, and that might tip over an already extended agency:

Critics will also argue that the FHA, which now has an inordinately, historically large share of the mortgage market, is in no position to take on any more risk. The FHA could be considered “underwater” itself, guaranteeing about $1 trilling in mortgages but sitting on just a $1.2 billion dollar cushion to cover losses.

To that end, officials say they could create a separate fund for these loans, not the regular mutual mortgage insurance fund (MMI). This would be a special risk fund, designed to handle high losses.

Basically, it sounds like an extension of the bailout, only now for people who bought high and had to watch as values dropped.  The reach of the program would not keep people at risk from losing their homes, but simply allow people to lower their interest rates on the existing principle in most cases, which means it doesn’t make them any less  underwater, either.  In fact, it might make matters worse:

To be eligible, borrowers would have to be current on their mortgages, not having missed a payment in at least six months. They need a credit score (FICO) above 580, must be employed, and must have a conforming loan (between $271,050 and $729,750 depending on their location). No appraisal would be necessary, according to officials.

Estimates are that the plan could help 3.5 million borrowers in addition to the 11 million expected to qualify for the existing refinance program for those with Fannie Mae and Freddie Mac loans (HARP). The one sticking point could be the mortgage insurance premiums charged by the FHA. If rolled into the loan, they would put a borrower further underwater.

“To use taxpayer dollars to bail out the few who are current and don’t need payment assistance but are underwater is ludicrous and worsens their equity position,” says JT Smith of Aristar Funding.

Note that I said most cases.  When the principal is more than 140% of current home value, the program would force lenders to write down the principal to 140% … which still leaves homeowners underwater and reduce assets for lenders, making it more difficult for them to lend money.  The administration will argue that this helps the lenders by getting rid of “risky” loans.  They’re only “risky” if the homeowners can’t make the payments, though, and even if that were true, lenders could simply choose to do this on their own.   Not only that, but because FHA — an outright government agency — would take on the loan instead of Fannie/Freddie or a completely private lender, taxpayers would also on the hook for that same “risky” loan for which taxpayers had no prior risk at all.

Jim Pethokoukis argued last week that this is Obama’s attempt to buy some middle-class support.  Republicans may stop it for its new fees on lenders, which will supposedly fund the costs, but certainly not the risks involved in this shell game, but that would also be useful for Obama in vote mining among underwater middle-class homeowners — in fact, it might be more useful than passage.  (Republicans could pass it with a provision approving the Keystone XL pipeline and dare Obama to veto it, too.)  Its passage will only extend the problem for most of these homeowners, transfer risk from private lenders to taxpayers in many cases, and do nothing to create conditions in which demand rises for housing that would solve the valuation issue.

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Middle class people don’t have mortgages starting at $271k and ending at three quarter of a million dollars.

Key West Reader on February 1, 2012 at 3:23 PM

The MAXIMUM loans can be $271K to $729K depending on where the house is.

It’s not starting at $271K to $729K.

Here is a list of the MAXIMUM loan values for Colorado for example.

http://www.fha.com/lending_limits_state.cfm?state=COLORADO

Every county has a MAXIMUM loan limit which is between $271K and $729K. The more expensive the area the higher the loan limits.

angryed on February 1, 2012 at 3:28 PM

The ppl in Ohio who consider themselves middleclass spend 250,000+ on homes. That was before the bubble burst.

angrymike on February 1, 2012 at 3:30 PM

angrymike

you’d have one giant trigger finger with normal sized opposable thumb.
mittens are dumb. Down with them I say.

DHChron on February 1, 2012 at 3:30 PM

burrata on February 1, 2012 at 3:28 PM

It was the shirtless pic that did it for me, but I have a thing for dreamy Kenyans.

DHChron on February 1, 2012 at 3:33 PM

DHChron
+ 1000
Down with mittens, gloves or bust!

angrymike on February 1, 2012 at 3:33 PM

Sadly, this nothingburger will be touted in the media as a boon to the middle class and anyone opposing it hates everyone but the one percent or something.

Even more sadly, too many Americans will suck it up with a spoon.

hillbillyjim on February 1, 2012 at 3:35 PM

The are no limits to which this charlatan will not go, or no amount of your money he will not spend, to slither back into office in 2013. Despicable!

rplat on February 1, 2012 at 3:35 PM

I don’t understand, I was told that Cloward-Piven wasn’t real.

LoganSix on February 1, 2012 at 3:36 PM

and must have a conforming loan (between $271,050 and $729,750 depending on their location)

My home is not underwater, in fact, it’s probably gone up a little, however, it’s not worth $271,050. Other than that I would qualify, but I’ve looked into refinancing a couple times with FHA, and I refuse to pay mortgage insurance when I’ve got 40% equity in my house because I was smart enough to put a decent downpayment down. Why should I pay for someone else’s insurance for being underwater? This is the whole redistribution/socialist crap. I’ll stick with my existing loan.

lea on February 1, 2012 at 3:37 PM

So is the PMI in this program suppose to be calculated based on the entire loan, or just 20% of the loan?

opustx on February 1, 2012 at 3:37 PM

Kenyans are foreign, right? Let’s just impeach this guy.

DHChron on February 1, 2012 at 3:38 PM

He’s buying people’s votes with their own money.

It would be nice if we had a nominee who would point that out.

HitNRun on February 1, 2012 at 3:40 PM

DHChron
YOU BIRTHER, the great country of Texas has spoke some truth!

angrymike on February 1, 2012 at 3:42 PM

angryed on February 1, 2012 at 3:28 PM

Thanks.

Still not taking gubmint cheese. If I did, I’d be screwing myself.

Key West Reader on February 1, 2012 at 3:42 PM

Let’s just impeach this guy.

DHChron on February 1, 2012 at 3:38 PM

He can’t be impeached, he is black.
We are not even supposed to think about such racist things, specially when today is the beginning of a very special month
:)

burrata on February 1, 2012 at 3:42 PM

Flim Flam Bam

fogw on February 1, 2012 at 3:42 PM

Republicans could pass it with a provision approving the Keystone XL pipeline and dare Obama to veto it, too

Din’t we already get the Keystone concession as part of the unemployment extension deal and Obama reneged on it after he what what he wanted? Are we going to keep making this type of deals with this guy and not hold him accountable when he doesn’t hold his end of the bargain?

neuquenguy on February 1, 2012 at 3:44 PM

angryed on February 1, 2012 at 3:28 PM

People just don’t listen to you Ed. In this area of Missouri the amount would be the $271,000 mark so a $130,000 home would qualify if the other conditions are met but a $275,000 home would not.

Vince on February 1, 2012 at 3:44 PM

My home is not underwater, in fact, it’s probably gone up a little, however, it’s not worth $271,050. Other than that I would qualify, but I’ve looked into refinancing a couple times with FHA, and I refuse to pay mortgage insurance when I’ve got 40% equity in my house because I was smart enough to put a decent downpayment down. Why should I pay for someone else’s insurance for being underwater? This is the whole redistribution/socialist crap. I’ll stick with my existing loan.

lea on February 1, 2012 at 3:37 PM

You do qualify.
$271,000 is a MAXIMUM loan value not a minimum. Congrats, you’re eligible for Obama welfare.

angryed on February 1, 2012 at 3:46 PM

burrata on February 1, 2012 at 3:42 PM

dang, is it black history month already? Here’s to that.

DHChron on February 1, 2012 at 3:46 PM

What if you don’t have a job?

Obama, nobody has a job!

Oh. Nevermind. We’ll just eat cucumbers from the WH garden and sweeten them with some WH honey.

Blech.

Stuffit up yo azz Obama.

Key West Reader on February 1, 2012 at 3:46 PM

MORE CORRUPTION will certainly make a right. Not.
MORE FEDERAL INTERVENTIONISM will certainly fix all wrongs. Not.

The Democrat law forcing banks to loan despite the borrowers with ruinous credit and without the traditional 20%/mortgage down payment, compounded by the massive fraud of not only Freddie Mac and Fanny Mae loan corruption, but the defaulted mortgages repackaged by the GOP Sec. of Treasury Paulson as derivatives for sale (Bush issued his CYA executive order upon departure declaring that the Sec./Treasury is now an autonomous position, beholden to no one, certainly not to Congress), all of that federal interventionism wasn’t enough to satisfy the liberal Marxists. Rather than these billionaires who preach “higher taxes” actually establishing a private enterprise of their own to fund charitable housing for the indigent, this POTUS Obama is the same crook lawyer who defrauded the City of Chicago public works program to refurbish the infamous Altgeld Gardens for the most impoverished and aged senior black Americans, ripped off by Obama’s crew of lawyers who profited by allowing gangsters to strip the premises of everything including the kitchen sinks, then condemning the public housing project literally throwing the poor into the slum streets without even a roof over their head, let alone plumbing. How many Mulligans will Americans permit the SCOAMF, allowing his sale of whole cloth at taxpayer expense? Given the record of official abuses from Obama’s administration et al., how many voters actually suffer from Stockholm Syndrome, or battered spouse syndrome, believing the lie from fear (swallowing the camel, choking at the gnat, identifying “the audacity of hope”).

maverick muse on February 1, 2012 at 3:48 PM

hmmmmm…you seem bitter Key West.

DHChron on February 1, 2012 at 3:48 PM

People just don’t listen to you Ed. In this area of Missouri the amount would be the $271,000 mark so a $130,000 home would qualify if the other conditions are met but a $275,000 home would not.

Vince on February 1, 2012 at 3:44 PM

But it’s not the value of the home. It’s the size of the loan. So if you have a house valued at $250K but the loan is $350K you don’t qualify. The home’s value is really irrelevant for the purpose of the $271K to $729K discussion.

angryed on February 1, 2012 at 3:49 PM

He’s buying people’s votes with their own money.

It would be nice if we had a nominee who would point that out.

HitNRun on February 1, 2012 at 3:40 PM

Our guys are thick and they don’t read sensible sites like HA. The problem is their staff of youngsters that are in way over their heads. They need to hire more mature, wiser staffers and stop the nepotism and payoffs to contributors sons and daughters.

I’m available.

Vince on February 1, 2012 at 3:49 PM

The fact nobody here seems to understand what the $271K means, I’m guessing most people won’t either. Which means a lot of people will read this story and think, oh well my house is only $250K I don’t qualify.

For once the MSM’s incompetence might help us out.

angryed on February 1, 2012 at 3:50 PM

angryed on February 1, 2012 at 3:49 PM

Correct! I should have said loan rather than home.

Vince on February 1, 2012 at 3:51 PM

Our guys are thick and they don’t read sensible sites like HA. The problem is their staff of youngsters that are in way over their heads. They need to hire more mature, wiser staffers and stop the nepotism and payoffs to contributors sons and daughters.

I’m available.

Vince on February 1, 2012 at 3:49 PM

Who, at Romney HQ, has time to form a committee on this when there are 500 Newt attack ads in Nevada to prepare?

angryed on February 1, 2012 at 3:51 PM

Stories like this make me want to go all Jesse Jackson on Bam Bam.

antipc on February 1, 2012 at 3:52 PM

The fact nobody here seems to understand what the $271K means, I’m guessing most people won’t either. Which means a lot of people will read this story and think, oh well my house is only $250K I don’t qualify.

For once the MSM’s incompetence might help us out.

angryed on February 1, 2012 at 3:50 PM

This might backfire in that the “poor, unfortunates” that this is aimed at might feel that Obama is paying off the 1%

Vince on February 1, 2012 at 3:53 PM

hehe…classic

DHChron on February 1, 2012 at 3:54 PM

It was the shirtless pic that did it for me, but I have a thing for dreamy Kenyans.

DHChron on February 1, 2012 at 3:33 PM

Oh, fer cryin out loud shut your pie hole. Barack Obama’s pie hole.

But, then there’s this: Seed of Malcolm

Key West Reader on February 1, 2012 at 3:56 PM

It pains me to read so many people who don’t understand even the basics of how this stuff works.

angryed on February 1, 2012 at 3:06 PM

Not so angry, ed!

It was merely a misreading based on how poorly the description of the program was worded here. It appears a number of people here misread it as I did of being between $271k and $729k, not that it was a maximum depending on area. I do see now how it was supposed to read, it just doesnt read that way on initial look.

gravityman on February 1, 2012 at 3:57 PM

What was the bit at the end about making sure that people who lose their jobs don’t lose their homes? How’s he gonna do that?? Will mortgage payments be made through the unemployment insurance system? Suspended for the duration?? If I’m in danger of losing my home, can I “arrange” to lose my job instead? Yet another Obama & Co fustercluck coming soon to the housing market in your neighborhood.

Interesting that a couple of Harvard Law School grads can’t understand a standard mortgage contract.

SukieTawdry on February 1, 2012 at 3:58 PM

Ahh section 8, landlord subsidy

jake49 on February 1, 2012 at 3:58 PM

Chit happens and life “aint” always fair. A little failure will go a long ways to solving this housing bubble that burst because the friggin’ government got involved in it to start with.Until the mortages are foreclosed and the houses are sold, and those underwater also either walk away from the houses are do like those who made a bad deal, cut your losses and move on, this problem is never going to be solved. Is there some way we could foreclose on the white house. Isn’t Obama underwater and mired in socialism?

they lie on February 1, 2012 at 3:59 PM

Ed writes: (Republicans could pass it with a provision approving the Keystone XL pipeline and dare Obama to veto it, too.)

C’mon Ed. We’re talking about Republicans here. You know, the STUPID party. The pantywaist R gang up in D.C. are too feeble to actually do something right and that would make them look good and the president bad.

mapper on February 1, 2012 at 4:01 PM

Key West Reader on February 1, 2012 at 3:56 PM

hahahahahaha. gotta love the audience. Uh-huh! yeah, he right girlfriend!

DHChron on February 1, 2012 at 4:01 PM

Basically, it sounds like an extension of the bailout, only now for people who bought high and had to watch as values dropped.

Not entirely true Ed. We bought before “high,” but prices have dropped even further than when we bought.

Bought: 160,000 mid-2004
High: 285,000 ~2006
Low: ~110,000 present

Not for nothing, Mr. President (in title only), but we should have been the first in line to get help. Not the last.

And by the way, Mr. President, we don’t want your help. If my fellow taxpayers have to bear the burden, thanks but no thanks.

Mr_Magoo on February 1, 2012 at 4:02 PM

DHChron on February 1, 2012 at 3:46 PM

how can we forget this gem

burrata on February 1, 2012 at 4:02 PM

He can’t be impeached, he is black.
We are not even supposed to think about such racist things, specially when today is the beginning of a very special month
:)

RIP Don Cornelius.

Never fear. In his FL victory address last night, Mitt announced that the purpose of his campaign is to save the soul of America.

/There’s always Mormon baptism for the dead. And since Mormons squish on abortion of “spirit children” and historically require a person’s own blood atonement, suicide shouldn’t present any snag gaining access by proxy into their celestial kingdom./

“This campaign is about saving the soul of America.”
Mitt Romney, Jan.31,2012, Florida Results

For “white” Americans, prepare for the avalanche of MORE Mormon “missionaries” looking for “quality converts” (15% income purchases celestial glory insurance). How’s them apples, non-Mormons? Mitt! Mitt! Mitt! Nuts. Can Mitt darn? “IF holes in the safety net exist, I’ll fix the holes.” Don’t dare say how, Mr. Romney. Mimic GHW,

“Read my lips: no new taxes.”

maverick muse on February 1, 2012 at 4:03 PM

burrata on February 1, 2012 at 4:02 PM

…That’s the world on which hope sits! And so it went; a meditation on a fallen world…

Bill Ayers really has a way with words.

DHChron on February 1, 2012 at 4:07 PM

Obama’s Keynesian, so is Mitt. Avoid taking the ride on the Keynesian authoritarian bandwagon nosediving over the economic cliff. “Of all the candidates, Only I Know how things work” is just another lie. As if Keynesian and Ivy League Mitt EVER built his own business from the ground up. No. Certainly, Mitt would show up for the shovel ceremony. But Mitt had his investors lined up in advance, “gifted”. Mitt was not an unknown entity who literally had to send out mass mailings in hopes of catching investors. No, Bain approached Mitt, handing the ready money to a wholesome looking front man. “I didn’t inherit anything” Mitt, another lie. Why would Mitt feel the compulsion to brag that he never inherited any money, that it’s all his, he “created” all of the money that has ever been spent on his behalf in his life, it’s all his, only his. That’s sick, to dismiss his father’s legacy. Besides, the only money that Mitt could “create” would be more fiat funny money from the printing press.

No, Mitt’s too proud to take a lesson in economics from the Austrian School. The same applies to Constitutional Law. Mitt would be inconvenienced to actually govern under the legal constrictions of separate branches, limited powers. How menial and beneath the Ivy League elitist standards of acceptability, to limit one’s own opportunism according to a constructionist Constitutional Republic (if you can keep it: B. Franklin).

maverick muse on February 1, 2012 at 4:26 PM

Seven hundred and fifty thousand dollars? Sounds like a bailout of the one percent to me.

Smedley on February 1, 2012 at 4:30 PM

Ok, in one breath they say this program won’t require an appraisal. And in the next breath, they say that if the LTV is >140%, the lender being paid off will be ‘required’ to do a principle reduction.

1. So is an appaisal required or not? If not, how do you calculate what the LTV is?

2. ‘Required’ to reduce the principle? I don’t think so. You can’t require a note holder to modify the note…that’s ever so slighly illegal folks.

3. The Debt Forgiveness Act of 2007 expires on 12/31/12. Any debts forgiven by a lender after that will be treated as ordinary income by the IRS. Thus, if the program ‘requires’ a lender to do a priciple reduction, they are placing a huge tax burden on the unsuspecting borrower.

The reason this plan makes no sense is because it will never..repeat never…be passed into law. It’s pure hot gas desined to win votes.

DrW on February 1, 2012 at 4:30 PM

Who would this help??

1.Those already in a HAMP program wouldn’t want PMI on top of their reduced interest rate.
2.It wont stop the tsuanmi of foreclosures headed our way.
3.it just generally sucks.

D.Mockracy on February 1, 2012 at 4:30 PM

I still don’t understand what the big deal is about being “underwater”.

You drive a car off the lot and if you’re financing it, you’re “underwater”. So what?

A house is a long-term investment. Maybe it takes 10 or 20 years to have equity, but until then, buck up. Markets rise and fall. No guarantee that it’s ever going to be a great investment, buy a house because you want to live there.

NoDonkey on February 1, 2012 at 3:18 PM

Some of you are missing the point that there are real middle class people who make their payments and are not in trouble but are still pissed that everyone else including the banks they owe got a bailout while meanwhile they are LOCKED into higher then market value interests rates on higher balances then would have been the case at markets rates for assets that lost value and this all was caused by the government. Asking the government to clean up their own mess and erase their previously engineered market distortions is not a bailout.

Resolute on February 1, 2012 at 4:34 PM

The fact nobody here seems to understand what the $271K means, I’m guessing most people won’t either. Which means a lot of people will read this story and think, oh well my house is only $250K I don’t qualify.

For once the MSM’s incompetence might help us out.

I get it now, in fact, looked up some numbers on PMI. The calculator I used for a FHA loan to refinance my home on a 30 year fixed had the PMI at $124 a month which offsets the savings on the interest rate. The payment was about a gain of $30/month because I have low property taxes. The actual program might have different terms, but I doubt the PMI would be any different. I don’t see where this program makes any sense at all.

lea on February 1, 2012 at 4:40 PM

Cynical pandering from the Campaigner in Chief.

OxyCon on February 1, 2012 at 5:00 PM

Interesting that a couple of Harvard Law School grads can’t understand a standard mortgage contract.

SukieTawdry on February 1, 2012 at 3:58 PM

A mortgage contract is more complicated than an automobile liability policy, but Barry still can’t comprehend how that contract works either.

This is what we get when our foolish and corrupt left-wing media combine forces with millions of low-information voters.

AZCoyote on February 1, 2012 at 5:01 PM

I am a little confused and my memories a little fuzzy. But didn’t government involvement in the housing market…crash it? So the solution is to have the government…intervene more?

Yeah, I suppose if Fannie and Freddie were some of your biggest campaign contributors or you have been away on another planet this makes sense.

How about we help the economy by improving our business climate, stop the over regulation of our industry, stop the spending, repeal new entitlements we can’t afford and in turn create jobs?

Just a thought. But I am making too much sense now.

Marcus Traianus on February 1, 2012 at 5:02 PM

I am so dumb. I bought a house I could afford, paid 20% down. Re-financed only once to get a better interest rate, took out no extra money, only change was for a shorter term. Now it is paid off and I don’t get any help, but get to help those who bought a home as expensive as their credit would allow.

Oleta on February 1, 2012 at 5:06 PM

I am a little confused and my memories a little fuzzy. But didn’t government involvement in the housing market… crash it?

Marcus Traianus on February 1, 2012 at 5:02 PM

Hush your mouth. We’ll have none of that crazy talk!

Fallon on February 1, 2012 at 5:21 PM

Congress won’t pass this. Harry is savvy and won’t get hung with this turkey. I don’t want to pay for someone else to buy a house, get healthcare or an abortion. I’m not poor, yet, so Mitt should still be concerned about my status.

Kissmygrits on February 1, 2012 at 9:28 PM

Ed –

Spell check misfires again?

principal not principle

slp on February 1, 2012 at 10:48 PM

Three years into his Presidency, Chimpy McHarvard discovers to his horror that no one is buying houses and values have been dropping for five years. Thank goodness we have such a brave visionary to lead us away from trouble!

Jaibones on February 2, 2012 at 12:59 AM

@lorien1973:

I’d bullcrap if it I my home was between those numbers. No appraisals? It’s not ripe for abuse or anything.

Ding. You win the giant panda!

Mortgagors should expect an avalance of crayon scrawled “notes from my appraiser” in conjunction with this dunderheaded barky spawned policy.

Mortgages long ago broke free of the constraints of fiscal reality thanks to the three legged monster of “the community reinvestment act” (thanks, jimmuh cahduh) and fanny and freddie. The latest nonsense is just bending things into ever funnier shapes.

GrassMudHorsey on February 2, 2012 at 9:32 AM

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