Bush to announce sub-prime plan

[bathsheba666]

..does he have any other type?

http://news.bbc.co.uk/1/hi/business/6971746.stm

Spoiler :

US President George W Bush is expected to set out plans later on Friday to help homeowners with sub-prime mortgages avoid defaulting.
Sub-prime mortgages are higher risk loans offered to people with poor credit ratings or on low incomes.

Rising numbers of defaults on such loans have hit banks, which have bought debt that include these loans.

President Bush is also expected to discuss ways to prevent such a crisis happening again in the future.

He is likely to allow the government-backed mortgage insurer - the Federal Housing Administration - to guarantee loans for borrowers who are more than 90 days behind with their payments, according to the Wall Street Journal.

He is also expected to highlight the need for strong enforcement of laws that prevent irresponsible lending.

Democrats claim the Bush administration has failed to make sure regulators oblige lenders to properly check whether borrowers will be able to repay their loans.

Record defaults

The crisis in the US sub-prime mortgage sector has been caused by American mortgage rates rising sharply over the past year.


Many US sub-prime borrowers may risk losing their homes

This has meant a growing number of sub-prime borrowers have been unable to meet their monthly payments as their initial low rates expire, leading to record levels of defaults.

The result has not only been significant financial difficulty for banks and investment firms heavily exposed to the sub-prime market, but also the recent stock market turmoil.

This is because of fears that the crunch in the sub-prime sector will spread to the wider loans market as banks become far more cautious about who they lend to.

The situation has been exacerbated by the fact that sub-prime debt is often resold as part of a wider debt package, meaning that banks and investors are, as yet, unsure about how far and wide the sub-prime downturn could spread.

Is he bailing out the feckless borrowers or the feckless lenders?
Why should this be necessary if the market deems otherwise?

 

[mrt144]

this is complete and utter . .. .. .. .. .. .. .. .. Bush is the worst financial conservative ever. I don't know how anyone can defend him as a fiscal conservative when he proposes . .. .. .. . like this. in fact this is even stupid considering theres already been a fair amount of foreclosures? do you backdate some of this relief for the families that already are out a home?

I hope that it actually will only benefit people that were manipulated not people that were manipulating the market like all the flippers. i doubt it.

let the market sort this out.

 

[Janusi]

So Bush has a plan, the master of disaster has a plan. Well, that should bring the stockmarkets down.

 

[mrt144]

his plan is going to be crap! CRAP!

 

[bhsup]

They shouldn't have signed the mortgage contracts. Why should the feds bail them out of poor financial decisions?

If you bought a cookie cutter McMansion that are spaced 5 feet apart from the others, but couldn't even afford to furnish it after buying the house much less make your payments once interest rates rose because you were stupid enough to sign a dumb adjustable rate mortgage, you shouldn't be expecting the feds to bail you out.

 

[AL_DA_GREAT]

that isn't the goverment's problem. It is their problem. Where does this notion that the goverment is an insurance company come from?

 

[IglooDame]

He is likely to allow the government-backed mortgage insurer - the Federal Housing Administration - to guarantee loans for borrowers who are more than 90 days behind with their payments, according to the Wall Street Journal.

Huh? Isn't that sort of counterintuitive? "You haven't been able to pay your mortgage, so we'll cover it for you." Am I missing something?

 

[mrt144]

this is so rife for abuse, it isnt funny.

 

[amadeus]

I wish the state would bail me out when I do stupid things.

 

[mrt144]

to be fair, i'd say that some, many, people were manipulated and didn't really know what they were doing. but that isn't any excuse to have the government bail them out.

 

[joycem10]

Philosophically I dont like it. As someone who is planning on selling a house soon, I do like it. I was really starting to worry about selling my place. The credit crunch was getting worrying and a couple of realtors told me it may hit my selling price.

If you think the Dems are going to oppose this you're wrong. Noone wants market insecurity and tight credit just prior to the next round of elections. I doubt there will be much opposition to this.

They shouldn't have signed the mortgage contracts. Why should the feds bail them out of poor financial decisions?

If you bought a cookie cutter McMansion that are spaced 5 feet apart from the others, but couldn't even afford to furnish it after buying the house much less make your payments once interest rates rose because you were stupid enough to sign a dumb adjustable rate mortgage, you shouldn't be expecting the feds to bail you out.

Im pretty sure this is going to help the lenders not the mortgagees. Its intended to protect the mortgage holdes in the event of default. Theres been a number of bankruptcys among the major mortgage finance companies the last month or so.

 

[mrt144]

the ultimate problem though is that any bailout or safety net for this will basically mean that no one has learned a lesson. Moral hazard extreme!

I find it distressing that all things will try to be swept under the rug like it never happened. and the fact that many people who were already foreclosed upon will receive no benefit.

 

[El_Machinae]

Where, exactly, is the money going to come from? Magic?

 

[mrt144]

tax payers, yay!
perhaps renters can get a tax credit

 

[Tank_Guy#3]

I've got the strangest feeling taxes are going to spike.

 

[MobBoss]

To me, this is proof that no matter what Bush does some people will snipe at him for it.....even if they would have liked it if a democrat had come up with the idea. You know who you are.

As far as the actual plan; I have never been a big fan of bailouts of any type, and would usually prefer to have the market forces sort it out in the long run. It wont affect me in the least, because I live in a area where housing prices continue to go up regardless of whats happening in the rest of the nation....that and I was smart enough to get a fixed loan and not an ARM.

And I suppose the reason behind it is to keep the economic growth going at near its current pace......that might work....but there are still a lot of issues with in doing it and still achieving the desired affect.

 

[marioh]

The government shouldn't be bailing out anyone.

Not the mortgage companies, and certainly not the idiotic speculators and fools who got in over their heads.

 

[skadistic]

The only good point is cutting the tax on the saved amount when refinancing.

 

[.Shane.]

to be fair, i'd say that some, many, people were manipulated and didn't really know what they were doing. but that isn't any excuse to have the government bail them out.

That's just it. If you think they're doing this to bail out the people, you're wrong. They're doing it to bail out the lenders.

Let 'em all sink together.

 

[QuoVadisNation]

Sometimes, the pragmatic approach makes more sense than any principle-based approach like "the borrowers should have saw it coming", or "all this does is represent big interest".

If this plan can avoid a disastrous turn of events brought on by years of irresponsible borrowing and lending, I'd welcome it. Of course, the plan hasn't been introduced yet. So I guess we'll just have to wait and see..