CNN Money.com: FDIC pushes mortgage help for jobless

[LadyDoveFL]

Keepin' my fingers crossed...

Special Report

FDIC pushes mortgage help for jobless

Buyers of failed banks who get assistance from the agency should consider giving forbearance plans to unemployed borrowers.By Tami Luhby, CNNMoney.com senior writer

September 11, 2009: 6:48 PM ET

Life after foreclosure

After losing their homes, these 4 families thought they'd never recover. They've found it difficult to rent and their credit is wrecked, but life is looking up. NEW YORK (CNNMoney.com) -- Some unemployed homeowners at risk for foreclosure could get a temporary break on their mortgage payments under a plan being pushed by the FDIC.




The Federal Deposit Insurance Corp. said on Friday it is encouraging certain banks to reduce mortgage payments for the unemployed or underemployed for at least six months.

Overall, relatively few of the unemployed will benefit from this recommendation because the effort would only apply to a handful of institutions. Specifically, it would affect those that bought failed banks and participate in loss-share agreements with the FDIC. In such deals, the agency covers some of the losses incurred on the assets of the failed banks. Some 53 institutions, mainly regional or community banks, have entered into such arrangements since January 2008.

"With more Americans suffering through unemployment or cuts in their paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures," said Sheila Bair, FDIC chairman, who has led the efforts to have loan modifications be based on income.
The expanding unemployment rolls have long vexed policymakers focused on stabilizing the housing market. Existing foreclosure-prevention programs, including the president's loan modification plan, generally do not help the jobless because they don't have enough income to sustain even reduced monthly payments.

Administration officials have said they are exploring ways to help the unemployed -- including through reduced payments, typically callled forbearance plans.

"This feature is still being assessed, along with many others, as possible HAMP extensions," said a Housing and Urban Development Department official, referring to the president's Home Affordable Modification Program.
Housing advocates said they approved of the FDIC's effort.

"It's in everybody's interest to give people time to get back on their feet," said Kathleen Day, spokeswoman for the Center for Responsible Lending.
While many servicers have offered forbearance plans in the past, fewer are these days. That's because financial institutions no longer feel that borrowers will be able to land a comparable job within a few months.
Assisting the unemployed

Citigroup is one of the few banks that has implemented a plan to help the jobless during the housing crisis. The bank will lower the payments of eligible borrowers to an average of $500 a month for three months.
Under the FDIC's recommendation, unemployed or underemployed borrowers would have their payments reduced to an affordable level for at least six months.

"This gives them a bridge period," said Michael Krimminger, a special adviser to the agency chairman.

Unlike a typical forbearance plan, where the arrears would have to be paid back within a year, the FDIC endorses allowing borrowers to catch up over the life of the loan.

Borrowers who cannot afford their payments once they get jobs would be considered for a loan modification program approved by the FDIC, which includes the president's plan. Eligible borrowers could have their monthly payments reduced to 31% of their pre-tax income if doing so would cost less than foreclosing on the home.

Banks in loss-share agreements must participate in such modification programs, according to the FDIC. Both modification and forbearance plans could ultimately save the FDIC money if they reduce losses from foreclosure.

[SillyWorld]

Yea yea yea Bla bla bla....They just wanna get us sick of hearing how well they are helping, yet doing as little as possible if any at all...After a year of nothing we will give up and the bankateers WIN!

[Garry]

This whole thing is stupid. Instead of giving some people the MHA mod, the banks are giving people more time to find a job. What jobs? I went into McDonalds the other day and I was the only one eating, the place was packed with people applying for a job.

[Moe Bedard]

Yup. It is all going to come down to jobs and it is getting worse on Main Street. The past economy was fueled by real estate. Construction, Realtors, loan officers, brokers, laborers, concrete, water trucks, mini blind guys, window washers, carpet installers, landscapers, roofers, title companies, escrow, appraisers, processors, lenders, banks, software co.'s etc., etc. etc. and then we have the tax dollars that have just about ceased and the countless delinquencies on taxes and debt.

The list can go on and on of the people that are now unemployed can go on forever. Now, what the hell are they going to do, work at Mcy D's.

The economy on Main Street has imploded and we are in the beginning of a depression.

Wall Street, not so much.

[SillyWorld]

The economy on Main Street has imploded and we are in the beginning of a depression.

Yep and the Big old Tax living House Peeps have no idea what we are going through

[Irish Gal]

Originally Posted by Garry

This whole thing is stupid. Instead of giving some people the MHA mod, the banks are giving people more time to find a job. What jobs? I went into McDonalds the other day and I was the only one eating, the place was packed with people applying for a job.

Gary,

Your observations are so right on. You need to go on the road, Michael Moore style, and report back to the nation via some popular show what's REALLY going on out there. These clowns in Washington are so out of touch, they might as well be on a space shuttle. But, in defense of Sheila Bair, her heart is in the right place. She's one of the only ones who fights these insider clowns, day in and out, until they bloody her up, politically. Eliz Warren is the other one. The big boys don't like either one of them, cuz they truly try to push through good policy for average Americans on these issues. And, both women have Republican roots! Go figure! They are from the smart, moderate, old school camp. Not the crazy, carnie camp that runs the R party today. She just can't get anything done that's truly good for Main St. because her hands are so politically tied, most of the time. She's a good lady.

[Irish Gal]

Originally Posted by Moe Bedard

The economy on Main Street has imploded and we are in the beginning of a depression.

Here's an article from yesterday re more Lawrence Summers' pearls of wisdom re unemployment rates. If HE's starting to (openly) say things like this, the party is starting to get real fun.

(for those who don't know Mr. Summers, he's head of O's econ team and Head Derivatives Guy Who Spent His Career Pushing Through Wall St. Casino Model Which Tanked Economy, while taking BOATLOAD of money from Wall St. throughout his career to make sure the casinos stayed open. )

SUMMERS: UNEMPLOYMENT WILL REMAIN "UNACCEPTABLY HIGH"

Jeannine Aversa 09/11/09 HUFF POST

WASHINGTON — A top economic adviser to President Barack Obama on Friday acknowledged the risks of reining in too quickly the emergency programs put in place to battle the financial crisis.

"We will not make the mistake of prematurely declaring victory or prematurely withdrawing public support for the flow of credit," said Lawrence Summers, director of the White House National Economic Council.

Summers added that he wanted to avoid the mistakes Japan made in the 1990s and the United States in the late 1930s by pulling the plug on government support too soon.

Such a mistake "we must not make today," he said in a session with reporters.
Doing so could short-circuit an economic recovery, freeze up lending, spook financial markets and send interest rates higher.

The economy has been flashing signs of a recovery, and lending has improved some. But the financial system and the economy remain far from normal.

Unemployment, now at a 26-year high of 9.7 percent, is "unacceptably high" and will remain so for "a number of years," Summers conceded. In addition, he noted, the commercial real-estate market is under pressure, and small businesses are having trouble tapping credit.

Still, amid evidence that the worst recession since the Great Depression is ending, the government is winding down some programs.

Treasury Secretary Timothy Geithner on Thursday said a department program to bolster money market mutual funds will close as scheduled Sept. 18. In June, the Federal Reserve said it would let a separate money market mutual fund program expire Oct. 30. It also scaled back some loans to banks.

Last month, the Fed said it would stop buying government bonds in October. That program had been aimed at driving down rates on mortgages and other consumer debt.

The Federal Deposit Insurance Corp., meanwhile, is considering whether to stop making new guarantees for bank debt at the end of October, as now scheduled, or extend the program.

Summers said the government's first steps toward withdrawing its emergency support show the financial system is strengthening.

President Barack Obama, in a speech set for Monday, will make a fresh pitch for Congress to overhaul financial rules to better guard against future crises.

The push comes a year after Lehman Brothers collapsed, sending financial markets around the world into chaos and nearly halting the flow of loans to investors, businesses and ordinary people.

Efforts to revamp financial rules have bogged down in Congress. White House spokesman Robert Gibbs said Obama's speech Monday will focus on "the need to take the next series of steps in financial regulatory reform."

Summers indicated that the administration is open to negotiation in overhauling regulations but refrained from offering details.

[SillyWorld]

Also remember Pres. Bush said we are not in a recession...Economy is strong, they are all in this together.

[AzGryffindor]

The economy is definitely getting worse.

My husband was laid off from his job (carpenter) in June 2008. It took him until July of this year to find another job. This new job has great benefits and a decent pay rate but the hours are very unpredictable. This past week had no hours at all. He doesn't even know when his next day of work will be.

As for my job, I work for a very small company. Our client base has been dwindling due to many of them going out of business. We lost over $12k last year because of businesses unable to pay their outstanding invoices.
We have cut all unnecessary expenditures but I don't believe we're going to survive much longer without new businesses opening.

My parents were both Depression era kids and it looks like my kids will be repeating the cycle.