Emergency Economic Stabilization Act of 2008 Gives Little Hope for Homeowners

[Moe Bedard]

I personally have read over the preliminary details of the 106 page Wall Street Bailout Bill, called the Emergency Economic Stabilization Act of 2008 and I am disappointed to say the least.

This was the most significant federal intervention in the economy since the Great Depression and a golden opportunity to develop a loan modification program that would get the mortgage industry to systematically modify these toxic loans to make them affordable. Yet, I feel they have failed to truly help the people on Main Street that are losing their homes.

The $700 billion bailout simply will not work to stabilize the economy if it does not address the underlying problem of home foreclosures and falling home prices.

Some claims have been made that since the US Treasury will own these mortgage backed securities, then they will offer mass loan modifications. But it is unlikely that the Treasury Department could unilaterally modify loans under the bailout proposal because it is likely to own slices of securities based on home mortgages, rather than loans themselves. (Meaning the same problem we have been having since the crisis began)

I am really trying to be positive for my readers and the homeowners coming to my blog for help and hope. Looking for a glimmer of hope, I read the proposed bill over and over. But, I am too much of a realist and I have to cut through the BS and give it to all like it is.

Unfortunately, the bill offers little substance and guarantees to ensure homeowners stay in their homes.

This bill does exactly what it was intended to do. Bailout Wall Street at our expense, while we get screwed out of just about everything that pertains to us little guys on Main Street. They will continue to live in shiny glass houses and yours and my landlords will be foreclosed on. (True story)

As it stands now, don’t expect this bill to help you much and please keep fighting the good fight. I am sincerely sorry to you all. Life will not change much and we will all still be doing much of the same ole, same ole and the loan modification glass will remain half empty. Folks, it is looking very bleak on the foreclosure prevention front.

Below I copied and pasted the details of the bill as it pertains to homeowners seeking a loan modification or loan workout with their servicer and foreclosure fighters everywhere. Please read this and write to me or comment below and tell me if you see anything in this bill different than me? Meaning, real help and hope for homeowners!

Most of all, write your Senators and demand that servciers be held accountable, hire more staff, open more foreclosure prevention centers and mandatory loan workouts take place with true guidelines that we all can follow and make sense.

Contact your state’s senator by clicking this link ASAP and let them know what you think.

Here are the details that pertain to homeowners:

SEC. 109. FORECLOSURE MITIGATION EFFORTS. RESIDENTIAL MORTGAGE LOAN SERVICING STANDARDS.

To the extent that the Secretary acquires mortgages, mortgage backed securities, and other assets secured by residential real estate, including multifamily housing, the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.

(b) COORDINATION.

The Secretary shall coordinate with the Corporation, the Board (with respect to any mortgage or mortgage-backed securities or pool of securities held, owned, or controlled by or on behalf of a Federal reserve bank), the Federal Housing Finance Agency, the Secretary of Housing and Urban Development, and other Federal Government entities that hold troubled assets to attempt to identify opportunities for the acquisition of classes of troubled assets that will improve the ability of the Secretary to improve the loan modification and restructuring process and, where permissible, to permit bona fide tenants who are current on their rent to remain in their homes under the terms of the lease. In the case of a mortgage on a residential rental property, the plan required under this section shall include protecting Federal, State, and local rental subsidies and protections, and ensuring any modification takes into account the need for operating funds to maintain decent and safe conditions at the property.

CONSENT TO REASONABLE LOAN MODIFICATION REQUESTS.

Upon any request arising under existing investment contracts, the Secretary shall consent, where appropriate, and considering net present value to the taxpayer, to reasonable requests for loss mitigation measures, including term extensions, rate eductions, principal write downs, increases in the proportion of loans within a trust or other structure allowed to be modified, or removal of other limitation on modifications.

ASSISTANCE TO HOMEOWNERS AND LOCALITIES.

DEFINITIONS.—As used in this section— (1) the term ‘‘Federal property manager’’ means the Federal Housing Finance Agency, in its capacity as conservator of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation; (B) the Corporation, with respect to residential mortgage loans and mortgage-backed securities held by any bridge depository institution pursuant to section 11(n) of the Federal Deposit Insurance Act; and (C) the Board, with respect to any mortgage or mortgage-backed securities or pool of securities held, owned, or controlled by or on behalf of a Federal reserve bank; (2) the term ‘‘consumer’’ has the same meaning as in section 103 of the Truth in Lending Act (15 16 U.S.C. 1602); (3) the term ‘‘insured depository institution’’ has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); and (4) the term ‘‘servicer’’ has the same meaning as in section 6(i)(2) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(i)(2)).

HOMEOWNER ASSISTANCE BY AGENCIES.

IN GENERAL.—To the extent that the Federal property manager holds, owns, or controls mortgages, mortgage backed securities, and other assets secured by residential real estate, including multi family housing, the Federal property manager shall implement a plan that seeks to maximize assistance for homeowners and use their authority to encourage the servicers of the underlying mortgages, and considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures.

MODIFICATIONS.—In the case of a residential mortgage loan, modifications made under paragraph (1) may include— 14 (A) reduction in interest rates; 15 (B) reduction of loan principal; and 16 (C) other similar modifications.

TENANT PROTECTIONS.—In the case of mortgages on residential rental properties, modifications made under paragraph (1) shall ensure— 20 (A) the continuation of any existing Federal, State, and local rental subsidies and protections; and that modifications take into account the need for operating funds to maintain decent and safe conditions at the property.

TIMING.—Each Federal property manager shall develop and begin implementation of the plan required by this subsection not later than 60 days after the date of enactment of this Act.

REPORTS TO CONGRESS.—Each Federal property manager shall, 60 days after the date of enactment of this Act and every 30 days thereafter, report to Congress specific information on the number and types of loan modifications made and the number of actual foreclosures occurring during the reporting period in accordance with this section.

CONSULTATION.—In developing the plan required by this subsection, the Federal property managers shall consult with one another and, to the extent possible, utilize consistent approaches to implement the requirements of this subsection.

ACTIONS WITH RESPECT TO SERVICERS.—In any case in which a Federal property manager is not the owner of a residential mortgage loan, but holds an interest in obligations or pools of obligations secured by residential mortgage loans, the Federal property manager shall encourage implementation by the loan servicers of loan modifications developed under subsection (b); and assist in facilitating any such modifications, to the extent possible.

LIMITATION.—The requirements of this section shall not supersede any other duty or requirement imposed on the Federal property managers under otherwise applicable law

[cactus77727]

Thank you for posting that Moe.

I wasn't expecting any help. Our government has reached a level of corruption that breaks my heart.

They obviously don't care.

But we all know, the coming waves of foreclosures will soon be lapping at the steps the Capitol building.

Come the November elections, I would urge republicans, democrats, independents, and every American, to vote against any politician that votes yes to the Wall Street bailout. From the looks of things, that means you will have to write in your own name on the ballot. It's time to take back our country. Vote them all out of office! Every last one of them.

[Nethh1]

Thanks Moe, great info!


Nethh1

[Dette]

Darn, I was holding out hope that they would help us all that are facing foreclosure.

[Moe Bedard]

The House of Representatives has just defeated the rescue bill by a vote of
228-205

[Dette]

Well if it wasn't going to benefit us who are losing our homes then I did'nt want it to pass.

[cactus77727]

Now this is a woo-whoo moment.

Is it possible all the peoples emails, faxes, and phone calls killed the Wall Street bailout? Or is there something else going on here?

Contact all your representatives again, so that the next version of the bill will contain real relief for homeowners and foreclosure prevention.

It can't hurt to ask.

[Dette]

These are the three sections that pertain to Homeowners:

Section 109. Foreclosure Mitigation Efforts.
For mortgages and mortgage-backed securities acquired through TARP, the Secretary must implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires the Secretary to coordinate with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

Section 110. Assistance to Homeowners.
Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.

Section 124. Hope for Homeowners Amendments.
Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

[Nethh1]

Originally Posted by *** Damiano

The House of Representatives has just defeated the rescue bill by a vote of
228-205

Miss ***,

Can you explain the votes? Does it mean no more rescue for homeowners?

Thanks,
Nethh1

[Moe Bedard]

It means the bill didn't go through...........

House ignores Bush, rejects $700B bailout bill - Yahoo! News

[Dette]

Moe, do you think that since this bill did'nt pass that it might be a blessing in
disguise for us struggling homeowners?

Would the Investors/note holders of our mortgages be more willing to negotiate a Loan Modification because they're not getting tax payer money for a bailout?

[nblair70]

That's my question - I am curious if this will make lenders more or less willing to work with us. Since a bailout isn't coming, will they look for ways to modify these loans and thereby making their bank statements more attractive (no bad loans) or will they be less willing?

Of concern to me right now is the idea that banks are not willing to lend to one another, much less cut me a break.

What do the really smart people on this forum think? (i.e. the ones that aren't me...)

[Persistence]

Hi nblair70 (and other viewers),

I am not one of the really smart ones on the site, but I would like to answer. The bill caused me pause when thinking about loan modifications. I thought, well, if banks get money, they will lend and get paid and go right on with their business and then they don't have to worry about the sheer volume of forclosed homes on their books, because they will have liquidity.

HOWEVER, if they don't get help, the banks have to do something to truly mitigate their losses, like modifications and other forms of adjustments designed to keep folks paying on their loans. Now, there is SO much more to all of this then I have fully understood yet, but, that was my first impression and I asked the same thing to myself that you just asked.

Also, I would like to say something else. The volume of bad home loans has been multiplied by wholesale buys by banks and investors. If the 6,000 or so of us on the website were the only ones with bad loans that we are struggling to pay, the stock market probably wound not have made a dive such as the one we saw today. We would be a drop in the world's bucket. Big business made wholesale risky decisions in order to make more money to buy more. The Mr. and Mrs. Mainstreet folks who made a down payment and were fast talked into these stinking loan products were not the sole downfall of Wall Street. Your family and mine bought one house. I have contact with investors who bought 50 homes and can't pay for one now. THAT is the problem. So banks won't lend enough money now and that "constipates" the flow of business.

I was not in favor of the bailout, because I think that the reckless cycle we have been in needs to adjust. I think it said alot about the "haves" and "have nots'. I learned from this that the " haves" can easily make the " have nots" easy prey. Conversely, the "have nots" have been forced to recognize what they need to do the next time around.

I, like you, ponder the future. Save money, don't buy what you don't need, and work like heck to save your investment.

Persistence

[925girl]

Let these Senators go back to the table. I'm sure a few more days won't bring riots in the streets. Wachovia my lender is toast. I'm not sad-one of the last conversations I had with them in May/June had me telling them I hope when they lost their job and needed modification to pay their mortgage they would have as sympathetic a person as they to deal with. Belive me, somehow American's will find a way to still sell cars, buy clothes, food etc. I am worried though about jobs. Will these clowns have enough money for extended unemployment checks????

[mtg2008]

Hi Everyone,

I have been following this bailout too. I know some people against this becasue they simply do not want to help the homeowners even if this is not a big help at all. I am just wondering if the congress go back to the house again to work on it, how much better they can make?

Also, as I understand this is the only option the government have to save the economy, it will effect our 401K, IRA.... If bank stop lend money, a lot of business would go out of business and a lot of people could end up lost their jobs.

Bailout is not a perfect solution now, but I guess now we have no choice, what do you think?

[nblair70]

I honestly don't think widespread bank failure and massive credit restrictions are something the overall economy can absorb. The only thing I would like to see added to the bill, well actually a few things, one would be greater power for the "common man" to go after these lenders for their horrible loan practices. Two, a force loan modification program - before the government buys their "bad" debt, they try to fix with with reasonable rates (i.e. loan write downs in affected areas, lower interest rates and conversion to fixed mortgages). Three, no bank can write an interest only loan or less then a 5 year adjustable loan (ie the loan does not reset until 5 years). Lastly, the CEOs of banks that get government assistance are tossed out on their collective arses without a "golden parachute" to help them land (a lead one would be more appropriate).

The problem I see is not so much if I am going to get help, or not going to get help but the long term consequences of the too tight lending practices. (and they are already starting, home loans auto loans and student loans are getting harder to get). If businesses can't borrow to help them with short-term cash flow problems then they will close their doors, when they close their doors, people will be out of work. If consumers can not borrow for larger ticket items such as washer/dryers or autos then they won't be able to purchase them and those companies will go out of business and people will be out of work. If manufacturing companies can not sell their goods than they will close their doors and all those people will be out of work. If the stock market keeps crashing then all the regular people's 401k's and IRA funds will be gone, and what will get you through retirement?

I guess I look at the bailout as more of an investment in our own future. From what the President said today (as if we could believe him), the intent is to sell back the loans when they are stable (not sure how they hope to accomplish that) so the taxpayers would be paid back for the bailout at that point.

I know there has been a lot of comparison to the Great Depression and what is happening now, and the similiarities are rather frightening. I know there are vast differences as well, however, after the stock market crash in 1929 and the banks started tightening the collective credit belt and bankers called in loans (in full) the government at first did nothing, thinking the "market trends" would simply reverse themselves. Well they didn't and we all know the rest of the story, mass bankruptcies, major bank failures, double digit unemployment rates. Granted I am basing this on my limited knowledge of the Great Depression, however I think it's fairly acurate.

So, this is my opinion, it is not something that just affects Wall Street - how I wish that were true. This is something that could affect all of us, and our children in very severe ways.

I know that sound dire, almost dramatic - but that is the way I see it.

[tryingtostay]

What really frustrated me was that it is still OPTIONAL for the lenders to okay the loan mods and short refis that people are requesting. The Oct 1st bill says the same thing.

What lender in their right mind would agree to it unless you are a very squeaky wheel? Honestly, if you called someone and said, could you please forgive my debt to the tune of $200K? I'd get a flat out no! from everyone I know. I can see why the lenders don't want to modify the loans.

Moe is right; they must be making money off foreclosures. They don't care about "Main Street."

The news announced that the last CEO of Wamu worked for THREE WEEKS. He was hired on with a $7.5 MILLION dollar sign on package. He left with a $6 MILLION severance package. So $13.5 MILLION to sit around for 15 business days and then have the Feds buy his bank out.

If he can get that much millions of $$, how come big corporations can't pay for more of the $700B price tag? Some actors can get $25 million for one movie, and some athletes make more than $20 million a year. Isn't it something like the top 2% of this nation are richer than the rest of the world combined? But Main Street gets to foot the bill....

Most people I know in "Main Street" America are living paycheck to paycheck and make under $80K a year. And about 1 out of every 10 people are struggling to stay in their house. Another big majority of that are tightening their budgets with the increases of prices.

I think the previous poster is right, people are going to buy only what they need. I think we're going to end up back to a society that only buys what they need or can pay cash for. A time before credit cards were invented. They didn't come around until the 1970s, people have been enjoying easy credit and now must reap the consequenses.

[lynneas3]

Moe,
It does seem that there is at least some hope for us--in that it is better than doing nothing, I guess. I have a question: is this bill in any way retroactive? Our bank filed foreclosure against us in August (after missing only 4 payments!) and I was wondering if this could benefit us in any way. I sure hope so.

Thanks, Michael R. Storesina