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At this latest housing program we're to make it through word of past were to become -- just how little work and who would be eligible -- -- morose as the Wall Street Journal recover we're.
-- journal report recovering housing -- joins us now with details are how this thing work as a practical matter this.
All the program that we're talking about today it's something that's part of this foreclosure settlement.
For all these abuses -- the debates are trying to resolve with the state attorneys general with the department of justice and so.
The federal by the federal officials in the states -- want -- government to.
Lower rates on loans where they hold them on their books.
And most mortgages are not actually held on bank balance sheets just about one in five mortgages.
On banks' books the restaurant more -- securities they're guaranteed by.
I know candy OK so -- also.
It's a limited number loans out there small number -- -- already loans or a it's it's not but the governments also trying to do this at the same time on a separate track.
With Fannie and Freddie -- idea is that you're making your loan payments.
But mortgage rates have fallen and you can't take advantage because home prices are down so we -- to try to help out those people who have been responsible.
And who were during the right thing right to get a modification you have to stop paying.
So there's kind of a perversity right now to get help.
You have to stop -- can we do something to help those people who are paying.
All right so the idea is to target folks.
Who are up to date paying their mortgages.
But they are under water so they owe more than house is worth right so what happens again a new loan at today's low low low interest rates.
Who pays for that.
Well it and if the if the loan is owned by the bank the bank does -- -- they're giving up that interest and come over the next few years and it's a performing on why would they wanna lower the rate.
If it's guaranteed by Fannie Mae and Freddie Mac then it's those companies which are on by the taxpayers.
The flip side -- -- eat it that's that's exactly right it causes a loss to Fannie and Freddie the question is if these homeowners ultimately default.
Because they're stuck in the six and half percent mortgage and they're saying -- I'm just not gonna continue paying on this underwater loan and they walk away then the taxpayer also gets the hit later so the question -- what can you maybe offset.
Some of those defaults by giving these people a reason to keep paying their loans you know the other point you bring up that I think is a fair one is.
Just because these programs -- -- doesn't mean the people are gonna take advantage of them there are a lot of rules.
Not just they're you know it's yeah a lot applying for them -- the banks won't participate absolutely and I think that's precisely the program you could have with this program right and the government right now is going back to the banks on the program that already exists -- the one for the Fannie and Freddie loans thing.
Are we -- organ after underwater are supposed to be able to refinance.
But people haven't been able to use that what can we do to try to get more people through the through the pipes on this program are.
Let me ask you this because.
You know this is all part of the settlement issue were mentioning between state AG's and the federal government of banks -- the banks being given to participate.
-- well the promise that is being given is that the states -- sued them right so they're trying to get a release of certain legal claims.
Where the state attorneys general say on these issues -- how are you I give out loans with these issues on how you process of foreclosures.
You won't face a bunch of different lawsuits that could become quite expensive and drag out over years and you're not going to be able to foreclose because of all the uncertainty so that's what they're getting an exchange.
And -- -- it's a they get they get off -- legal -- right.
And they have to forego some interest payments which they may or may not be willing to do so it'll be interesting to see if it happens now.
This was actually fashion to get California to be a part of this deal because it would've been happening is this whole thing have been falling apart.
We've been waiting for months and months and months for a deal to come together and this is you know obviously over the robo signing deals that that when -- -- These these companies these banks had to agree to.
Make homeowners hold the do something for them this is what they're coming out with but I got to tell -- It looks like it has all the possibilities of hamper harper -- -- of a number of other programs that's been tested by the federal government that frankly have a work.
-- that's obviously a concern the idea here is gonna get a bunch of penalties from the banks.
The numbers that are out there twenty billion dollars 25 billion dollars the government could just collect those -- finds that they're saying well why don't we take that money and try to use it.
To help people who've been you know been -- -- one way or another by the big drop in home prices but -- -- work I mean that's the twenty billion dollar question in this case.
It's a tough question to fix housing that's for sure guitarists thanks for helping us out today really appreciate your time great story meanwhile -- journal.
Thank you placement to --
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