Tuesday, November 18, 2008

Hope: From the time it came out, it's been stuck in quicksand.

Once touted as a potential breakthrough to help solve the foreclosure crisis, the government's Hope for Homeowners program has failed to live up to its billing so far. And there are serious doubts it ever will.

Bankers don't like it. Consumers don't understand it. Government regulators don't trust it to solve the problem. a liquidity crisis is making its presence felt on a global level. The stability of the world economy demands liquidity, and the current economic climate is in particular need of renewed cash flow. But do we also require political intervention in order to solve the present mortgage crisis?

The entire world is shaken by the present liquidity crisis. In order to stop the global mortgage meltdown, a number of well known banks worldwide have come together to auction off huge amounts of dollars. A stable economy is inherently based on liquidity. What is indispensible now is a regular and uninterrupted cash flow. The point is, is political help a need of the hour for tackling this mortgage crisis?

Market analysts believe that government assistance may not be necessary to avoid the potential crash of the mortgage market. What is the meaning of Sub prime mortgage? It can be classified as a mortgage crisis caused by a worldwide reduction in liquidity. The United States mortgage market has suffered profoundly because of the current crisis. And as expected, this has resulted in global mortgage crisis.

In 2005, We witnessed the advent of sub prime mortgage crisis. This was followed by rising rates of interest as well as a moderate fall in the prices of real estate in 2006. A clear understanding of the present mortgage crisis requires you to fully comprehend the concept of 'foreclosure'. If a home owner, in reference to the present mortgage crisis, is unable to fulfill the terms and conditions as put down in the 'mortgage' agreement, a foreclosure becomes applicable.

What is the root of the present mortgage debacle? The sub prime mortgage crisis is a fallout of a number of factors. The unpredictability of real estate prices is currently a common phenomenon. The worldwide mortgage crisis probably takes it's roots from this particular phenomenon.

The increasing popularity of high-risk mortgage loans is also to blame for the tightening of liquidity. Millions of individuals indulge in mortgage fraud nowadays. Erroneous calculation of credit scores is a significant contributor to the current mortgage crisis as well. Rigid government policies are responsible for the sub prime mortgage catastrophe as well.

Plenty of economic experts think that the mortgage crisis has helped new buyers out. Because of dropping home prices, a greater number of investors have applied for low-interest mortgage loans.

The result: Federal housing officials have received fewer than 115 applications since the program took effect Oct. 1. Compare that to the more than 3 million homeowners currently in some form of foreclosure, according to the real-estate research firm RealtyTrac.

Other alternatives are already lining up to possibly supersede Hope for Homeowners, which offers to get people facing foreclosure into affordable, fixed-rate mortgages, insured by the Federal Housing Administration.

Two new initiatives were unveiled last week:

*A home-loan-guaranty program by the Federal Deposit Insurance Corp., aimed at providing refinancing to an estimated 2.2 million distressed homeowners.

*A loan-modification program by Fannie Mae and Freddie Mac that would fast-track applications for mortgage relief.

Neither requires lenders to take a write-down on the principal of the mortgage -- a major objection the banking industry has had with the rules of Hope for Homeowners.

Lenders are wary of the deal, especially when the mortgages are held by investors who don't want the potential value of their investments trimmed. Banks fear they will be targeted by investor lawsuits.
Basically, you're trying to get them to take a big haircut on the balance of the loan, but you have to get someone who has the authority to make that decision
There's really no teeth in this program that can make that happen

There's also a catch for the homeowners: If they eventually sell their home, they'll be required to share half of any profits with the government.

Meanwhile, bankers are trying to sort out which approach to focus on, even as the government has already doled out the first 25 percent of the $700 billion banking rescue/bailout program.
But the rescue program has raised a number of open questions now about what would be best for both lenders and borrowers."

From the time it came out, it's been stuck in quicksand

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