Legal Commentary

How HOLC-y Is HASP?

By Big Tent Democrat

The NYTimes reports:

The administration’s initiative, called the Homeowner Affordability and Stability Plan, is an effort to slow the decline in the housing market. As the economy drops deeper into a recession, home values are falling faster and faster, and more Americans are losing their houses to foreclosures or distressed sales.

The plan would allow four million to five million homeowners refinance mortgages guaranteed by the government-controlled housing giants Freddie Mac and Fannie Mae. The administration said allowing people to refinance at lower mortgage rates would reduce monthly payments and save families thousands of dollars every year.

[More . . .]

In his prepared remarks, Mr. Obama said the plan would “give millions of families resigned to financial ruin a chance to rebuild.” “It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy,” the president said in the remarks. “And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”

The plan would seek to entice lenders into lowering rates, and would offer homeowners a chance to shave thousands of dollars off their mortgages. The government would offer homeowners principal reductions of $1,000 a year for five years if they stayed current on their payments, and would give $500 to loan servicers if they modified loans before borrowers fell behind in their payments. Or, if a lender lowered interest rates so that buyers were spending 38 percent of their monthly income on mortgage payments, the government would provide matching funds to lower that payment to 31 percent of income. The White House said such a reduction could equal $400 in monthly savings on a $220,000 mortgage.

(Emphasis supplied.) It seems to me, at first blush, that again the Obama Administration has delivered an inadequate plan. This is not HOLC-y at all it seems to me. Consider my bolded sentence - "The plan would seek to entice lenders into lowering rates" - Entice? A HOLC plan would purchase the mortgage loan (those "toxic assets" banks hold) at current value and then provide the relief the homeowner would need.

"Entice?" This seems an inadequate plan for the situation to me. I'll await more information before writing further.

Speaking for me only

Full post as published by TalkLeft on February 18, 2009 (boomark / email).