Subprime loan bailout programs
April 24, 2007 | Foreclosure | 
2 comments
It is clear that the increase in foreclosures caused by negative amortization loans and short term fixed teaser rates has prompted some state governments to get involved by offering a bailout program. In addition to regulatory pressure on lenders the state of Maryland has stepped up to provide a program to help borrowers get out of these loans.
The program, called Lifeline, provides borrowers with a list of approved lenders that will refinance the loans into a long term fixed rate loan. There are limits to household income and loan amounts to qualify but this is a step in the right direction. The state program offers 30 year fixed rates of 6.5% which is well below what many subprime borrowers would qualify for.
Ohio has a similar program called the “Opportunity Loan”. Other states that plan to jump on the band wagon soon are Rhode Island, Massachusetts and Virginia.
The drawback is that these loans will tap into funds earmarked for other state projects and if the foreclosure problem becomes to great this could be an issue.
Many borrowers’ current loans have prepayment penalties and while the state has greater leverage to force lenders to comply with the program there is no assurance these penalties won’t be enforced.
The cost of the Lifeline program for borrowers is 2 points which can be factored into the loan.
Popularity: 6% [?]
In my area of Alaska we really are not seeing all the foreclosures like most of the lower 48 states. But I think we have the same issues and its not being talked about a lot. In the past 3 years people have been given loans they could never afford in the first place. Then they have gotten inflated appraisals and taken out as much money on the property as possible. Now prices have stabilized and are not selling at inflated prices and these people need to sell for one reason or the other, many are military people who are known to rotate out every 3 years have. They have already taken out the equity in their homes and spent it. I know people who gone on vacation, bought boats, snow machines, new cars and such. Why should the rest of the working people be straped with these properties because they are now worth less then their mortgages are. Whos stupidity was that! Any way you look at it these lenders, appraisors and home owners should not be allowed to skim off the cream and then cry for the govenment to bail them out. There seems to be no accountability or responsibility in this mess. What happened to the American dream, work hard and prosper. Now if you work hard and have anything your a selfish greedy person and the govenment is going disburse your money as they see fit to others who are not willing to do for themselves. It is wrong!