Mortgage bail outs start

[TonyM]

Ohio Plans Bonds to Bail Out Homeowners Strapped by Mortgages

By Martin Z. Braun

March 23 (Bloomberg) -- Ohio, which had the highest foreclosure rate among the 50 U.S. states at the end of 2006, plans to issue $100 million in taxable municipal bonds next month to help homeowners refinance mortgages they can't afford.

Proceeds of the bond issue by the Ohio Housing Finance Agency will provide financing for about 1,000 loans with a fixed rate of about 6.75 percent, said Robert Connell, the agency's director of debt management.

``We believe that it is incumbent on this agency to do something to assist these folks to enable them to keep their homes,'' Connell said. ``A $100 million bond from this agency is not going to solve Ohio's foreclosure problem. We hope to at least make a dent.''

A March 13 survey by the Mortgage Bankers Association found that Ohio had highest rate of homes in foreclosure nationwide. The state, whose economy has suffered amid declines in manufacturing, also had the highest rate of subprime loans in foreclosure. Subprime mortgages are granted to people with poor credit histories or high debts and often have rates at least 2 or 3 percentage points above safer prime loans.

Earlier this month, Ohio Governor Ted Strickland, a Democrat, formed a task force to stem home foreclosures in Ohio. The group will develop strategies to assist homeowners facing foreclosure and educate homebuyers.

April Rollout

Ohio will begin rolling out the refinancing program on April 2, Connell said. The loans will be limited to homeowners whose income is up to 125 percent of the median income of their county.

``It will be available to the residents of Ohio to take them out of their adjustable-rate mortgages, their interest-only mortgages and avail them the opportunity to move into a fixed rate mortgage which may now benefit their individual financial situation,'' Connell said.

Kansas City, Missouri-based George K. Baum & Co. will manage the bond sale for Ohio's finance agency. The bonds will taxable because the U.S. tax code prohibits states and local governments from using proceeds of tax-exempt bonds to refinance existing mortgages, Connell said.

The survey by the Mortgage Bankers Association found that Ohio's foreclosure rate across all loan types was 3.38 percent. Indiana was second among U.S. states with 2.97 percent and Michigan was 2.39 percent. Ohio also led the nation will 11.32 percent of subprime loans in foreclosure.

Also today, lawmakers in California and New Jersey said they plan to hold special hearings on subprime home lending and how it may affect residents in their states.

Massachusetts officials earlier this month subpoenaed UBS AG and Bear Stearns Cos. as part of an investigation into why the companies wrote upbeat reports on subprime mortgage lenders as bad loans rose to a four-year high.

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net .

[cramerica1972]

Ohio Plans Bonds to Bail Out Homeowners Strapped by Mortgages

By Martin Z. Braun

March 23 (Bloomberg) -- Ohio, which had the highest foreclosure rate among the 50 U.S. states at the end of 2006, plans to issue $100 million in taxable municipal bonds next month to help homeowners refinance mortgages they can't afford.

Proceeds of the bond issue by the Ohio Housing Finance Agency will provide financing for about 1,000 loans with a fixed rate of about 6.75 percent, said Robert Connell, the agency's director of debt management.

``We believe that it is incumbent on this agency to do something to assist these folks to enable them to keep their homes,'' Connell said. ``A $100 million bond from this agency is not going to solve Ohio's foreclosure problem. We hope to at least make a dent.''

A March 13 survey by the Mortgage Bankers Association found that Ohio had highest rate of homes in foreclosure nationwide. The state, whose economy has suffered amid declines in manufacturing, also had the highest rate of subprime loans in foreclosure. Subprime mortgages are granted to people with poor credit histories or high debts and often have rates at least 2 or 3 percentage points above safer prime loans.

Earlier this month, Ohio Governor Ted Strickland, a Democrat, formed a task force to stem home foreclosures in Ohio. The group will develop strategies to assist homeowners facing foreclosure and educate homebuyers.

April Rollout

Ohio will begin rolling out the refinancing program on April 2, Connell said. The loans will be limited to homeowners whose income is up to 125 percent of the median income of their county.

``It will be available to the residents of Ohio to take them out of their adjustable-rate mortgages, their interest-only mortgages and avail them the opportunity to move into a fixed rate mortgage which may now benefit their individual financial situation,'' Connell said.

Kansas City, Missouri-based George K. Baum & Co. will manage the bond sale for Ohio's finance agency. The bonds will taxable because the U.S. tax code prohibits states and local governments from using proceeds of tax-exempt bonds to refinance existing mortgages, Connell said.

The survey by the Mortgage Bankers Association found that Ohio's foreclosure rate across all loan types was 3.38 percent. Indiana was second among U.S. states with 2.97 percent and Michigan was 2.39 percent. Ohio also led the nation will 11.32 percent of subprime loans in foreclosure.

Also today, lawmakers in California and New Jersey said they plan to hold special hearings on subprime home lending and how it may affect residents in their states.

Massachusetts officials earlier this month subpoenaed UBS AG and Bear Stearns Cos. as part of an investigation into why the companies wrote upbeat reports on subprime mortgage lenders as bad loans rose to a four-year high.

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net .there should be NO bailout.....they knew what they were getting into when they took the loans.

[Svenwulf]

..something about tossing money out of a helicopter?....

[Lou]

its kinda a catch 22 - Ohio's economy, at least in Cleveland is dead because LTV steel is now gone. so, Strickland, a Democrat, cannot let the state fall much further. also, the mortgage laws in Ohio are different than 95% of the other states, mortgage companies can defraud a client and NOT be held accountable, in Cali, Florida, Texas, its opposite, Ohio is changing the law slowly. now, if your a moron customer who takes out a option arm or whatever and you dont understand that, and that causes you to lose your house, well thats life in my eyes. plus, it creates a great buying opportunity to buy new hud homes, which i am ready jump all over

[Jazen]

its kinda a catch 22 - Ohio's economy, at least in Cleveland is dead because LTV steel is now gone. so, Strickland, a Democrat, cannot let the state fall much further. also, the mortgage laws in Ohio are different than 95% of the other states, mortgage companies can defraud a client and NOT be held accountable, in Cali, Florida, Texas, its opposite, Ohio is changing the law slowly. now, if your a moron customer who takes out a option arm or whatever and you dont understand that, and that causes you to lose your house, well thats life in my eyes. plus, it creates a great buying opportunity to buy new hud homes, which i am ready jump all over

Yeah? And where do you think they will get the money to bail out the mortgage companies? From you, dude.

[Lou]

Yeah? And where do you think they will get the money to bail out the mortgage companies? From you, dude.


your on drugs. not me. the mortgage companies will go out of business or get bought out. tax dollars has nothing to do with mortgage companies.

[spanky]

Who says it's through taxes that they make it up? They just tack on more fees and only mortgage at a slightly higher interest rate. Trust me, the business will not just write off the loss, they always pass it on to the consumer... that's you and me

[Lou]

Who says it's through taxes that they make it up? They just tack on more fees and only mortgage at a slightly higher interest rate. Trust me, the business will not just write off the loss, they always pass it on to the consumer... that's you and me


your statement makes no sense. the state is going to issue muni bonds. they (muni bonds) will be paid back by state fee's or taxes (sales, corporate, property) etc. if a lender/bank has a mortgage and those go into foreclosure, they either write it off at a total loss or buy it back at 80 cents on the dollar at auction, either way its a loss. my tax dollars are going to 1000 families to stay in a house. thats not a bad thing, its actually a good thing. the housing market stays a float, some mother with two kids gets to keep her home, some family who's father lost his job gets to keep his kids in a home. all the lenders/banks have to be approved with the ohio finance agency. its not like spanky mortgage can come in charge them 5% on a origination fee, its limited to 1%. 100m is nothing, id rather my tax dollars go to a good cause then some inner social program that doesnt work or a tax abatement to walmart. nothing in the post states that ohio, or any other state is giving 100m to mortgage companies so they can stay in business. has anyone in the senate talked about giving millions to new century to bail them out? not really, people on one side say let the market correct, people on the other side say more regulation.

[robvia]

All I hear about is the "Subprime" thing.

It should have nothing to do with the market as a whole, but it does. Even when there is good news about the housing market, that "subprime" word comes up. I wish they'd get over it already.

If the mortgage companies make bad loans and go out of business then so be it.
Creidt card companies do the same thing giving the world credit no one pays back. Yet no one is talking about that.

[Jazen]

your statement makes no sense. the state is going to issue muni bonds. they (muni bonds) will be paid back by state fee's or taxes (sales, corporate, property) etc. if a lender/bank has a mortgage and those go into foreclosure, they either write it off at a total loss or buy it back at 80 cents on the dollar at auction, either way its a loss. my tax dollars are going to 1000 families to stay in a house. thats not a bad thing, its actually a good thing. the housing market stays a float, some mother with two kids gets to keep her home, some family who's father lost his job gets to keep his kids in a home. all the lenders/banks have to be approved with the ohio finance agency. its not like spanky mortgage can come in charge them 5% on a origination fee, its limited to 1%. 100m is nothing, id rather my tax dollars go to a good cause then some inner social program that doesnt work or a tax abatement to walmart. nothing in the post states that ohio, or any other state is giving 100m to mortgage companies so they can stay in business. has anyone in the senate talked about giving millions to new century to bail them out? not really, people on one side say let the market correct, people on the other side say more regulation.

Let them burn, serves them right for making stupid loans, it's kind of like weeding out the bad competition? Stupid business people make stupid businesses, then those businesses go out of business. But, I would think you wouldn't be in favor of this at all, being, well, you know.

[madcowdisease]

Your and my tax dollars at work here, Lou. Friggin' b.s. if you ask me.

:roll:

[cramerica1972]

Your and my tax dollars at work here, Lou. Friggin' b.s. if you ask me.

:roll:
it is B.S

[Ramza]

It is B.S. indeed - sad to see this country succumb to more socialist principles. Before you know it, the government will start trying to make all of our important decisions for us, because obviously, people simply cannot make decisions for themselves as well as the government can!

:|

[Lou]

Your and my tax dollars at work here, Lou. Friggin' b.s. if you ask me.

:roll:

its all a matter of opinion. i honestly have no problem with 100m going to people. its 9 dollars out of my pocket. now, if it was going to new century, etc id be calling strickland myself. dont forget, first time gov, saving families, keeping them in their homes, politices 101. i still think its better than some crappy social program that wont work.

[cramerica1972]

its all a matter of opinion. i honestly have no problem with 100m going to people. its 9 dollars out of my pocket. now, if it was going to new century, etc id be calling strickland myself. dont forget, first time gov, saving families, keeping them in their homes, politices 101. i still think its better than some crappy social program that wont work.those ppl knew what they were getting into....if the lose their homes....TOO BAD

[madcowdisease]

its all a matter of opinion. i honestly have no problem with 100m going to people. its 9 dollars out of my pocket. now, if it was going to new century, etc id be calling strickland myself. dont forget, first time gov, saving families, keeping them in their homes, politices 101. i still think its better than some crappy social program that wont work.

Lou, it is a crappy social program that likely wont work. If oil continues it's ascent the Fed wil be forced to raise rates this year to combat inflation yet again. All those jokers with the liar loans and no money down 80/20 crap will be foreclosing anyway.

[cramerica1972]

Lou, it is a crappy social program that likely wont work. If oil continues it's ascent the Fed wil be forced to raise rates this year to combat inflation yet again. All those jokers with the liar loans and no money down 80/20 crap will be foreclosing anyway.who exactly is the so-called FED?

[optimus25]

who exactly is the so-called FED?

He's talking about the Federal Bank...Bernanke & Co.

[TonyM]

He's talking about the Federal Bank...Bernanke & Co.

Oh, you mean it's not K-FED? I was wondering what Brittany's ex had to do with this:lol:

[cramerica1972]

Oh, you mean it's not K-FED? I was wondering what Brittany's ex had to do with this:lol:who owns the FED?foreign nations?

[TonyM]

who owns the FED?foreign nations?

I'm not sure if you're having fun with the whole April fool's gig or not, but in case your serious:

http://www.federalreserve.gov/FOMC/

[Svenwulf]

..actually, i think the question of who owns the "fed" quite serious...

[Lou]

Subprime bailouts: How they work
There's some state-sponsored help on the way for subprime borrowers.
By Les Christie, CNNMoney.com staff writer
April 24 2007: 8:10 AM EDT


NEW YORK (CNNMoney.com) -- "They got themselves into this mess and I don't want my tax dollars used to get them out of it." That's the attitude of many when it comes to bailing out subprime borrowers from bad loans.

Still, many programs to help those facing foreclosure are being launched, with the aim of moving borrowers out of high-interest, variable-rate loans and into lower-rate, fixed ones.

Maryland launched one of the first such plans, called Lifeline, a year ago.

Say you're a homeowner with a 2/28 hybrid ARM due to reset next month from the initial two-year 5.25 percent "teaser rate" to 8.25 percent. It will reset again every six months up to as much as 12 percent.

The difference in monthly payments between the initial rate on your $200,000 mortgage and the first reset is nearly $400 ($1,502 versus $1,104). That's bad enough but after another year or two, your mortgage payment could come to $2,057. You can't afford it.

You can go to one of the approved lenders on the Web site of Maryland's Department of Housing and Community Development and ask to refinance into a fixed rate loan with a permanent low rate. Your payments will not only be lower than the reset rates, they will stay the same the entire length of the loan.

Without Lifeline, many borrowers would not have been able to secure a new loan, at least not with attractive terms. In many cases their credit scores would not qualify them for the rates the state-backed program offers.

In addition, their old lenders may have insisted on enforcing the onerous terms of their original agreements, such as prepayment penalties. The state has more leverage with lenders to compel them to co-operate with the program.

After the approved private lender puts together the new loan, it bundles it with others and sells them to the agency, which uses cash from a bond issue to buy the bundled loans.

The best part for taxpayers is that state coffers are not used; the state pays off those bonds with the interest it collects from borrowers.

Not every Maryland borrower is eligible for the program. You can't have household income of more than $126,420 and you can't borrow more than $525,000. These limits vary from county to county, with high-cost areas near Washington, D.C. having the highest maximums.

The loans have interest rates of 6.25 percent for a 40-year fixed and 6.5 percent for a 30-year. There are also interest-only loans available that carry a rate of 6.5 percent. Borrowers pay 2 points at closing for any of these products, which may be folded into the loan.

Maryland also requires that the home be a primary residence and that the loan not exceed 85 percent of the value of the property.

So far, just a handful of borrowers have signed up for the program, fewer than 10 but many more are expected as numerous hybrid ARMs taken out in 2005 and 2006 start to hit their first resets.

To avoid future crises, Maryland is also trying to discourage irresponsible or unscrupulous lending, according to Thomas Perez, secretary for the Maryland Department of Labor, Licensing and Regulation.

"I want to track loan originators who have disproportionate numbers of loans that go into foreclosure," said Perez. Too many dings on a mortgage broker's record, for example, could bring suspension or revocation of the broker's license.


Ohio, which is suffering from a great many job layoffs as manufacturing plants shut down, has a similar program it calls Opportunity Loan.

Mark Wiseman, who runs a foreclosure prevention program for Cuyahoga County (which includes Cleveland), said the state had the highest foreclosure rate in the nation by the end of 2006. There are 1,200 foreclosures a month in his area and forecasts are for 75,000 statewide this year.

On April 2, Ohio announced it would sell $100 million worth of bonds, which could go to $500 million eventually, to fund Opportunity Loan. Rita Parisi, of the Ohio Housing Finance Agency, emphasizes that no taxpayer money is involved in the bailout. "We're selling taxable bonds to make new mortgage loans to homeowners," she says.

As in Maryland's Lifeline program, the bonds are paid off using interest paid by the borrowers.

The subprime mess will be no easy fix
Parisi says her agency works with Fannie Mae to obtain underwriting waivers so that people unable to refinance under traditional products can qualify for the Opportunity Loans.

Homeowners can go to the agency's Web site for a roster of approved lenders and start the process.

Other states, including Rhode Island, Massachusetts and Virginia, have started or are planning similar programs, according to the National Council of State Housing Agencies. More states are mulling over these and other options, such as interest rate buy down plans and rescue funds.

Nationally, relief for troubled subprime borrowers is coming from Freddie Mac. It has earmarked $20 billion to buy refinanced loans targeting holders of exotic mortgages, but it will not bailout every borrower.

Freddie Mac has tightened up the standards it requires from lenders when they judge credit worthiness and the bailout terms mandate that lenders' underwriters qualify borrowers at the fully indexed, fully amortizing rate. It limits use of low documented loans, so-called "liar loans," in which borrowers do not have to prove assets or income.

The underwriters also must take into account (as they also must do in the state bailout programs) property taxes and insurance in judging the qualifications of an applicant and the agency recommends that taxes be collected in an escrow account.

The program is due to launch mid-summer. Information will come available on the Freddie Mac Web site.

[sealatte]

well MILA here in seattle just shutdown....laid off 300 today...
they were in Subprime lending.. they even sold funds to other banks and investors...

shorting sub prime stocks..

sealatte

[Jazen]

No bail outs. Period.
Let them fry.

[Amnion]

I want to know who would be buying the bonds. Why would anyone buy taxable muni bonds, especially since they would have to have a lower interest rate (I assume less than the interest rate on the mortgages).

I am also for letting them lose their homes. They shouldn't have stretched to buy the houses. I keep wondering if it was because everyone else was buying so they wanted to as well, not a good reason to buy.

[TonyM]

Not sure I agree with any bail outs...yet, if the economy were in serious trouble and we could justify the bail outs as having a good chance of reversing this, then maybe it would be worth it in the big picture scheme.

I am for the note holders restructuring the loans and converting to fixed rate with minimal closing costs tacked on to the loan in cases where the borrower can make the fixed rate payment...foreclosure is expensive for the note holder and in some cases the homes have been stripped clean of the interior, further diminishing the value. If I were a shareholder I would view a restructured loan as capital preservation.

[Lou]

I want to know who would be buying the bonds. Why would anyone buy taxable muni bonds, especially since they would have to have a lower interest rate (I assume less than the interest rate on the mortgages).

I am also for letting them lose their homes. They shouldn't have stretched to buy the houses. I keep wondering if it was because everyone else was buying so they wanted to as well, not a good reason to buy.

Im going to try and see if I can get any information about the bonds, rates, etc