First Mortgage Bailout Sucks, Just think what the Auto Bailout Will Look Like!

Comments on the first bailout proposal, which sucks. Stop paying your mortgage because you have to be 3 months behind to qualify!!!

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Beginning Dec. 15, the government would reduce interest rates for homeowners who are at least three months behind on their mortgage payments and owe 90 percent or more than their home is worth. The interest rate would be cut so that they don't have to pay more than 38 percent of their income for housing. Some mortgages also might be extended to 40 years from 30.

The hope is that other mortgage companies will follow Fannie and Freddie's lead and offer similar restructurings, since most subprime loans won't be covered by the plan.

Felix Salmon offers a quick run-down of the plan's shortcomings:

• It applies only to mortgages owned by Frannie, which means, by definition, that it doesn't include subprime mortgages. FHFA is trying to apply moral suasion -- but no cash -- to persuade other mortgage holders to adopt the same plan. Good luck with that.
• It doesn't even begin to address the problem of mortgages which have been securitized, rather than being held by a single bank.
• It's based on the idea that servicers "have dedicated personnel who are experienced in working with borrowers
  who are struggling with finances, but who are eager to keep their homes". Not nearly enough of them they don't.
• It requires borrowers to be 90 days delinquent -- and therefore gives many borrowers with mortgages over 38% of their gross monthly income a massive incentive to cease making any mortgage payments now.
• The onus is on the borrower to initiate proceedings, providing a package including "monthly gross household income, association dues and fees, and a hardship statement". For $800 per mod, servicers aren't going to be proactive about helping get this kind of thing done, especially given how overworked they are already."