So I just recently learned a little about the Government’s Home Affordable Refinancing Program (HARP) due to a personal experience and a dear family friend who has been pretty beaten down by the economy.
Recently I just completed a refinance myself to remove PMI but in doing so, saw that we lost almost 50k equity on our home in the last 4 years (since purchase). Lucky for us we still had enough equity and cash on hand to complete the refinance and remove the PMI, but just barely. Another family that we are close with was not so lucky and is sitting on a higher interest rate and seriously underwater on their property. They are hoping for an extension and expansion of the HARP program in 2013.
Now as someone who has personally always been pretty conservative when it comes to matters of finance and entitlements (while also moderate on social issues), I am conflicted by this program. Specifically I am speaking about a bill in the house nicknamed HARP 3.0 that will extend government backed low interest financing and relaxed approval of the program to many people who are upside down on their mortgages.
I know by definition that this is a handout, but given all the predatory lending and corruption that has been rampant in the last decade and the legions of brokers and banks that got rich in the process, maybe this program makes sense? Maybe I should be upset that the republicans are and will fight this tooth and nail in congress. Perhaps it is because this hits closer to home with a family that I know works hard and does not look for handouts, but this seems like a no brainer and a good example (unlike so many bad ones) that actually will help MANY hard working families.
Yes many of these people made their own decisions, but we cannot be blind to the fact that many of these people were duped, misled and flat out lied to by people who got rich and left the homeowner underwater. And even those that went in with eyes wide open, could not know the housing market would falter as it did (due to those corrupt lenders).
IMO it is not often that a really good government program comes along and I believe many people just vote or judge based upon a party line as opposed to really looking into its merits.
I’d like to hear from other conservatives (as well as democrats) on why you would NOT support such a program?
I should add that this program is ONLY open to those home owners who have not been delinquent in their payments. This as opposed to many other programs which are full blown bail outs. IMO this is a the definition of a solid government program.
IANAC, but I’ll side with them against a government program designed to artificially prop up the price of real estate, especially when we just went through a financial bubble in that very market. I think we need a corollary to the first rule of holes (when in one, stop digging): When in a burst bubble, stop trying to keep inflating it.
As it happens, I’m closing tonight on my HARP refinance. It’s reducing my monthly payment by several hundred dollars and cutting three years off the loan.
It seems designed to help the people who did everything right and got screwed anyway, and since by definition it’s helping people who aren’t big credit risks I doubt it’s even that expensive. Ideally any cost would be borne by the predatory lenders themselves, but that’s probably too much to ask for.
Sorry, I’m not seeing this. These refi’s aren’t going to affect the floating price of any real estate in a volatile market. All it’s doing is helping people keep their homes, by more fairly adjusting their rates, when things are upside down. How is society benefited by throwing more people into poverty? They pay it back. It’s just a bridge to help them through a hard time.
More people out of their homes = more houses sitting empty = driving down values further = more people upside down = more people out of their homes. Only a banker could think, just standing back and watching, is a good idea.
I don’t see how a conservative in 2012 could sympathize with those people. What you have described is the ultimate goal of today’s conservatives through their campaign to reduce government regulations and bailouts. Their concept of the free market is predicated on the clever profiting from the unwary. You are their natural prey.
I completely disagree. In addition to helping responsible people who really need the help because they are underwater on their mortgage, this program will reduce the number of foreclosures, which in turn helps the housing market, which in turn helps the economy.
And as for the cost of the program - and maybe i am mistaken - but I believe most of the cost would be shouldered by the lenders not the government. I am just trying to understand why any republican would vote against this… whats the down side? Even some lenders are in support of this along with most (all?) national real estate associations.
The list of potential HARP 3.0 candidates at the bottom of that article looks a little sketchy. A lot of self-reporters and sub-prime borrowers. What’s the expected cost of this program? What’s the expected default rate? Is it higher than previous iterations of HARP? How much has HARP cost the government?
You sign a contract to pay a certain amount per month for your house. Now you think that is a bad deal so you would like the taxpayers to give you money so you can pay less per month.
If you knew the amount of the loan and the amount of interest you would pay then calling the loan predatory makes no sense. You were probably anticipating the value of the home would go up and you would make money when you sold the house. But the nature of investments is that sometimes they go up and sometimes they go down. If the house had gone up in value you would have kept the money, so you have to take the hit when the house goes down in value.
Everything you said is correct by the letter of the law, no doubt.
However don’t you think that view is a little myopic? The defaults and foreclosures only hurt the market in general and even impact those around the foreclosures. Having some foreclosure in your neighborhood really drops your home value and the amount of foreclosures in the last 3 years is unprecedented.
Look, the whole point of this type of program is to avoid the extreme ups and downs that come with a completely unregulated market. Punishing individual people for having been screwed by a market bubble is cutting off your nose to spite your face. We all participate in this economy. We’re all hurt when it goes bad.
Don’t you think this view is myopic. If people get the message that if your home goes up in value you get to keep the money and if the home goes down, the government will make it up, then that is a textbook way to have a real estate bubble. This government guarantee will start getting priced into homes, and homes will shoot up in value, until the bubble pops and the government is on the hook for hundreds of billions in bad mortgages. Why should we imperil the global economy to help out some people who made a bad choice when to buy a house?
In most of the country if you wait long enough, you will recoup most of the equity you lost, and in the meantime you get to live in the house for the price you agreed to pay for it.
Only took eleven posts to get snarky to conservatives. Longer than I might have predicated I suppose.
I’m one of the Republicans who is socially very liberal but fiscally very conservative. I’m primarily a Republican because I have more faith that they will get us out of our financial mess than Democrats, but it’s a close call.
I’m not in favor of this. If we weren’t $16 trillion with a ‘t’ in debt and growing, I’d be for it, but I think we need to start saying “no” to spending somewhere. No one put a gun in anyone’s head to buy a house, and they knew what the cost would be. Many viewed it as an investment. I bought less house than many of my friends did because I wanted to be able to afford it.
At some point people need to live with the choices that they have made, without the government (and me as a tax payer) bailing them out.
Not that I have a dog in this fight, but : wouldn’t this benefit people who currently don’t own a house and could then afford one? Isn’t this protecting a social category that is somewhat better off at the expense of poorer people?
I understand that many homeowners have hit hard times, but isn’t there quite a lot of hand outs for homeowners (tax deductible interests and such) in the USA and essentially nothing for people who currently don’t own one (and whose taxes nevertheless fund the programms homeowners benefit from)?
The market was not and is not “completely unregulated”. If you think more regulation is needed, then propose it.
Housing prices need to reach an equilibrium in the market. Propping them up with taxpayer’s money is just delaying the inevitable. And whoever said this won’t prop up housing prices doesn’t understand the market. If you can’t afford your house payments, then you bought too much house for your budget. And if you don’t want to sell it because you’ll lose money, then it’s not worth what you think it is or what you paid for it.
Homeownership is the Holy of Holies to American politicians. They love it as much as the nuclear family or the Greatest Generation ((C) Tom Brokaw). As has been observed upthread, handouts for homeownership were one of the components which inflated the housing bubble. They also hamper worker mobility, something we desperately need to stay competitive. Doesn’t matter. Homeowners will continue to be the most coddled class in the nation for the foreseeable future.
Agree in principle, but you’re putting undue hardship on the country if you were to just say “screw 'em and let God sort it out.”
I support a generic program that (1) prevents homelessness and (2) allows housing prices to gently relax without collapsing again. Maybe it’s more economic to let them collapse, but unfortunately, we set ourselves up in a fix where too many people in the country would suffer.
I’m always torn on this kind of issue, speaking as a semi-conservative. On one hand, there is a lot of blame to be assigned onto people who are not homeowners for the recent bubble and burst, and foreclosures on same seem to be punishing the wrong people at least in part. On the other hand,** John Mace** is absolutely right that the way to fix the aftermath of a bubble isn’t to re-inflate it, and any program by the government designed to encourage home ownership is going to by definition inflate the real estate market.
On the balance, I’m not opposed to HARP-type programs in times like this, but then again I’m a Keynesian so I don’t object to a little government spending when in a recession. I’d say there needs to be a lot more careful consideration of the effect on home prices, though.
John, seriously, in all honesty, do you really think you convinced me of anything with that post?
And don’t tell me to “propose legislation”, John. That’s what this thread is ABOUT. The proposing of a specific piece of legislation.
Again, you seem more interested in punishing specific homeowners than in keeping us away from a huge bust. Remember about the nose and the spite and the cutting?