Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


President Obama unveiled his homeowner bailout plan today.  The first provision is aimed at motivating mortgage servicers to offer underwater homeowners improved loan terms:

Servicers can receive an up-front payment of $1,000 for each eligible loan modification that meets certain criteria. The government said it would pay servicers $500 and mortgage investors $1,500 if at-risk loans are modified before borrowers fall behind. The government said it would also help pay down the principal of certain mortgages by up to $1,000 a year for up to five years if the borrower doesn’t miss any payments.

Hmmm.  Loan servicers already have an incentive to rework loans that would otherwise go into default, and for the most part they aren’t doing it.  Will a couple thousand dollars change their internal calculus?  Offhand, it doesn’t sound like enough to really make a difference — though another provision of Obama’s plan adds a stick to the carrot, by allowing bankruptcy judges to unilaterally alter mortgage terms.  So it’s possible that the carrot and the stick together will have a noticeable impact.

The second major part of the program is aimed at lowering interest rates on underwater loans:

Finance companies cannot currently refinance a loan if the homeowner owes more than 80 percent of the home’s value. But under the plan, Fannie and Freddie — which were taken over by the government last year — would be able to refinance a mortgage if it does not exceed 105 percent of the current value of the property. For example, if the value of the borrower’s property is $200,000, but the homeowner owes $210,000, he or she could still qualify for the program.

This sounds promising.  If the interest rate reductions are significant, it could provide some serious help to homeowners.  It will also help arrest the slide in home prices, which might be a worthwhile goal at this point.  It’s true that house prices are still too high and need to fall further, but Obama’s program most likely won’t have a serious effect for another six months at least, and by that time we might be at risk of house prices overshooting on their way down.  A program that pushes against that tide could end up being a good countercyclical tool.

THIS IS BIG FOR US.

And we won't beat around the bush: Our fundraising drive to finish our current budget on June 30 and start our new fiscal year on July 1 is lagging behind where we need it to be.

If you value the reporting you get from Mother Jones and you can right now, please consider joining your fellow readers with a donation to help make it all possible. Whether you can pitch in $5 or $500, it all matters.

If you're new to Mother Jones or aren't yet sold on supporting our nonprofit reporting, please take a moment to read Monika Bauerlein's post about our priorities after these chaotic several years, and why this relatively quiet moment is also an urgent one for our democracy and Mother Jones’ bottom line—and if you find it compelling, please join us.

payment methods

THIS IS BIG FOR US.

And we won't beat around the bush: Our fundraising drive to finish our current budget on June 30 and start our new fiscal year on July 1 is lagging behind where we need it to be.

If you value the reporting you get from Mother Jones and you can right now, please consider joining your fellow readers with a donation to help make it all possible. Whether you can pitch in $5 or $500, it all matters.

If you're new to Mother Jones or aren't yet sold on supporting our nonprofit reporting, please take a moment to read Monika Bauerlein's post about our priorities after these chaotic several years, and why this relatively quiet moment is also an urgent one for our democracy and Mother Jones’ bottom line—and if you find it compelling, please join us.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate