Hold off on the hoopla about the ‘Homeowner Affordability and Stability Plan’…

February 19, 2009

The $75 billion dollar Homeowner Affordability and Stability Plan announced by Obama today promises to relieve between 4-5 million responsible households who are facing foreclosure.  Included in the plan are provisions to work with mortgages that are not yet in default.  For some well framed examples of the types of calculations for refinancing the Administration expects the plan to enable see here.  It is noteworthy that the plan does not dispute the price of the house nor does it compensate owners who have paid down value that has now been lost; it simply permits the readjustment of loan amount, where ratio rules might have impeded modifications, to the current value of the property. In other words, it provides access to refinancing.

A key word in the plan is responsible which is repeated again and again in the Administration’s Fact Sheet.  There is a strong populist emphasis on demonstrating that unscrupulous speculators will not be rescued or rewarded.  We won’t know how eligable homeowners will be defined until guidelines are announced.  This is expected to occur on Wed. March 4th. In watch points, look for the use of FICO scores, in the the determination of individual responsibility…

One Response to “Hold off on the hoopla about the ‘Homeowner Affordability and Stability Plan’…”

  1. danielbeunza Says:

    Intriguing post. I am not sure what your position on the plan is: for or against? And on the use of FICO scores to establish responsibility, why is that significant?

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