Obama's Homwowner Affordability and Stability Plan & FICO

[Anonymous]

As it stands now, if you take a lower-payment loan under Obama's program, the lender will report you as "paying reduced amount as agreed" and FICO will lower your score and it'll take 1-2 YEARS to recover.  My mortgage co. says they're talking to FICO about this.  This is unfair and keeps eligible people who have high scores from applying and pisses me off.

[Anonymous]

Why is this unfair? You are paying a reduced amount not the amount you agreed to pay why shouldnt you lose points isnt this the same as a settlement on a debt? If you want a lower payment refinance instead of settling.

[Anonymous]

[Why is this unfair? You are paying a reduced amount not the amount you agreed to pay why shouldnt you lose points isnt this the same as a settlement on a debt? If you want a lower payment refinance instead of settling.]

It's unfair because we all came tumbling down with the bursting of the housing bubble.  We thought our equity was gonig to increase & we'd be able to handle the loan.  After I bought my house for cash from sale of my CA home (2004) I used the equity to buy a rental.  My plan was to leapfrog through rentals, never keeping one longer than 5 years.  Now nearly 5 years later, I'd be lucky to sell the rental,  and doubt if I could make enough off it to pay the loan off.  

[MarineVietVet]

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@Anonymous wrote:

[Why is this unfair? You are paying a reduced amount not the amount you agreed to pay why shouldnt you lose points isnt this the same as a settlement on a debt? If you want a lower payment refinance instead of settling.]

It's unfair because we all came tumbling down with the bursting of the housing bubble.  We thought our equity was gonig to increase & we'd be able to handle the loan.  After I bought my house for cash from sale of my CA home (2004) I used the equity to buy a rental.  My plan was to leapfrog through rentals, never keeping one longer than 5 years.  Now nearly 5 years later, I'd be lucky to sell the rental,  and doubt if I could make enough off it to pay the loan off.  

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There are inherent dangers of treating a house like it's a personal banker instead of a place to live. I'm sorry your plans didn't work out but that's the risk/reward of doing business. 

BTW there is nothing in this life that's fair. I've lived long enough to learn that.

[laz98]

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@Anonymous wrote:

[Why is this unfair? You are paying a reduced amount not the amount you agreed to pay why shouldnt you lose points isnt this the same as a settlement on a debt? If you want a lower payment refinance instead of settling.]

It's unfair because we all came tumbling down with the bursting of the housing bubble.  We thought our equity was gonig to increase & we'd be able to handle the loan.  After I bought my house for cash from sale of my CA home (2004) I used the equity to buy a rental.  My plan was to leapfrog through rentals, never keeping one longer than 5 years.  Now nearly 5 years later, I'd be lucky to sell the rental,  and doubt if I could make enough off it to pay the loan off.  

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this is partly why the bubble burst.  people bought homes they couldn't entirely afford, because they were relying on equity.

[marty56]

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@Anonymous wrote:

It's unfair because we all came tumbling down with the bursting of the housing bubble.  We thought our equity was gonig to increase & we'd be able to handle the loan.  After I bought my house for cash from sale of my CA home (2004) I used the equity to buy a rental.  My plan was to leapfrog through rentals, never keeping one longer than 5 years.  Now nearly 5 years later, I'd be lucky to sell the rental,  and doubt if I could make enough off it to pay the loan off.  

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We should you or any person who brought a home at obviously over-inflated prices for income investment get a break when people lost money in the stock market?  if you are being offered a deal to reduce the principle a rental home, be thankfull you got a break when others didn't. 

As far as the FICO score hit in doing so, that is 100% fair that for regardless of what the reason is, a person who has a reduction in the principle owed on a home, or any loan, should get a FICO score point hit. 

Dont forget that a principle reduction on a rental home may be taxable so you could wind up with a shiny new tax lean on your CR which might make it harder to sell the home. 

Message Edited by marty56 on 12-23-2009 06:22 AM

[Anonymous]

My friends....let us not get into the appearance of disagreeable dispute and judgements.

Suffice it to say that many people "expected" values of property to continue to rise, and it was this expectation that was relied upon for the repayment of debt or sale at profit.

In the military it is known that the first casualty of war is the battle plan.

The circumstance is not one of fair or unfair, that is a subjective opinion.  It is merely the reality of circumstance.  Market values rely upon buyer demand.  Buyer demand relies upon discretionary income, stability and the availability of cheap money (at least that is what was required for the bubble build up).

The problem that transpired is that values were inflated beyond true market values.  A market value is not the speculative investment value, but the price a person is willing to pay at a given time, in a given economic climate.

Too much cheap money and very little limitation on who could obtain it lead to huge jumps in the perceived value or paper value.  But just like any ponzi scheme, once the infusion of money from the bottom level of people dries up....the house of cards comes tumbling down.

Wealth is actually the expansion of real assets and value to the economy.  Inflated values based upon a runup of short term buyers is not an expansion of wealth, but a grab at it which will actually take from the pot leaving a deficit.

Message Edited by txjohn on 12-23-2009 05:46 AM