About mortgage 'bailout'

A 5% loan would be for someone who hit the mortgage rate at practically the perfect time. It would also be for someone with excellent credit and collateral for security. Joe can't afford his house, so he doesn't have excellent credit anymore. The house would no longer be collateral so this would not be a secured loan. A more reasonable interest rate for an unsecured loan for a person with poor credit would be 9%. Remember there would be a $30,000 real estate commission on the sale of the house. This brings the loss to $170,000. It is interest only, so it would have to be paid for the rest of Joe's life, say 35 years. So Joe would pay $15,300 a year for

Extreme cases as your example would not qualify for bailout. Only slightly underwater mortgages (105% LTV) qualify. The program is punishing those who didnt have down payments.

There's a bumper sticker out that reads "Honk if you're paying my mortgage"

On Mar 6, 9:11 am, "rick++"

"In theory, there is no limit on the so-called loan-to-value ratio for a modified mortgage. In other words, people are eligible for help even if the value of their house is far less than the outstanding amount of the mortgage, as is the case for about 14 million people who bought houses at the very peak of the market and often put no money down. Administration officials have said, however, that people who owe more than 150 percent of the current market value of their homes will probably have a harder time persuading their lenders to modify the mortgage."

Joe should sell before missing payments, and let the bank know. The mortgagor has a lot of incentive (170k note at original rate and a sold house, is better than foreclosure at 450k). They wouldn't mind allowing principal payments as Joe crawled out.

But after reading your scenario, I'm not sure I ever want a mortgage :-)

Rick - Thanks, I missed that wrinkle :-) It also punishes sub-prime, no?