I haven’t said much about the housing plan because I haven’t had time to study it, but this seems like a pretty good explanation. The plan has two notable restrictions on the types of loans that qualify:
- The loan must have been held or securitized by Fannie Mae or Freddie Mac. So no jumbo loans and no crazy option ARMs, because Fannie and Freddie didn’t do those. Beyond that, there are just lots of loans that didn’t go through those agencies and therefore don’t qualify.
- The loan to value ratio can’t exceed 105%. You can be a little upside down, but not massively upside down. This won’t help people who bought a $500,000 house that’s now only worth $300,000. (Nor should it, in my opinion. That would be using taxpayer money for a spin of the roulette wheel. Sad as it is, a person in that situation is wiped out and needs to leave the table. Their losses shouldn’t be covered by taxpayers who didn’t overspend on houses or who couldn’t afford a house in the first place. Likewise, their bank’s losses shouldn’t be covered.)
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