Proposed ban on foreclosures splits Obama from some Democrats
The president says he's opposed to a plan, backed primarily by fellow Democrats, to institute a nationwide ban on home foreclosures.
Q. I am a huge fan of President Barack Obama, so I was shocked when he recently said he opposes a national moratorium on foreclosures. It seems to me that stopping all foreclosures, at least for a little while, would prevent a lot of people from getting kicked out onto the streets. What gives?
A. Obama opposes a move by some legislators most of them fellow Democrats to declare a national moratorium because he and the rest of his cabinet believe that such a ban ultimately would make the foreclosure crisis even worse and further delay a real estate recovery.
It's a controversial stand on a complicated issue. But in a nutshell, proponents of banning foreclosures nationwide, at least until banks can prove they are following all the legal rules and aren't kicking people out prematurely or without any cause at all, say it will spare many Americans from losing their homes at the coldest time of the year.
They also say it will bring more stability to the housing industry because, if lenders are forced to halt their foreclosure sales, the number of homes that are for sale will drop dramatically and thus push the value of houses that are offered by nonforeclosure sellers higher.
Obama thinks otherwise. His decision to oppose a nationwide ban may be puzzling to staunch supporters like you, but he and his advisers essentially believe the proposed ban would only delay (not avoid) the foreclosure of countless borrowers who can't meet their mortgage payments today and probably won't be able to make them in the future.
The president believes that by clearing out the foreclosure inventory at a steady rate, banks will avoid billions of dollars in additional losses that taxpayers may have to cover, and the housing market will rebound much sooner. A full-blown ban also would be unfair to buyers who have recently agreed to purchase a foreclosed home, because their pending deal would be suddenly thrown into limbo, Obama says, leaving them unsure whether their sale will be completed on-time or if they'll eventually have to look for another house.
Foreclosure laws vary from one state to the next. Rather than a blanket national ban, Obama is urging regulators in each of the 50 states to enforce rules that are already on their individual books and search for new ways to protect the interests of borrowers and lenders alike.
Q. I live in an older home that does not have any smoke alarms. Are these devices required by law?
A. Most cities and counties require that each home have at least one smoke alarm, and many have stiffer ordinances that require alarms be placed in each bedroom or even every room. Some municipalities actively inspect individual properties to ensure compliance, while others only enforce their smoke-alarm laws when a home is sold and the transaction goes into the closing process.
Relatively few communities across the U.S. have no alarm policies at all, instead leaving the decision to install the devices up to the individual owner. But with top-quality, battery-operated alarms now available for between $10 and $20 each, there's really no reason for owners not to have at least two or three alarms spread across their homes.
Fire department officials say the batteries in such easy-to-install alarms should be changed at least twice a year. A good way to remember to make the semiannual switch is to replace the batteries when Daylight Saving Time begins in the spring, and then do it again when you move your clock backward in the fall.
Daylight Saving Time ended last weekend. I hope you shopped the “battery aisle” of your local store.
Q. I refinanced my mortgage last month at a 4.6 percent fixed interest rate for 30 years. The loan is for exactly $250,000, and the monthly payment for principal and interest is $1,282. If I add an extra $50 to each payment, how much would I save in future interest charges and how much faster would I pay the loan off? Also, what would be my savings if I added $100 per month instead of $50?
A. If you simply keep the $1,282-per-month repayment schedule that the bank provided when you refinanced your loan last month, you will pay about $211,380 in finance charges in the next 30 years.
Adding a relatively modest $50 “principal only” payment each month would reduce your future interest charges by $18,732 and allow you to pay the mortgage off two years, three months ahead of schedule.
By adding a heftier $100-per-month principal-only payment, you'll save $34,194 in interest and knock four years, two months off the life of the mortgage.
For the booklet “Straight Talk About Living Trusts,” or “Free and Clear: Getting the Mortgage Monkey off Your Back,” send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
© 2010, Cowles Syndicate Inc.