America Needs A RESCUE Mortgage Program

What we need is a RESCUE Mortgage program, a reduced equity, spoiled credit, unemployed/underemployed expectation loan that brings mortgage relief to those who cannot otherwise qualify for the refinance programs that are currently available. It’s taken me two days to figure out why I had nothing to say about the enhanced Home Affordable Refinance Program (HARP) the White House announced this week. As much as I want to get in line behind other bloggers and applaud the president’s efforts, it is hard to get excited about HARP when I know in the back of my mind that 11 million mortgages are underwater, 8 million mortgages are delinquent and 14 million people are out of work. For the delinquent and unemployed, HARP might as well be a fiddle

But instead of criticizing President Obama for doing all he can do, given the limited powers of the executive branch and an uncooperative Republican Party that controls the House of Representatives, I am going to lay out my RESCUE mortgage idea, one his administration can feel free to use as they see fit.

Making loans to people with reduced home equity who have stable jobs and good credit scores is easy. Making loans to people with reduced home equity who have spoiled credit is a challenge. Making loans to people with reduced home equity who have spoiled credit and are unemployed or underemployed is practically impossible. But many of these same borrowers, despite their circumstances, find ways to make some form of mortgage payment month after month. Many of them, who may be 30 or 60 days late on their mortgage have made these late payments—what we used to call “rolling lates”—for the last two or three years. They don’t have any savings left. Their retirement accounts, if they ever had any, are tapped out. Yet month after month, they are able to scrape together enough money to continue to have a place to call home.

If that’s not the sign of a person who believes in the future of this country, I don’t know what is. Which is why I call the RESCUE mortgage an “expectation” loan, because these beleaguered homeowners believe, as bad as the economy looks, that sooner or later it will get better. So why don’t we bring these Americans to the front of the bailout line for a change? In a lot of ways, they are better risks than the mortgage banks who loaned them the money to buy the houses they are living in.

I know people of all income levels need relief, and I can appreciate the diligence of Senator Schumer to make sure, in a state like New York, that mortgages up to $729,000 are included in any mortgage relief plan. But the average mortgage in this country is right around $185,000.

Take someone with a $185,000 mortgage whose current rate is 7.5%. With principal & interest of $1293, $50 a month in insurance premiums and $150 a month in taxes, their principal, interest, taxes and insurance (PITI) ends up being $1493 a month.

Refinance their home through the RESCUE mortgage program at 5%, which is about a point over the rates a prime borrower can get today, and with their principal and interest now $993, their total payment drops to $1193, which cuts the amount they have to scrape together each month by $300. In much of the country, the average mortgage is even lower than $185,000. In the state of Kentucky, for example, the average home purchase price right now is $143,000, which means the average home mortgage is probably quite a bit less than that.    

How would I qualify borrowers for a RESCUE mortgage loan?

Is this an owner occupied property?

Is the applicant listed on the security deed as the borrower(s)?

Are the applicant’s mortgage payments less than 60 days late?

These are the only borrower supplied items you need to know to refinance a loan when you are offering to help the borrowers who need help the most. The rest of the underwriting process, from the Automated Valuation Model (AVM), to the title search, to the mortgage payment history, will serve mostly to verify collateral, which is about the only one of the 4 C’s—capacity, character, credit, and collateral—that can be measured in this instance.  

The enhanced HARP program guidelines announced this week seem to be more stringent than the requirements for some of the Expanded Approval Level II and Level III products Fannie Mae offered back when I was a loan officer. However, something is better than nothing, and with an obstructionist Congress willing to sacrifice the very people they are supposed to be serving so long as it helps to destroy this president, this is probably the best President Obama can do. HARP will help borrowers in places like Atlanta, Chicago, Los Angeles, New York, and Houston, where even in a bad economy, many people still have stable jobs and sizeable incomes.

The paradox of our current mortgage dilemma?

If we don’t do anything as a nation to drastically reduce the number of homes that are going to go into foreclosure, the billions in home equity that no longer exists may finally have to reconcile with the billions in make believe home equity our nation's banks are still carrying on their balance sheets.

Image courtesy of Shutterstock.

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Homo sapiens have been on earth for 200,000 years — give or take a few ten-thousand-year stretches. Much of that time is shrouded in the fog of prehistory. What we do know has been pieced together by deciphering the fossil record through the principles of evolutionary theory. Yet new discoveries contain the potential to refashion that knowledge and lead scientists to new, previously unconsidered conclusions.

A set of 8-million-year-old teeth may have done just that. Researchers recently inspected the upper and lower jaw of an ancient European ape. Their conclusions suggest that humanity's forebearers may have arisen in Europe before migrating to Africa, potentially upending a scientific consensus that has stood since Darwin's day.

Rethinking humanity's origin story

The frontispiece of Thomas Huxley's Evidence as to Man's Place in Nature (1863) sketched by natural history artist Benjamin Waterhouse Hawkins. (Photo: Wikimedia Commons)

As reported in New Scientist, the 8- to 9-million-year-old hominin jaw bones were found at Nikiti, northern Greece, in the '90s. Scientists originally pegged the chompers as belonging to a member of Ouranopithecus, an genus of extinct Eurasian ape.

David Begun, an anthropologist at the University of Toronto, and his team recently reexamined the jaw bones. They argue that the original identification was incorrect. Based on the fossil's hominin-like canines and premolar roots, they identify that the ape belongs to a previously unknown proto-hominin.

The researchers hypothesize that these proto-hominins were the evolutionary ancestors of another European great ape Graecopithecus, which the same team tentatively identified as an early hominin in 2017. Graecopithecus lived in south-east Europe 7.2 million years ago. If the premise is correct, these hominins would have migrated to Africa 7 million years ago, after undergoing much of their evolutionary development in Europe.

Begun points out that south-east Europe was once occupied by the ancestors of animals like the giraffe and rhino, too. "It's widely agreed that this was the found fauna of most of what we see in Africa today," he told New Scientists. "If the antelopes and giraffes could get into Africa 7 million years ago, why not the apes?"

He recently outlined this idea at a conference of the American Association of Physical Anthropologists.

It's worth noting that Begun has made similar hypotheses before. Writing for the Journal of Human Evolution in 2002, Begun and Elmar Heizmann of the Natural history Museum of Stuttgart discussed a great ape fossil found in Germany that they argued could be the ancestor (broadly speaking) of all living great apes and humans.

"Found in Germany 20 years ago, this specimen is about 16.5 million years old, some 1.5 million years older than similar species from East Africa," Begun said in a statement then. "It suggests that the great ape and human lineage first appeared in Eurasia and not Africa."

Migrating out of Africa

In the Descent of Man, Charles Darwin proposed that hominins descended out of Africa. Considering the relatively few fossils available at the time, it is a testament to Darwin's astuteness that his hypothesis remains the leading theory.

Since Darwin's time, we have unearthed many more fossils and discovered new evidence in genetics. As such, our African-origin story has undergone many updates and revisions since 1871. Today, it has splintered into two theories: the "out of Africa" theory and the "multi-regional" theory.

The out of Africa theory suggests that the cradle of all humanity was Africa. Homo sapiens evolved exclusively and recently on that continent. At some point in prehistory, our ancestors migrated from Africa to Eurasia and replaced other subspecies of the genus Homo, such as Neanderthals. This is the dominant theory among scientists, and current evidence seems to support it best — though, say that in some circles and be prepared for a late-night debate that goes well past last call.

The multi-regional theory suggests that humans evolved in parallel across various regions. According to this model, the hominins Homo erectus left Africa to settle across Eurasia and (maybe) Australia. These disparate populations eventually evolved into modern humans thanks to a helping dollop of gene flow.

Of course, there are the broad strokes of very nuanced models, and we're leaving a lot of discussion out. There is, for example, a debate as to whether African Homo erectus fossils should be considered alongside Asian ones or should be labeled as a different subspecies, Homo ergaster.

Proponents of the out-of-Africa model aren't sure whether non-African humans descended from a single migration out of Africa or at least two major waves of migration followed by a lot of interbreeding.

Did we head east or south of Eden?

Not all anthropologists agree with Begun and his team's conclusions. As noted by New Scientist, it is possible that the Nikiti ape is not related to hominins at all. It may have evolved similar features independently, developing teeth to eat similar foods or chew in a similar manner as early hominins.

Ultimately, Nikiti ape alone doesn't offer enough evidence to upend the out of Africa model, which is supported by a more robust fossil record and DNA evidence. But additional evidence may be uncovered to lend further credence to Begun's hypothesis or lead us to yet unconsidered ideas about humanity's evolution.