Archive
$1.5 Billion For Struggling Homeowners
Will this work this time? I guess we will find out. I do like that it is targeting help for the unemployed. It targets states where the average price for all homes have fallen more than 20% from their peak. Of course Florida is one of them.
CNBC reported that the initiatives may include:
- Measures for unemployed homeowners;
- Programs to assist borrowers owing more than their home is now worth;
- Programs that help address challenges arising from second mortgages; or
- Other programs encouraging sustainable and affordable homeownership.
Paying Your Credit Cards Before Your Mortgage
It’s scary but true and it makes sense. The bailouts are in the housing industry and just like the article states if you have a cash shortfall you want to be able to have access to your credit cards for your everyday essentials. It used to be that a homeowner would do whatever they could to pay their mortgage and save their home, not anymore.
The data reflects a “fundamental paradigm shift” in the way consumers prioritize payment of debt obligations, says Ezra Becker, of TransUnion. “This is dramatically different,” he says. “It is a clear manifestation of the dynamics that lead up to the recession and the recession itself.”
http://finance.yahoo.com/news/Forget-the-Mortgage-Im-Paying-usnews-816222158.html?x=0&.v=2
Pennsylvania Mortgage Relief
What can I say PA knows how to do it. Okay, I’m from PA so I am biased. According to the article it seems PA is providing short term aid to those who are suffering from a hardship such as jobless which is exactly who we should be helping.
I received a call from someone yesterday that lost their job and they aren’t getting any help from Bank of America. I told him to ask for a forbearance of 6 months which can give him time to get a new job. Why are the people who really need it the most and can clearly show a hardship not getting help? Anyone can play with their debts and income to make it look like it’s a hardship but if someone lost their job, could afford it prior to, then help them out!! They are trying to duplicate this in other states and has already been copied by a handful.
“Pennsylvania’s Homeowners’ Emergency Mortgage Assistance Program was created in the 1980s in response to job losses in the steel and coal industries. With funding tight, the approval rate for new loans in the Pennsylvania program has fallen to about 22% from a high of more than 40% in the 1980s. Roughly 80% of loans involve one-time payments, with just 20% going to borrowers who need continuing help with their mortgage payments for up to three years.”
Treasury To Fix the Foreclosure Program
All I can say on this topic is if you are trying to get a loan modification then good luck. I guess we will see what comes of it but again don’t get your hopes up even when they are talking about doing principle reductions, again.
Even though I do think the only correct way to modify the loans is to do a principle reduction it does create a moral hazard and many will try to get one even though they don’t need it. One person can ruin it for everyone. I feel very bad for those who legitimately could afford their home but are now unable to because their income has be reduced or they lost their job.
“Many economists and mortgage experts have concluded that banks must ultimately forgive loan balances to restore equity to underwater borrowers. Otherwise, growing numbers will walk away from their homes and accept foreclosure rather than make payments on properties in which they no longer own a stake. The Treasury has resisted calls to push lenders to write off loan balances, concerned that such a course would either threaten the health of banks by forcing them to swallow billions of dollars in write-offs or cost taxpayers additional money.”
http://www.nytimes.com/2010/01/22/business/economy/22modify.html
Have Loan Modifications Made Things Worse?
I would have to agree with this statement, “Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes. Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.”
If you are going to modify loans I think you must do a principle reduction along with 30 year fixed rates. They need to stop offering 5 year Arm’s (adjustable rate mortgages). If not, the banks are just postponing the inevitable.
The New American Dream
Apparently it is to stop paying your mortgage when you are upside down and rent. Here is my opinion, a lot of people bought homes they couldn’t afford so yes they are responsible too. However, we are human and make mistakes and I feel this goes back to the book I read, “Chain of Blame: How Wall Street Created The Credit Crisis.” In this book Angelo Mozillo, CEO of Countrywide, said back in 2002 (I believe 2002) “if these weren’t good loans then Wall Street would sniff it out. If you are lending the money you need to take control of the situation and not allow these individuals to purchase.
I am going back to my favorite paragraph from a previous Wall Street Journal article. “If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.”
This was an interesting comment and probably accurate. “For the 4.8 million U.S. households that data provider LPS Applied Analytics estimates haven’t paid their mortgages in at least three months, the added cash flow could amount to about $5 billion a month — an injection that in the long term could be worth more than the tax breaks in the Obama administration’s economic-stimulus package.”
http://online.wsj.com/article/SB126040517376983621.html?mod=rss_economy
Are You A Renter & Been Evicted From Your Home?
If so, make sure to check out http://www.rentalforeclosure.com/. There are a lot of good articles on here and information about each state’s foreclosure process. However, it doesn’t seem very up to date. The last article posting was on July 15th, 2009.
The new law requires that tenants who pay their rent on time can remain in their home until the end of their lease, unless the bank sells the property to someone who intends to make it his own residence. Even without a lease, renters must be allowed to stay in their home for 90 days after the foreclosure. The provision is scheduled to expire at the end of 2012
Regardless, make sure to do your homework upfront to see if the landlord is in foreclosure. You can do that on your county property appraiser sites by looking up the address and seeing who the owner is. In South Florida go to http://www.bcpa.net/RecMenu.asp, Miami-Dade go to http://www.miamidade.gov/pa/property_search.asp, and for Palm Beach go to http://www.co.palm-beach.fl.us/papa/aspx/generalsearch/generalsearch.aspx.
How To Improve Loan Modifications
I don’t know why they don’t go back to the Hope for Homeowners loan if they are going to loan modifications. The Hope for Homeowners in a nutshell is a new loan at 90% of the current appraised value. If you are going to do loan modifications I think this is the way to go because the appreciation is shared with the government, it would be a mortgage manageable payment, it’s a fixed rate loan, and now the borrower isn’t upside down. Anyway, you can decided.
“The first shortfall is that the program doesn’t provide a clear process to triage the over 7.5 million delinquent loans. The second is that it doesn’t take into account that the primary reason borrowers default is “negative equity.” When a house is worth less than what is owed on it, making monthly payments seems like a waste of money and many homeowners walk away.”
http://online.wsj.com/article/SB20001424052748704342404574577853961145272.html#mod=todays_us_opinion
Should You Walk Away From Your Mortgage?
Although many will not agree with this article and neither am I, I want to paste an article that I posted before from The Wall Street Journal because they make a great point.
“If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.”
You can read the article and decide for yourself.
More Loan Modification Help
We will find out more today but the Treasury wants to monitor it more and increase the amount of modifications. Now if you are looking to get a modification and are reading this, don’t get too excited because we have seen this push before.
With delinquencies increasing I guess the theory is that they need to stop foreclosures. I personally think if you are going to do this then you need to go back to the Hope for Homeowners loan where you get a new loan based on 90% of the current appraised value and share the equity with the government. Unless you make it so the homeowner isn’t upside down you are postponing the inevitable.
If you have attempted to get a modification I am sure you have experienced this, “Mortgage companies have stepped up efforts to collect documents, but many borrowers say firms are frequently disorganized and ask repeatedly for the same paperwork or offer confusing information.”
http://online.wsj.com/article/SB125952206832568569.html#mod=todays_us_page_one
MillerOnMortgages
- An error has occurred; the feed is probably down. Try again later.
Miller on Mortgages 