In his scheduled speech on job creation this Thursday, President Obama is likely to “include a nod” to his latest mortgage relief plan according to sources familiar with the administration’s plans[1]. The administration has been gathering data and garnering opinions for weeks on a refinancing initiative designed to help borrowers refinance the loans on their homes at current low rates if those loans are backed by Fannie Mae, Freddie Mac or the FHFA. However, the administration has not yet determined if borrowers seeking a loan of more than 80 percent of the value of their home would qualify for the refinancing. If not, then the program will likely not reach many of the homeowners in the greatest danger of foreclosure.
Of course, if the plan goes through, the holders of the mortgage bonds that are being paid off early will take a hit. “It’s a political hail Mary,” said head of securitized products at Denver’s Janus Capital Group John Kerschner, who does not believe that the economy will derive any significant net benefits from a government-encouraged refinancing wave. However, proponents of the program say that currently the housing market is dead in the water because “homeowners without a job or good credit histories have been essentially shut out of the refinancing process.” Supporters of the plan like William Galston, a scholar at the Brookings Institution think tank, says that the plan might “jump start” the housing recovery by helping households work off their debt burden more quickly than if things take a natural, gradual course[2].
Do you think that refinancing should be an option for more people than it is currently? Should the government be involved in that decision?
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[1] http://www.msnbc.msn.com/id/44340713/ns/business-real_estate/#.TmTI0qgmbW4
[2] http://www.reuters.com/article/2011/08/31/us-usa-obama-housing-idUSTRE77T6DV20110831?feedType=RSS&feedName=topNews&rpc=71
There has to be a myriad of plans if they are going to solve the problems. What about the people who suffered a loss of some of their income but not a total loss, they find themselves owing way more on their home than the 31% the mortgage industry likes to see. Without assistance those people cannot continue to make payments based on 6-8% interest rates. If lender didn’t require an appraisal and accepted this is the mortgage amount both the lender and buyer agreed upon but reduced the rate there are many people who could be spared the loss of their homes. As an example $150,000 loan amount on an original $155,000 sales price at 7% interest creates a PI payment of $997.00 with an income of $3200/month. When that household looses 40% of their income $1900/mo they can’t handle $997/mo in housing payments. They can’t sell without ruining their otherwise decent credit, they cannot refinance because now their house is only worth about $90,000 or 60% of it’s original loan amount and value. Give them a 3% interest rate at the same mortgage amount with payments of $632 and they can make that payment, keep their home and hopefully wait out the market until their house value catches up with their mortgage or as their income improves they can pay more on the loan to get it in alignment with future values. Forget about values of the property, appraisals, percentages of LTV and just give them a payment in keeping with their new lower income at the loan amount both buyer and lender agreed to. It could be graduated as time goes by giving them a 3-5 year period before the graduation and hopefully an economic recovery. Forcing people out of their homes because they lost income due to conditions out of their control and more importantly because there were lenders out their defrauding everyone and creating this debackle, simply is not reasonable. Why give the banks money unless you require they do something with it that helps the public. After all we are paying for it and they created the necessity. If someone owed me 997/mo and couldn’t pay it but would pay 632, I would certainly rather have some than nothing, especially when I knew I was going to get back my collateral at 60% of the value and had to go to the expense of getting it back. What am I talking about that is exactly what I have done with my tenancts. Rather than loose tenants I agreed to lower their rent in keeping with their new income an reassess each year. I would rather have something than nothing and no one is reimbursing me for my loss. You can bet if I caused their income loss, I would hang my head in shame while they suffered through this recession. This would vastly help the real estate industry if all those houses weren’t in foreclosure.
and the lenders were getting 60% of what they are loosing right now.
a lot of homes underwater reduce the principle