Home Values and Housing Sales Prices Decline as Obama Mortgage Rescue Plan Rolls Out
by admin ~ February 25th, 2009.While most real estate evaluators would agree that Obama’s mortgage rescue plan is likely to slow foreclosures for many homeowners, some home financing experts question how much it can help in a high cost regions such as San Diego where home values have fallen so sharply. For example, the rescue plan offers much-needed refinancing to borrowers who owe more than 80 % of the value of their homes. But homeowners would be ineligible for mortgage refinancing to a lower, more affordable rate if their first loan exceeds 105 % of their home’s current market value.
Obama Outlines Mortgage Foreclosure Rescue Plan
Home refinancing would be limited to loans guaranteed by Freddie Mac and Fannie Mae, the government-controlled secondary mortgage agencies. “How is 105 % loan-to-value going to help people who are upside down by 20% to 50 %?” said Dave McDonald, president of the San Diego chapter of the California Association of Mortgage Brokers.
Less critical was Dustin Hobbs, spokesman for the California Mortgage Bankers Association, who lauded Obama for coming up with a flexible program that could yield some positive results. Much will depend on the implementation, he said, especially the part of the proposal that aims to provide mortgage loan modifications for borrowers in danger of default or foreclosure. Obama is proposing to have the Treasury Department partner with financial institutions to reduce mortgage payments so that borrowers pay no more than 31% of their income. Under the new mortgage rescue plan, mortgage rates could be reduced to as little as 2%; they now stand at about 5% for thirty-year, fixed rate mortgage loans. “I would certainly hope that when they’re working on the implementation details, they’ll take into consideration that California is in a unique situation with so many borrowers in high-cost regions who are 15% or more underwater,” Hobbs said.
FHA has attempted to stem the foreclosure crisis with their Hope for Homeowners program that was designed to reward lenders who write-down mortgages to 90% for borrowers with negative home equity and delinquent mortgage payments. CFB mortgage advisor, Jeff Moran said, “Hope for Homeowners looks great on paper, but the FHA mortgage lenders have not wanted to touch them.”
Obama pointed out that aid will not be available to speculators or “flippers,” nor will it help people who purchased houses they knew they could not afford. “We are always delighted to see more options and tools available to troubled homeowners,” said Melinda Opperman, vice president of community outreach for Springboard, a nonprofit counseling agency. “Some individuals, though, may find there may not be a solution or option to prevent foreclosure. But in working with their lender or counselor, they can prepare for a new location for their family.”
Part of the strength of the Obama plan is creating clear loan modification standards, said Mark Goldman, a real estate instructor at San Diego State University. “So many of the programs that were supposed to help last year have really done nothing,” he said. “Now, they’re really putting pressure on the lenders, saying you cannot keep the rapid pace of home foreclosures and clearly it’s bad for everyone involved when the foreclosure news continues to worsen.”
Category: FHA Home Financing News, Home Equity News, Mortgage News | Tags: California Association of Mortgage Brokers, home financing, Home refinancing, mortgage loan modifications, mortgage refinancing