Guidelines for loan mods, refis released
'Home Affordable' program aimed at helping 9 million homeowners
By Inman News, Thursday, March 5, 2009.The Obama administration has released the guidelines that loan servicers will use to determine who is eligible for mortgage loan modifications and refinancings under a new initiative aimed at helping up to 9 million homeowners avoid foreclosure.
The Homeowner Affordability and Stability Plan's "Home Affordable Refinance" component will rely on Fannie Mae and Freddie Mac to refinance 4 million to 5 million mortgages for borrowers who might otherwise be unable to refinance because their homes have lost value and they have less than 20 percent equity in their property.
First American CoreLogic released a report Wednesday estimating that more than 8.3 million homeowners were "upside down" at the end of 2008, meaning they owed more on their mortgage than their homes were worth.
The "Home Affordable Modification" component of the initiative will provide insurance and incentives for both borrowers and lenders that the Obama administration hopes will generate 3 million to 4 million loan modifications.
When the plan was announced, the Mortgage Bankers Association pointed out that it would not help borrowers refinance if their loan-to-value ratio had ballooned past 105 percent, or if their loans aren't owned or guaranteed by Fannie and Freddie (see story).
Although those aspects of the program remain in place, the MBA said Wednesday that it was pleased that mortgages of up to $729,750 will qualify for modifications under the program's guidelines, regardless of whether they are in high-cost areas.
The National Association of Realtors welcomed the release of the guidelines, saying the initiative will help stabilize home prices by helping "millions of families avoid foreclosure."
But NAR said in addition to preventing foreclosures, incentives for buyers are needed. The group called for "creative approaches that will lower interest rates for all homeowners and buyers."
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Submitted by Joseph Bridges on March 5, 2009 - 7:44am.
Hopefully lenders will take action on this and help these home owners. We have seen legislation in the past that was supposed to help many but did not have the desired result.
I hope that future instances or need for this legislation are not needed and after things settle down we look at how this happened.
I am glad that NAR is also pushing for buyer incentives. The quicker that these properties get off the market the better.
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Submitted by Sean OToole on March 5, 2009 - 8:23am.
This plan is a non-starter when it comes to dealing with the significant negative equity that is at the root of our current housing and economic crisis.
The refinance plan only modestly improves on the Hope For Homeowners (H4H) plan rolled out last year, and suffers from as many or more problems (restrictions on type, equity, 2nds, etc that exclude most real world situations).
The loan mod plan still remains primarily focused on payment, rather than principal balance, modifications that will only trap those homeowners that sign up in a prison of debt. The average foreclosed home in CA is now $180k upside down - even if the borrower is offered affordable payments, most will have to sell at some point (job loss, transfer, illness, etc) and at that point foreclosure will remain the only option. Thus these plans only delay the inevitable to the detriment of homeowners, the housing market, and the economy overall. CA just made the same mistake with their "California Foreclosure Prevention Act".
There is zero doubt in my mind that the prices we reached at the peak were an artificial outcome of the loose lending at the time, that prices will not return to those levels for many years, that we need to eliminate the $2-4 Trillion in negative equity nationally ---- and most importantly that we will only have a healthy housing market and economy once those things happen.
That's my take, what do you think?
Sean O'Toole
Founder / CEO
ForeclosureRadar.com
ForeclosureTruth.com
Submitted by Ninah Hunter on March 7, 2009 - 2:02pm.
The jury is still out as far as I'm concerned whether this new plan will have the saluatory effect it is intended to have on the housing market. I am concerend like Sean that it seems too limited and will not help the majority of people upside down on all kinds of real estate, not just primary residences. Nevertheless, it's nice to have something to offer first time home buyers and homeowners that may need help and can qualify for loan mods. Maybe part of this will be educating people who might not otherwise know about it and take advantage of what's offered, if they can qualify. We've been told there is no quick fix and it will take time. So, I'll give it time before this jury renders her verdict.
~Ninah
Ninah Hunter
Broker Owner
CENTURY 21 Action Realty
Montrose, Colorado