So do you think Congress finally got it right? Do you think that they really came up with a plan to attack this ongoing housing crisis? Their latest effort being this "Hope For Ownership" program.
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Hope For Homeowners?
John Driscoll | Sunday, October 19, 2008
So do you think Congress finally got it right? Do you think that they really came up with a plan to attack this ongoing housing crisis? Their latest effort being this "Hope For Ownership" program.
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Random Diversion
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Comments
The HOPE programs sounds great, but has some limitations and needs to be endorsed by lenders. There is shared equity (owners will owe a portion of their future appreciation) with FHA after a HOPE refinance and lenders are going to have to be willing to "reduce" or cut their payoffs on many of these refinances. Sounds good versus executes easily and efficiently are often two different things. Every little bit helps, not sure this will be a huge benefit???
The problem from my perspective, is that the more the government steps in to "help" the more problems we incur; Firstly the government has a huge tendency to overpromise and not deliver or change the rules as they go, so it is hard to rely on the promises, so this results in millions of socialist consumers angry at our "broken" government. Secondly when the government does deliver on a plan like this we move one step closer to a true socialist economy. If we all were 100% accountable for the situations we have created for ourselves we would not look to the government to "bail us out" we would be determined to keep our own power and create a solution for ourselves! I AM a true Patriot and Capitalist, and have struggled in this meltdown as much or more than anyone, but I continue to love my country, my democratic government, and the abundant opportunities that are mine to be created and enjoyed!
I am glad to see a post calling for this topic to be explored. It is clear that Congress is intent on providing some help at the individual level to prevent further decline and financial catastrophe at the aggregate level. The stimulus ACT, 3221, etc, are all evidence of this effort. But the H4H program has come with some heavy criticism. A real estate attorney introduces some of the problems, notably when 2nd position liens are a factor: http://dirtlaw.typepad.com/blog/2008/08/more-new-foreclosure-legislation.html And this article captures the response from the lending industry when 'encouraged' by Congress to participate: http://money.cnn.com/2008/09/17/real_estate/Hope_for_homeowners_hearing/index.htm?postversion=2008091716 The banks seem more inclined to perform note modifications, and I have heard of many more cases involving reduced rates to 1, 2, or 3% than I have about principle being reduced. Banks simply do not want to take the loss of a written-down principle, and hope the very low rates are incentive enough to keep borrowers in their homes for the long-haul. I have clients who are looking at both options, but like the rest of us, are confused about which one makes more sense. And both options may have different appeals to different situations. In one case, I have a borrower who doesn't expect to keep the home for long enough to get back to even. The idea of a principle reduction is much more attractive to him than a low rate, as he would have room to to sell. For another who wants to keep the house, a 3% note provides enough long-term savings to keep him there until the price recovers. And he is likely to eventually sell at a profit, making the 50% profit-sharing unattractive. So - it will be interesting to see if the H4H program gains any real traction, and I think we can all help one another by sharing our stories and experiences as the fog clears a little in this sector.
Do I think Congress finally got it right? You betcha! However, the operative word in "finally." I belive resistance from the lending community will cause them to make revisions to the current bill titled H.R. 3221, or otherwise known as The American Housing Rescue and Foreclosure Prevention Act. Simply put, this bill expands the current FHA program so that many borrowers imminently in danger of losing their home can refinance into lower-cost government-insured mortgages that will be more affordable to repay. This is not a bailout as some say. Lenders and mortgage investors will absorb significant losses by reducing the loan principal on troubled loans (primary residences only). But they are taking major losses now with the glut of foreclosures. (It now costs a lender approximately $50,000.00 to foreclose on a property, after paying legal fees, "cash for keys," refurbishing costs, carrying costs, and broker comissions.) In exchange for this reduction and an FHA guarantee on the mortgage, borrowers will then be required to share any profit from the resale of a refinanced home with the government. The FHA insured loan can be up to 90% of the present value of the home but the loan limits are capped at $625,550. Where you will see revisions to this bill come in to play will be in forcing lenders to waive their pre-payment penalties (watch as these fees become unenforceable in my opinion)and regulating the refiancable interest rate a lender may charge. Do I think that they really came up with a plan to attack this ongoing housing crisis? Well, you might say they created the framework, or at least the groundwork. Will it help everyone? Of course not, and nor was it designed to. Will there be revisions to this bill? Yes, and that will be surrounding it's implementation and execution. Let's congratulate the congress for acting and taking a step in the right direction for once. ·
While I am impressed that Congress has demonstrated the capacity to make a decision in "rapid fire" fashion, I remain skeptical that this bill will be positively impacting the lives of a significant number of homeowners; Within the lending industry, we are all aware of the "added layers" of criteria lenders can (and will) add to implement a particular solution, so regardless of the intent of the bill to "keep it simple", there will be a considerable effort on the part of the institutions and investors holding this paper to squeeze the greatest quantity of blood from the proverbial turnips they possibly can before acquiescing to a 90% recast/write down. Whenever I witness the passage of a proposal such as this, I wonder "who is -in fact- the ultimate beneficiary?" and I am still wondering. Regardless of this, those of us remaining in the industry can take heart: this is a job security blanket, as the rules of this new board game are such that few consumers will be able to navigate it without the aid of a hands-on professional. Translaters and advocators will be in high demand for many months to come.Sorry, Di-tech.
WELL. It was a tough call. It came down to JohnGlynn & Laura... And the WINNER is.... LAURA!!! Yeah! CONGRATS Laura. We hope to see all of you back soon commenting. We enjoy your feedback. Thanks, John
Laura I totally agree with you comment about who is the “real beneficiary” here. I am so darn skeptical about having the government as my business partner in anything!! Period!! Besides things can change so fax with all of the tax rules and such who can keep up? You can’t even really plan around their rules, for example…If Obama gets elected and they change the gains tax structure or remove the tax free money from selling your primary residence that is really going to shake up everyone in America’s retirement plan. I still don’t understand why you don’t hear Congress talking more about forcing mortgage companies to modify these crappy loans. So what if they have to take a lower return on their portfolio and can’t continue to use false accounting practices. I think the whole nation would feel much better about loans and real estate in general if they knew that they were secure. If I had a choice to lose 50% of my principle investment or take a lower return and keep all of my principle, I would pick a lower return every time. If the government wants to regulate something why don’t they make being a loan officer a more difficult job to get? If I have $500 I want to invest in my retirement I pretty much have to go to a financial advisor with credentials, but I can so easily get into the largest debt on my biggest asset and get advice with someone who doesn’t even have a GPA! For that I say SHAME ON THE CONSUMER!!!