About Government Refinance and Home Purchase Programs

As of Tuesday the Obama administration had released very few details on how it plans to specifically help struggling homeowners. Odds are pretty good that the efforts will be directed to prompting banks to modify more loans but there is a push to revamp and revive the failed Hope For Homeowners programs as well. Here are some quotes from a recent AP article on the subject:

To those on the front lines of the housing crisis, the Obama administration’s pledge to spend $50 billion to combat foreclosures was a welcome change in the government’s approach. But the actual plan won’t be unveiled for at least a week and might not be enough to prevent the housing market’s troubles from mushrooming further.

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“The question is: Can we work to design a system where the banks recognize it’s in their interest to avoid foreclosure?” Obama said Tuesday in Fort Myers, Fla., which has been devastated by foreclosures and sinking home prices.

Obama said he would announce his housing strategy in the coming weeks. Meanwhile, home prices are not expected to hit bottom until year-end at the earliest.

A report published this month by Moody’s Economy.com projected that home prices will plummet by at least 50 percent in more than 30 metro areas in California, Florida and Nevada by the time the housing bust ends. More than 60 percent of all metro areas nationally are expected to see prices fall by 10 percent or more, the study found.

While Treasury Secretary Timothy Geithner’s revised plan to stabilize the financial system offered few details about housing on Tuesday, consumer advocates said they were still confident that the forthcoming proposal would offer far-reaching help to borrowers.

“It’s a tough problem,” said Michael Calhoun, president of the Durham N.C.-based Center for Responsible Lending. “They want to make sure to get it right.”

Less patient was Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. He issued a statement criticizing the administration for taking too long to put together a housing plan.

While more and more banks are stepping up to the plate and willingly modifying loans for homeowners who have no equity left, a lot of banks are still rejecting pleas from homeowners who are in trouble but not yet late in their mortgages. One trend to look for in 2009 is for banks to be more and more willing to modify loans even before the situation gets dire. In a recent AP story, new Treasury Secretary Tim Geitner is quoted as saying that banks that receive government help will be required to modify loans to help struggling homeowners. Of course the definition of “struggling” remains fuzzy so we will have to wait and see if the banks will help people who have not fallen behind or not. Here are some quotes from that article:

Treasury Secretary Timothy Geithner on Saturday told lawmakers that financial institutions that receive government assistance will have to make loan modifications and meet other new standards, according to Democratic sources.

Geithner, during a briefing with House of Representatives’ Democrats, was asked about a New York Times report that the Obama administration would not require banks to increase their lending as part of revamped government effort to restore stability to the financial industry.

According to the sources, who asked not to be identified, Geithner said: “We are not doing what they wrote … Institutions that get assistance will have to participate in loan modifications and meet other standards that we set.”

“Public assistance is a privilege, not a right,” the sources said Geithner told lawmakers.

Have you seen zillow.com yet? If not it is a good place to go to get a rough feel for the current value of your home.

Now don’t overestimate this tool. It can at times be pretty far off in its estimates. But it does seem to end up in the right ballpark more often than not. It basically just uses public data on sales of homes and sales prices and then drops that into some proprietary formula to estimate home values. If you live out in the country it may not be able to locate your home but the site has pretty good coverage within most cities. Also, be sure to check the square footage it is basing the estimate on; if you have made additions to your home that Zillow wouldn’t know about that would increase your value.

The value of your home is a vitally important question when it comes to a refinance. As we noted above, if you are “upside down” on your home, or, owe more than it is currently worth, it reduces your refinance options quite a bit (unless you already have an FHA or VA loan).

As we have noted in the past, values on homes continue to drop so if you have equity left still and are in an adjustable rate mortgage (ARM) or a loan with a 6.5% or higher rate now you can contact us in the sidebar to see about refinancing to a 30-year fixed rate loan while rates remain low.

Here is a link to an interesting article over at the New York Times. There are plans that have arisen from both sides of the aisle in Washington on how to help struggling homeowners. Here are a few quotes:

…liberal and conservative economists and lawmakers are pushing to redirect the economic stimulus bill to what they say is the core problem: the housing market.

Senate Republicans are seeking new tax breaks and up to $300 billion in mortgage subsidies to attract homebuyers. Democrats want to spend at least $50 billion on federal programs aimed at reducing mortgage foreclosures.

The Obama administration is hammering out its own plan to spend $50 billion to $100 billion to prevent home foreclosures. And later this month, Democrats hope to pass a measure that would give bankruptcy judges the power to reduce monthly mortgage payments for homeowners who are in default.

There is a growing consensus among lawmakers in both parties that the deepening collapse of the housing market is at the heart of the country’s acute economic downturn.

It will certainly be interesting to see how this plays out over the next several weeks. Stay tuned.

This weekend President Obama reiterated his pledge to help homeowners and to mitigate the mortgage crisis. But details are still lacking. See at Reuters article on the subject here. Here is a quote:

President Barack Obama’s pledge to help housing with a new financial plan spotlights the root cause of the deep U.S. recession and may earn public goodwill as he balances massive bank bailouts with help for homeowners.

Obama promised on Saturday to lower mortgage costs as part of a financial rescue effort he is unveiling soon to boost the battered economy

One thing the federal government has continued to do is buy mortgage backed securities which is keeping mortgage rates below 6%. That is a very good thing for homeowners looking to refinance. Contact us if you are interested in taking advantage of the unusually low rates for a refinance.