Show All » 2009 » February
Friday, February 20, 2009Homeowner Affordibility and Stability Plan
The proposed Homeowner Affordibility and Stability Plan will be as ineffective as the Hope for Homeowners program at stemming the tide of foreclosures and here is why.
1. The bill will only help the borrowers if the mortgage is on their primary residence.
a. Investors who purchased rental properties will still find the foreclosure / short sale is their best option in most cases.
2. Your loan amount must fall under Fannie Mae / Freddie Mac conforming loan limits.
a. The limit is $417,000 for the Twin Cities area.
3. You must be able to qualify for a 30 year fixed loan on your CURRENT income.
a. Good luck getting qualified if you got an Option ARM mortgage product and qualified using the minimum payment or interest-only payment. The majority of homeowners that are in trouble got there because their mortgage is adjusted and their payments have doubled or even tripled. Too bad there is about $500 billion in option ARM mortgages that will be adjusting from 2009-2012.
4. If you have lost your job or have had a decrease in your income there will be no practical help for you.
5. If you have a Fannie Mae or Freddie Mac loan you may qualify to refinance your home up to 105% of the property value.
a. Considering that values in the Twin Cities decreased 21% last year the limit of 105% financing will disqualify most homeowners.
b. If the 21% decrease in value wasn’t bad enough – consider that most borrowers with option ARM loans have been making the minimum payment. This payment usually didn’t even cover the entire amount of interest that was due each month. So, the unpaid interest has increased the loan amount, further increasing the difference between the amount owed and the property value.
c. If your loan is not with Fannie Mae or Freddie Mac it will not qualify.
6. Lenders have to agree to participate in the Homeowner Affordability and Stability Plan. Few lenders will likely agree to this. This is similar to the Hope For Homeowners Plan in which no major lenders participated.
a. Since it unlikely that the major lenders will agree to participate the Plan, it will help very few homeowners.
So to sum it up, borrowers who find themselves in trouble due to an adjusting option-ARM mortgage are very unlikely to find relief and will most likely find themselves facing a foreclosure.
A foreclosure does not need to be a traumatic event. In many cases, a foreclosure provides relief to borrowers and allows them to get them back on track to rebuilding their finances and credit.
By Mary Alice Short
Posted By: Ryan O'Neill @ 10:25:59 AM