Help on the way for unemployed homeowners

With talks still ongoing this weekend about the debt ceiling and if lawmakers will reach an agreement, there is good news to come from Washington, at least for those unemployed homeowners.

The Obama administration has announced that they will extend unemployed homeowners a few months’ forbearance on paying their mortgages to 12 months.  This is another action by Washington to put a halt to foreclosures and keep people in their homes.  Obama has been quoted as saying the housing market has been a terrible issue to solve and that “The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected, and so that’s continued to be a big drag on the economy.”

He also mentioned that they will be communicating with banks in the hopes that they will work more efficiently to help modify loans for those in need.  And in order to qualify for the 12 months’ relief, homeowners must be in the process of looking for a job.  And for those that can afford to pay a portion of the loan, they must do that, as well.  You wouldn’t be mortgage-free the entire time.

Comments to this USA article suggest that programs like I’ve described just drag this crisis out longer and makes it tougher for those not struggling to make money on their home.   What are your thoughts on this?  By offering relief to some, is it negatively impacting others?  Will this keep the housing market at an all-time low for too long?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.

Government help for those underwater on 2nd mortgage

So now homeowners that are having trouble paying their second mortgage can be eligible for possible modification.  I was a little unsure of this initially, thinking about all the people who are struggling with paying their first mortgage.  I was wondering, “Why are we worried about those with two?”  But it makes sense.  Homeowners who are trying to get modifications on their first mortgages that have two mortgages are the ones having the most trouble.  Many lenders won’t do modifications or take losses on the loans of their first mortgage unless the second lien-holder does, too.  And because second mortgages usually are for a much smaller loan amount, homeowners are able to keep up with those payments. And that’s where this plan coms into play. 

Here’s what the Obama administration is introducing.  It’s called 2MP.  Currently it’s only available to those whose second loan originated on or before January 1, 2009.  Anything originated after that is not currently eligible.  And the first mortgage needs to be modified under the Federal program.  If the lender or lien-holder on the second mortgage is also participating in that program, they have to offer to modify the second mortgage.  They’re required to defer the payment of the same proportion of the principal that was deferred on the first loan.

Right now the program is expected to help about 1.5 million homeowners.  So far Bank of America, Wells Fargo, Citigroup, and JP Morgan Chase participate.  Bank of America recently started sending letters to home equity customers introducing this possible modification.

My concern is that it’s still too difficult to work out.  I understand and appreciate what the government is trying to do.  The banks are taking their sweet time approving these modifications, making it extremely difficult for customers to get them done on their own.  With the amount of time it takes to connect to someone, fill out paperwork, and hear back, it’s almost like a part-time job.  I’ve had clients say they’ve had to submit paperwork multiple times to their lender and still haven’t heard back.  It’s worth it to lower payments if you have the time and perseverance to wait.  It also may be worth it to you to talk to a company that offers to assist with loan modifications on your behalf.

More information on this new program can be found here. And I can be found on my Web site.

Obama’s new plan to prevent foreclosures

As I had written about previously, President Obama is trying to do whatever he can to keep homeowners in their homes.  He’s unveiled a new plan to prevent and lower the amount of foreclosures across the country.  The new plan requires lenders to reduce the mortgage payments for their unemployed borrowers for three to six months.  For those having trouble paying but aren’t unemployed, he’s trying to encourage the same lenders to reduce principal payments if you pay your loan on time each month and are current and stay current.

By beginning this plan, if it could prevent a whole bunch of foreclosures at once, it could delay the dramatic decrease in prices and help to stabilize the housing market a little bit.  This way the lower prices will hit over time.  Some in opposition to this plan use that to say this will just delay the inevitable, that these homes will still go into foreclosure, it’ll just take longer.

But it is a benefit to those who lose their job and don’t want to lose their home.  To qualify, you need to live in the home, have a mortgage of less than $729,750, and receive unemployment benefits.  They’ll have to spend no more than 31% of their monthly income on their mortgage.  This plan will be available over the coming months.

What if you owe more than what your house is worth?  For many, this is when they list the house as a short sale.  Meaning, the lender will agree to sell the house for less than is currently owed on the mortgage.  Obama is trying to help people in this situation keep their homes.  It’s possible they can refinance with FHA-backed loans.

In order to qualify for one of these, you need to have a mortgage payment of $729,750 or less, show that you’re in financial trouble, and spend at least 31% of your pretax income on your monthly mortgage payment.  Lenders then can reduce the mortgage payment by about 10%.  You can’t be in default at all.  You must be current on all of your payments to qualify.   However, this plan is a completely voluntary one.  The lenders do not have to agree to do this. 

Do you think that this is a good idea or that it will just delay the inevitable?  I’d love to hear your thoughts.  Please leave me a comment below or visit me online.  More information on the program can be found here.

Energy conscious homeowners get rewarded

You may all remember the famous Cash for Clunkers program offered by the government last year.  Well, Obama wants to do for homeowners what he did for car owners and that is offer a similar program called Cash for Caulkers.  He’s proposing a bill where homeowners can earn tax credits and receive money back for purchasing energy-efficient appliances.  Up to $12,000 per home!

Congress is currently working on drafting a bill that would be twofold.  First, homeowners would receive reimbursement for energy-efficient equipment and insulation.  Second, the government would reward small businesses and companies.

Included would be appliances such as refrigerators, washing machines, dryers, and even air conditioning, heaters, windows, and insulation.  They’re currently looking at reimbursing homeowners 50% of the purchase price PLUS installation.  So without an income cap, you could spend up to $24,000 to get $12,000 back.  Congress is still working out the kinks as to how the money would get returned.  It’s possible that it would come in the form of a tax credit (there is a current tax credit for energy-efficient appliances already, but not this much) or they might set it up where you can fill out information for a rebate and receive a check.  The government is looking at a cost of about $10 billion to fund this.

They’re trying to model it similar to New York State’s energy efficiency program.  How that program works is homeowner’s contact a contractor who is licensed to perform an energy audit from the State’s Web site of a toll free number.  The contractor arrives to determine how much energy is wasted in that specific home.  It costs the homeowner several hundred dollars.  When the contractor generates a list of what could be replaced, the cost, and how much energy could be saved, the homeowner chooses what he wants done and negotiates a price.  The contractor gets paid directly, submits paperwork to the state, and the homeowner receives about 10% back in the form of a check.

So do you think it is another program that could invite fraud?  Will homeowners take advantage of it?  Is the government wasting $10 billion that could be spent elsewhere?  I’d love to hear your thoughts.  Please leave me a comment or visit me online.

More information on the program can be found here, here, and here.