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25 Feb 09 Obama Mortgage Rescue Plan Rolls Out as Median Home Price Drop Below $300,000

While most real estate evaluators would agree that Obama’s mortgage rescue plan is likely to slow foreclosures for many homeowners, some financing experts question how much it can help in a high-cost regions such as San Diego where home values have fallen so sharply. For example, the rescue plan offers much-needed refinancing to borrowers who owe more than 80 % of the value of their homes. But homeowners would be ineligible for mortgage refinancing to a lower, more affordable rate if their first loan exceeds 105 % of their home’s current market value.


Home refinancing would be limited to loans guaranteed by Freddie Mac and Fannie Mae, the government-controlled secondary mortgage agencies.  “How is 105 % loan-to-value going to help people who are upside down by 20% to 50 %?” said Dave McDonald, president of the San Diego chapter of the California Association of Mortgage Brokers. 


Less critical was Dustin Hobbs, spokesman for the California Mortgage Bankers Association, who lauded Obama for coming up with a flexible program that could yield some positive results. Much will depend on the implementation, he said, especially the part of the proposal that aims to provide mortgage modifications for borrowers in danger of default or foreclosure. Obama is proposing to have the Treasury Department partner with financial institutions to reduce mortgage payments so that borrowers pay no more than 31% of their income.  Under the new mortgage rescue plan, mortgage rates could be reduced to as little as 2%; they now stand at about 5% for thirty-year, fixed rate home mortgages. “I would certainly hope that when they’re working on the implementation details, they’ll take into consideration that California is in a unique situation with so many borrowers in high-cost regions who are 15% or more underwater,” Hobbs said. 


FHA has attempted to stem the foreclosure crisis with their Hope for Homeowners program that was designed to reward lenders who write-down mortgages to 90% for borrowers with negative home equity and delinquent mortgage payments.  CFB mortgage advisor, Jeff Moran said, “Hope for Homeowners looks great on paper, but the FHA mortgage lenders have not wanted to touch them.”


Nonprofit counseling agencies approved by the federal housing department to work with financially struggling homeowners said they expect the plan will be able to avert foreclosures but caution that there are still those who may have to walk away from their homes. “Some individuals, though, may find there may not be a solution or option to prevent foreclosure. But in renegotiating with their mortgage lender or credit counselor, they can prepare for a new location for their family.”


Part of the strength of the Obama plan is creating clear loan modification standards, said Mark Goldman, a real estate instructor at San Diego State University. “So many of the programs that were supposed to help last year have really done nothing,” he said. “Now, they’re really putting pressure on the lenders, saying you cannot keep the rapid pace of home foreclosures and clearly it’s bad for everyone involved when the foreclosure news continues to worsen.”  The proliferation of foreclosures was reflected in DataQuick’s report, which showed that 1,232 of January’s 2,240 re-sales were foreclosure properties, compared with 340 of 1,038 re-sales in January 2008.


As President Barack Obama unveiled his plan to stem the tide of foreclosures, new figures showed distressed properties continuing to drag down San Diego’s housing market. MDA DataQuick reported yesterday that the county’s median home price fell below $300,000 last month for the first time in seven years depressed by reduced sales prices of foreclosed homes.


The January median of $280,000 was down 6.7% from December, the largest single month percentage decrease of the current slump. While home sales volume was up 34.7% from a year earlier, a record 55% of re-sales were homes that had gone through foreclosure in 2008. “I think for a lot of buyers in inland areas, this has become a bargain bonanza,” DataQuick analyst Andrew LePage said.


The Census Bureau and U.S. Department of Housing and Urban Development reported separately that construction of new homes and apartments nationwide dropped 16.8% last month to a seasonally adjusted annual rate of 466,000 units, the slowest pace for a survey that dates back to 1959, two years before Obama was born.

Meanwhile, DataQuick’s LePage said some neighborhoods – Lemon Grove, Oceanside and South Bay as a whole turned in record sales counts for any January since the company began tracking San Diego in 1988.  “All indications are that prices will continue to erode, but not everyone is waiting for the ultimate price bottom,” LePage said.  Mortgage interest rates remain incredibly low but the credit crunch continues with mortgage lenders continuing to offer tighter guidelines that prevent the average consumer from purchasing a new home or refinancing an existing property in an effort to avoid foreclosure.


As of January, San Diego County’s overall median had dropped 45.9% from the November 2005 peak of $517,500. The resale house median was down 44.3% from its $574,000 peak to $320,000, and resale condos were off 51.3% from their $400,000 peak to $195,000.  Among signs of an eventual recovery, however, is a continuing drop in the number of homes for sale.


According to the San Diego Association of Realtors, active listings yesterday totaled 15,108, down 18.1% from a year ago.   “There’s very little we can say positive about the economy or job market,” Dennehy said, “but we can certainly say this is an encouraging sign that qualified buyers are responding to the bargains available to the market and volumes are improving from last year’s levels.”  Read complete  UNION-TRIBUNE CA Housing Article article written by Roger Showley and Lori Weisberg



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17 Dec 08 Home Lending Restoration? Fed Cuts Interest Rates

According to Mortgage Rate News, the Federal Reserve rate cut inspired lenders nationwide to lower mortgage rates to 5% for 30-year fixed rates for conventional home loans.  The federal government made additional promises to promise to continue to buy bad credit mortgages in an effort to revive the struggling housing markets. 

Brokers Network executive, Steve Park said, “The government commitment to protect struggling borrowers with new FHA loan program opportunities like, Hope for Homeowners should help restore consumer confidence and lows.  The Feds confirmed more relief with the promise to buy bad credit mortgages in an effort to revive the struggling housing markets.

According to Kelly Media Group president, Jason Cardiff, “The fact the lenders are willing to provide loan modifications to homeowners that do not qualify for traditional or FHA refinancing is simply remarkable.”  Cardiff continued, “The interest rate cut by the Fed clearly signals a monumental step by the U.S. to restore trust in our financial systems that should spur more market recovery globally.”  Read the complet article > Mortgage Lending Systems Begin to Reform with Historic Rate Cut by the Fed .


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27 Nov 08 Hope for Homeowners with FHA Refinancing

FHA announced more revisions for their highly touted refinance product, Hope for Homeowners. This FHA loan program encourages distressed homeowners to keep their house, while also providing incentives to FHA mortgage lenders for renegotiating their mortgage balance with a principal reduction down to “fair market value.”

QUESTION: What is the new Hope for Homeowners program?

ANSWER:  A new FHA refinance program with an additional $300 billion in FHA mortgage insurance authority. Under the program, borrowers unable to afford their present mortgage loans and who meet other criteria, can refinance into an FHA mortgage loan. Existing mortgage lenders who volunteer to participate agree to provide loan modifications and accept short refinancing by writing down principal to 90% of the appraised value of the property. These FHA mortgage refinance loans will be eligible for securitization with Ginnie Mae. The program is voluntary on the part of lien holders.

QUESTION: What are the outlines of the new “H for H” program?

ANSWER:  These are some of the basics according to HERA:

Reps and Warrants: Insurance benefits will not be paid if a mortgage violates the representations and warranties the program’s governing body (Board) will require or if a borrower of the new loan fails to make the first payment on the FHA mortgage.

o    Eligibility: Mortgages eligible for refinance must have been originated on or before January 1, 2008.

o    Borrowers must have housing debt-to-income ratios greater than 31 % (or a higher ratio set by the Board) as of March 1, 2008.

o    Borrowers must certify they did not intentionally default on the original mortgage or other debts or furnish false information (five year jail time for false statements) to obtain the FHA loan.

o    Borrowers are not eligible if convicted of fraud within the last 10 years.

o    Borrowers’ income must be fully documented through their two most recent tax returns and other standards established by the program’s governing Board or HUD.

o    Eligible borrowers may only have one primary residence.

o    New Loan Requirements: 30-year fixed rate loan not exceeding 90 % of the property’s appraised value.

o    Principal amount cannot exceed 132 % of the 2007 Freddie Mac loan limits (i.e., $550,440).

o    FHA plans to establish fair compensation regarding origination fees.

o    Prohibits second mortgages for five years.

Data sources: Mortgage Bankers Association, FHA Mortgage Lending Blog and FHA Home Loan Refinancing


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