“The Obama administration is doing the right thing here,” said Atlanta Realtor Zac Pasmanick. “I’m a firm believer in anything that stops or slows down foreclosures will get us into a recovery faster. Foreclosures are devastating the market.” Michelle Jones, vice president of counseling at the Consumer Credit Counseling Service of Atlanta, said the financial incentives to mortgage servicers and homeowners should curb foreclosures.
“This plan definitely has the potential to help a lot of people,” Jones said. “I believe servicers are going to participate.”
Houston-based Litton Loan Servicing, which operates a center in McDonough and services loans in Georgia, said in a statement it “is looking forward to working with the federal government on this plan.”
In Atlanta, home values have fallen to 2002 levels, the Standard & Poor’s Case-Shiller Index shows. That’s among the worst showings in the nation.
As a result, many local homeowners who bought when the market was strong are now “underwater,” stuck with mortgages for more than the value of their houses. Some are simply abandoning those homes. The number of properties scheduled for courthouse foreclosure auctions in the Atlanta region climbed almost 77 percent from 2006 to 2008, according to Equity Depot, which tracks foreclosures in 13 counties.
The Obama plan is intended to help make such homeowners by making them eligible for either refinancing or loan modifications that would lower their monthly payments.
Nationally, critics of the plan said tens of thousands of borrowers in the most battered housing markets won’t qualify because their homes have lost too much value.
The $75 billion program, as detailed Wednesday, is limited to borrowers who owe up to 5 percent more than their home’s current value. That doesn’t help homeowners in states “that are at the epicenter of the housing debacle,” such as California, Florida, Nevada and Arizona, said Greg McBride, a senior financial analyst at Bankrate.com.
For a homeowner who borrowed $380,000 on a house now worth $270,000, “I just don’t know what you do with that,” said Jared Martin, a mortgage broker in Bethesda, Md.
Government officials acknowledged that the initiatives are only a partial fix. “This is not going to save every person’s home,” said Robert Gibbs, the White House press secretary. It “is not intended to … augment somebody’s loan for a house that they couldn’t afford under any economic situation, good or bad.”
But the metro Atlanta market’s problems, while severe, haven’t been accompanied by as steep a drop in prices as in many other metro areas.
Real-estate Web site Zillow.com, which provides a national reading on home sales and prices, says 42 percent of homeowners in the 26-county Atlanta metro area are eligible for loan modifications described in the new plan, compared to 25 percent nationally.
The program has two parts: one to work with lenders to modify the loan terms for up to 4 million homeowners, the second to refinance up to 5 million homeowners into more affordable fixed-rate loans.
Under the modification part of the plan, which runs through 2012, a lender or servicer would agree to lower a mortgage payment to 38 percent of monthly income. The government then would buy down the loan further, to 31 percent.
Borrowers are only allowed to have their loans modified once, and the program applies for loans made on Jan. 1, 2009, or earlier.
Mortgages for single-family properties that are worth more than $729,750 are excluded.
Lenders could reduce a borrower’s interest rate to as low as 2 percent for five years. Rates would then rise to about 5 percent until the mortgage is repaid.
The refinance program is only offered to homeowners with loans held by Fannie Mae or Freddie Mac. The two mortgage finance companies own or guarantee almost 31 million home loans, more than half of all U.S home mortgages, and say they are lowering some fees to allow more borrowers to qualify.
It remains to be seen how many lenders sign up for the program, which is voluntary.
“I’ve just seen so many of the programs not work,” said Pava Leyrer, president of Heritage National Mortgage in Randville, Mich. “It gets borrowers’ hopes up. They call and call for these programs and we can’t get anybody to do them.”
1 comment:
This article is very timely and relevant. As I quote Cameron Muir, an economist, "Home sales are unlikely to fall much further..That being said we expect home sales not to decline much further."
But it's never too late, with the right set up business plan, it will lead to valuable outcome. This is what most counselors would give as an advise.
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