Is The New Federal Mortgage Relief Plan Enough To Help Ailing Economy?
The government announced yesterday, it’s latest effort to help troubled homeowners, but will it really help?
On the surface, it appears like a great plan to help people stay in their homes and to keep newly foreclosed homes from entering the market. Qualified borrowers would receive help in a few key ways. Their interest rate would be reduced so that the borrower would not pay any more than 38 percent of their gross income on housing expenses. Home loans can be extended up to 40 years and in some cases, some of the principle can be deferred, interest free.
To qualify, the homeowner will have to be at least 90 days late on their mortgage and would have to owe 90 percent or more of their home’s value. Investment property owners and those in bankruptcy would not be eligible.
Now for the catch. The plan is focused on loans owned or guaranteed by Fannie Mae and Freddie Mac. The problem with this is that although they are the dominant owners of mortgages in the US, their portfolio only represents 20 percent of delinquent loans.
The vast majority of troubled loans have been packaged into complex investments that are very difficult to unwind. Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won't likely be helped by the new plan.
Citigroup and JP Morgan are expanding their mortgage modification programs, which in reality, may be a good sign of things to come. Modification and forebearance from the private sector will be good for all involved and help to make a significant dent in current expanding foreclosure rates.
As for further government assistance to troubled homeowners, a much better plan needs to be implemented in my opinion. Current government actions have been woefully inadequate and almost laughable in contrast to the mortgage bailout for big business.
Home value is key to our entire current economic problems, and a true effort by the government to help ailing homeowners would give the housing market the jumpstart needed to begin economic recovery.
Too often, economic matters come down to dollars and cents, leaving common sense out of the equation. People are hurting and experiencing tremendous stress as they lose, or are about to lose their homes. We should expect a much better plan to help the common person than what has been received.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
On the surface, it appears like a great plan to help people stay in their homes and to keep newly foreclosed homes from entering the market. Qualified borrowers would receive help in a few key ways. Their interest rate would be reduced so that the borrower would not pay any more than 38 percent of their gross income on housing expenses. Home loans can be extended up to 40 years and in some cases, some of the principle can be deferred, interest free.
To qualify, the homeowner will have to be at least 90 days late on their mortgage and would have to owe 90 percent or more of their home’s value. Investment property owners and those in bankruptcy would not be eligible.
Now for the catch. The plan is focused on loans owned or guaranteed by Fannie Mae and Freddie Mac. The problem with this is that although they are the dominant owners of mortgages in the US, their portfolio only represents 20 percent of delinquent loans.
The vast majority of troubled loans have been packaged into complex investments that are very difficult to unwind. Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won't likely be helped by the new plan.
Citigroup and JP Morgan are expanding their mortgage modification programs, which in reality, may be a good sign of things to come. Modification and forebearance from the private sector will be good for all involved and help to make a significant dent in current expanding foreclosure rates.
As for further government assistance to troubled homeowners, a much better plan needs to be implemented in my opinion. Current government actions have been woefully inadequate and almost laughable in contrast to the mortgage bailout for big business.
Home value is key to our entire current economic problems, and a true effort by the government to help ailing homeowners would give the housing market the jumpstart needed to begin economic recovery.
Too often, economic matters come down to dollars and cents, leaving common sense out of the equation. People are hurting and experiencing tremendous stress as they lose, or are about to lose their homes. We should expect a much better plan to help the common person than what has been received.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Labels: business, economy, finance, money, mortgage rates, refinance, refinance rates
posted by Jim Bisnett at
11:35 AM
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