We learned yesterday that President Obama announced a plan to help homeowners avoid foreclosure which involves two different initiatives.
1) A refinance program that will help for homeowners who have played by the rules (made their payments on time) but have been unable to refinance because they owe more on their home then it is worth.
2) A loan modification program that is designed to keep troubled homeowners out of foreclosure and to keep “at risk” borrowers from defaulting in the first place.
Although lenders are not required to participate the plan is designed to entice the lenders and mortgage services by offering new incentives.
Since the loan-modification plan does not mandate lenders to take part in either program it will require banks and financial institutions to follow the government’s protocols who have received capital under the government’s $700-billion financial bailout program known as TARP. Other lenders can use their own discretion when offering these types of loans.
To be eligible:
1 -The home must be a borrowers primary residence
2 -The loan must be a conforming loan (at or below $417,000) and guaranteed by Fannie Mae or Freddie Mac.
3 -Borrower does not need to be behind in payments (in fact a mortgage servicer will be paid a higher incentive fee if a modification is done before a borrower falls behind).
What the Plan does not do:
1) The plan will not require participating lenders to reduce the principal on a borrowers mortgage because the home has lost value. The modification will act to lower monthly payments, (by lowering rate or extending the term) but the homeowner’s outstanding debt will probably not change.
2) The plan will not help borrowers with “jumbo” mortgages—any loan above $417,000.
3) The plan does not include second mortgages, such as a home equity line of credit, any modification or refinancing would apply only to the first mortgages.
4) It is not targeted to help non-occupied borrowers who have “investment” properties as it only applies to primary residence.
5) The plan does not mandate lenders to participate.
It has been reported that the number of borrowers who are in “trouble” on their mortgages has risen from 10 million to 15 million, yet the plan may only help 7 to 9 million. As you can imagine there are some good things here yet officials acknowledge that the plan will not help all borrowers or prevent all foreclosures. The policies of the plan are to be released on March 4th 2009.
Lessons of the Hot Dog Vendor
During these days of continually being bombarded by doom and gloom about the economy, it might be a good time to re-visit the story of the Hot Dog Vendor...
A Man lived by the side of the road...and sold hot dogs.
He was hard of hearing, so he had no radio. He had trouble with his eyes, so he had no newspaper. But he sold good hot dogs.
He put up a sign on the highway, telling how good they were. He stood by the side of the road and cried, "Buy a hot dog, mister!" And People bought.
He increased his meat and bun order, and he bought a bigger stove to take care of his trade. He got his son home from college to help him. But then something happened. His son said, "Father, haven't you been listening to the radio? There's a big Depression on. The international situation is terrible, and the domestic situation is even worse."
Whereupon the father thought, "Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know." So, the father cut down on the bun order, took down his advertising sign, and no longer bothered to stand on the highway to sell hot dogs.
His hot dog sales fell almost overnight. "You were right, son", the father said to the boy. "We are certainly in the middle of a Great Depression."
Moral of the story ~
Stop reading the newspaper, turn off the news on the radio and television, and serve your clients!
A Man lived by the side of the road...and sold hot dogs.
He was hard of hearing, so he had no radio. He had trouble with his eyes, so he had no newspaper. But he sold good hot dogs.
He put up a sign on the highway, telling how good they were. He stood by the side of the road and cried, "Buy a hot dog, mister!" And People bought.
He increased his meat and bun order, and he bought a bigger stove to take care of his trade. He got his son home from college to help him. But then something happened. His son said, "Father, haven't you been listening to the radio? There's a big Depression on. The international situation is terrible, and the domestic situation is even worse."
Whereupon the father thought, "Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know." So, the father cut down on the bun order, took down his advertising sign, and no longer bothered to stand on the highway to sell hot dogs.
His hot dog sales fell almost overnight. "You were right, son", the father said to the boy. "We are certainly in the middle of a Great Depression."
Moral of the story ~
Stop reading the newspaper, turn off the news on the radio and television, and serve your clients!
How the Stimulus will effect housing
Just signed and sealed...a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II. The package signed by President Obama increases the home buyer tax credit to $8,000, drops the repayment feature, reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans, and provides $2 billion in additional funding for states and localities to be used to purchase, manage, repair and resell foreclosed and abandoned properties.
Homebuyer Tax Credit. The bill provides for a $8,000 tax credit that would be available to first-time home buyers (those who haven't owned in at least three years) for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment for buyers who hold onto their property for at least three years. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
The three-year minimum holding period is a safeguard against speculators' use of the credit. The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or local financial assistance that comes from the proceeds of tax-exempt mortgage revenue bonds.
The start date for the first time homebuyer credit is January 1, 2009 through and before December 1, 2009.
FHA and conforming loan limits. Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development.
Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion.
Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis. Transportation infrastructure. Up to $29 billion for highway construction projects, $8 billion for rail projects.
Rural housing development. Increased funding for the Rural Housing Service direct and guaranteed loan programs.
Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, increases in the residential tax credit through 2010 for certain energy efficient upgrades and $5 billion to weatherize low-income homes. Another thing to keep an eye on in the coming weeks is President Obama's plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That's because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
Homebuyer Tax Credit. The bill provides for a $8,000 tax credit that would be available to first-time home buyers (those who haven't owned in at least three years) for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment for buyers who hold onto their property for at least three years. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
The three-year minimum holding period is a safeguard against speculators' use of the credit. The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or local financial assistance that comes from the proceeds of tax-exempt mortgage revenue bonds.
The start date for the first time homebuyer credit is January 1, 2009 through and before December 1, 2009.
FHA and conforming loan limits. Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development.
Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion.
Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis. Transportation infrastructure. Up to $29 billion for highway construction projects, $8 billion for rail projects.
Rural housing development. Increased funding for the Rural Housing Service direct and guaranteed loan programs.
Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, increases in the residential tax credit through 2010 for certain energy efficient upgrades and $5 billion to weatherize low-income homes. Another thing to keep an eye on in the coming weeks is President Obama's plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That's because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
A Recession is a Terrible Thing to Waste
We are in a recession… there…now, let’s all take a breath and move on.
What we are not in is a depression. I am not intending to be flippant or insensitive to the plight of many in horrendous situations but consider this: history will show that the times we are experiencing most certainly are challenging, albeit devastating for some, but pale in comparison to what we have endured as a nation in the past.
As we move forward in 2009, it is important for all to take stock and gather some perspective. Depending on who you listen to, the experts say we may be half-way through this present recession. Economic historians observe, that after every valley (recession) we always see a recovery climb following
Here are three factors that have or will come into play:
Liquidity: Contrary to many reports, borrowers that are responsible are able to secure financing. In fact, rates are historically low right now.
Employment: This is obviously a major concern for potential borrowers. Most believe that unemployment will reach 8% to 9% in 2009. My home province of Quebec that the unemployment rate reached 14% in the early 1990s. Thankfully, the job market did not remain in that territory for an extended period. Keeping things in prospective – the unemployment rate during the great depression was 25%. Consumer confidence may take some time to return.
Affordability: The peak of 2005’s market pushed affordability out of reach of many. The correction we’ve seen has brought much needed affordability back into the equation.
What you need to know… and why demand IS coming!
What we are not in is a depression. I am not intending to be flippant or insensitive to the plight of many in horrendous situations but consider this: history will show that the times we are experiencing most certainly are challenging, albeit devastating for some, but pale in comparison to what we have endured as a nation in the past.
As we move forward in 2009, it is important for all to take stock and gather some perspective. Depending on who you listen to, the experts say we may be half-way through this present recession. Economic historians observe, that after every valley (recession) we always see a recovery climb following
Here are three factors that have or will come into play:
Liquidity: Contrary to many reports, borrowers that are responsible are able to secure financing. In fact, rates are historically low right now.
Employment: This is obviously a major concern for potential borrowers. Most believe that unemployment will reach 8% to 9% in 2009. My home province of Quebec that the unemployment rate reached 14% in the early 1990s. Thankfully, the job market did not remain in that territory for an extended period. Keeping things in prospective – the unemployment rate during the great depression was 25%. Consumer confidence may take some time to return.
Affordability: The peak of 2005’s market pushed affordability out of reach of many. The correction we’ve seen has brought much needed affordability back into the equation.
What you need to know… and why demand IS coming!
- Due to the recent financial collapse, developers are not able to access the monies required to build multi-home or condo developments. The impact of situation will result in a building shortage within the next three years.
- Even though the mortgage industry has tighten and some people will not qualify for a loan, the overall health of the housing market will be improved due to the stringent regulations.
- People are living longer, for most, that’s a good thing! As Americans live longer lives their housing needs will affect the supply.
- Prior to August 2007 The availability of “free” purchase money and minimum standards for investors to jump in was out of control. The market is in the process of correcting itself and both the unqualified buyer and the amateur investors will be few and far between. Financing is available and for qualified buyers.
As I look at all of these indicators, I believe that within the next three years we will have a housing shortage! For many the current real estate market is a chance for many to take advantage of the possibilities this moment in time affords.
Subscribe to:
Posts (Atom)
Posts
