Archive for the 'Foreclosure Help' Category

Two housing advocates in California have called on President Barack Obama’s administration to expand its foreclosure program in order to help more distressed homeowners. They said the requirement that borrowers’ loans must not be more than 5 percent higher than the value of their homes will exclude many homeowners in California.

Assemblyman Ted Lieu, author of the foreclosure moratorium legislation signed by Governor Arnold Schwarzenegger, said many borrowers in California owe more than the value of their homes by over five percent. This makes them ineligible for refinancing with Fannie Mae and Freddie Mac.

The other California advocate, Columbia Business School professor Christopher Mayer, has called for a refinancing of all Freddie Mac and Fannie Mae loans by increasing the loan-value ratio for loans. Researchers at the school’s real studies center said over 30 percent of borrowers in San Diego and San Bernardino counties owe more than the refinancing limit. In Los Angeles County, there are 29 percent of borrowers who do not qualify for refinancing because of the less-than-5-percent restriction.

In addition to Lieu and Mayer, the U.S. Congressional Oversight Panel has also claimed Obama’s plan does not do enough in helping homeowners facing foreclosures. The panel even called for help for second mortgages. But no one remembered tax foreclosures. Perhaps because tax foreclosures have been normal occurrences long before the foreclosure crisis, or perhaps because the number of tax foreclosures is not as overwhelming as the number of lender foreclosures.

But the current economic downturn has also adversely affected groups of homeowners who are facing tax foreclosures or have lost their properties to tax foreclosures. But these troubled homeowners are not receiving assistance similar to what borrowers facing lender foreclosures are getting.

Despite flaws in Obama’s foreclosure program, Lieu and Mayer applauded the administration for launching it. Lieu said Obama is making efforts to help troubled American homeowners, in contrast to the Bush administration which gave away billions of money to the banks without allocating anything to foreclosure-troubled Americans, some of whom could also be bothered by tax foreclosures.

Nevertheless, Lieu called on administration officials to increase the refinancing limit to 115 percent to help more homeowners in California save their homes from foreclosures.

Mayer also called for the provision of legal protection to mortgage servicers involved in loan modification. He said servicers are hesitant to help borrowers pursue loan modifications because of the threat of lawsuits from mortgage-backed security owners.

On February 18, 2009, President Barack Obama showed his administration’s commitment to boost the country’s economy and strengthen the housing market by announcing an economic stimulus package that includes a foreclosure prevention plan.

Everyone is hoping that Obama’s foreclosure prevention plan will be able to curtail the spread of foreclosure homes in the country. But as early as March of this year, doubts have surfaced whether Obama’s anti-foreclosure homes plan would succeed in California as nearly 30 percent of homeowners in the state owed more mortgages than the market value of their properties.

Most of these distressed homeowners owed mortgages the total amount of which exceeded the limit that the U.S. government established for a refinancing under the anti-foreclosure homes program.

The anti-foreclosure homes program allowed struggling homeowners who pay their monthly mortgages diligently to quality for new loans with affordable interest rates, for as high as 105 percent of the fair market value of their properties.

For example, a homeowner could qualify for a loan of $315,000 against his property worth $300,000.

However, most homeowners in California may not able to qualify for this anti-foreclosure homes program because they owe over 105 percent on their properties, according to Bankrate.com senior analyst Greg McBride.

In Inland Empire alone, homes have dropped their values more than 40 percent in 2008 and 50 percent of homeowners have mortgages that surpassed the market value of their properties.

Another feature of the anti-foreclosure homes plan is cash and fee incentives that the Obama Administration will give mortgage lenders to motivate them to modify loans of distressed homeowners to allow them to pay monthly mortgage payments of not more than 31 percent of their pre-tax incomes.

However, in order to avail of a loan modification, a distress homeowner should be financially capable of making payments which is hard to do if he had lost his job. And California is one of the states where unemployment rate is at its peak. The state’s 10.1 percent unemployment rate in January 2009 is way higher than the 7.6 percent rate nationwide.

Studies showed that unemployment is the main reason why prime borrowers fall behind their monthly payments, go into default and eventually become victims of the foreclosure crisis. And this bodes ill for Obama’s strategy to offer incentives to mortgage providers to modify loan terms to make them affordable to distressed Californian homeowners.

Advocates for homeowners across the country are reacting with anger to critics of efforts by the Obama administration to help homeowners troubled by lender foreclosures. Critics are accusing Obama and his advisers of using the hard-earned money of responsible citizens to abet the foolishness of borrowers defaulting on their mortgage loans. They assert that losers should be blamed for their losses and should face the consequences. Some say persons who have lost assets to tax foreclosures are not laying the consequences on other taxpayers.

One of these advocates is the Chicago Urban League’s Housing and Foreclosure Prevention unit, led by Margaret Wooten. The league has been campaigning for the use of part of the bailout funds to help homeowners troubled by foreclosures. Wooten says the foreclosure crisis has disproportionately battered African Americans. She claims more than 50 percent of borrowers who have lost their homes to foreclosures are African Americans. In majority of these cases, the homes are occupied, which means the foreclosures are forcing out families into the streets. This is contrast to tax foreclosures, which may or may not be affecting families. In some areas, tax foreclosures involve companies owning relatively large numbers of properties.

Moreover, Wooten has also expressed her disappointment at the reality that most brokers who enticed African Americans to take mortgage loans they can not afford or to use risky mortgages which are sure to fail are their fellow African Americans.

Homeowner advocates are especially angry at groups that support the bailout of large financial institutions, but oppose the rescue of ordinary Americans. Advocates do not accept the argument that bailing out the financial services industry is much more important and more crucial to the nation’s economy than helping out ordinary homeowners. They do not accept comparisons between lender foreclosures and tax foreclosures that put mortgage foreclosures below tax foreclosures on the responsibility scale.

In addition, the financial industry is to blame for the flood of subprime foreclosures that devastated the housing market, leading to more foreclosures and foreclosures even in higher-income neighborhoods. In their efforts to rake in more commissions and fees, banks and mortgage firms provided and serviced loans for applicants without implementing standard screening procedures. Many analysts have been calling on the financial industry to take a big part in solving the crisis that it started. Just like former owners of tax foreclosures, financial executives should correct their mistakes.

President Obama in Phoenix, AZ today unveiled his administration’s latest attempt to help save millions of Americans from possible foreclosure. The Homeowner Stability Initiative will provide up to $75 Billion dollars in aid to struggling homeowners; those who are facing foreclosure and those who also are “upside down” on their home loans. This new initiative is expected to help as many as 9 million homeowners and will be ready to start helping homeowners as soon as March 4, 2009.

Last Tuesday, a Financial Stability Plan has been outlined by Treasury Secretary Timothy Geithner that aims to distribute as much as $2 trillion of private and public funds to the crippling financial system. The plan will be financed within a complex combination of a balance sheet extension of the Fed, private capital and federal tax dollars. Basically the central bank will produce more money in order to finance business and consumer lending and slow down home foreclosures. The plan has four focal points to strengthen financial markets:

The entire U.S. banking industry and millions of foreclosure-troubled homeowners are awaiting Treasury Secretary Timothy Geithner’s bailout plan. They expect that his plan is vastly different from that of Henry Paulson, as Paulson’s plan largely failed because he focused only on helping financial institutions.

The U.S. Department of Housing and Urban Development recently allotted $91 million dollars to address the Florida foreclosures. The amount is expected to help the entire state, according to Gov. Charlie Crist.

With the continuous flooding of foreclosures in the housing market, the need for government assistance is undeniable.

A year of extra attention and effort failed the Congress in resolving the foreclosure crisis.

Barack Obama, who is just a few days away from being inaugurated as the 44th and the first African-American U.S. president, is facing his first big test in the Senate. Democratic and Republican senators have been debating whether to give him the second $350 billion of the Troubled Asset Relief Program fund for his own foreclosure prevention program.