Obama Team Announces Loan Modification and Housing Relief Plan

by admin ~ March 8th, 2009.

The Associated Press reported that the Obama administration rolled out a new loan modification program Wednesday designed to help up to 9 million borrowers stay in their homes through mortgage refinancing or mortgage loan modification plans to lower mortgage payments each month for the remainder of their loan terms.  Borrowers, however, are being advised to be patient in their efforts to get help, because loan modification companies are likely to be buried with phone calls. 

 

Government officials, launched the “Making Home Affordable” program, also acknowledge that the initiatives are only a partial fix for a massive problem that has significantly contributed to the worst recession in decades for the U.S. economy. As a matter of fact, thousands of distressed homeowners facing foreclosure in the most devastated housing markets concentrated in California, Florida, Nevada and Arizona will not be eligible for the two plans.  “It’s not intended to prevent every foreclosure or to help every homeowner,” a senior Treasury Department official told reporters. “It’s really targeted at responsible homeowners.” Many home foreclosure experts working on achieving more affordable home loan payments for the struggling homeowners are hopeful that the stimulus package and the Obama mortgage relief bill can make a difference.  The foreclosure crisis has played a major role in the recession and the deflated home values.

 

Many mortgage brokers, however, are critical. They argue that the fees imposed by Fannie and Freddie over the past year make it difficult for borrowers to afford mortgage refinancing. The two companies, which are now government-controlled, have yet to detail how they will implement the plan, or whether any fees will be rolled back.

 

 

 

 

More than 11% of Maryland Home Loans Delinquent

 

Problems first seen in subprime mortgages are spreading to prime loans

The number of Maryland borrowers who face foreclosure or have missed mortgage payments topped 100,000 for the first time at the end of last year  a record 11.1% of home loans in the state, the Mortgage Bankers Association said yesterday.

 

Rising joblessness is adding to a worsening housing crisis that has sent foreclosures and delinquencies to record levels, economists said yesterday. Problems for borrowers with subprime home loans are now spreading into more conventional home mortgages. Nationally, 12 % of borrowers were behind on their mortgage payments at the end of December.  The federal loan modification programs should help some of these issues fueling the foreclosure and housing crisis.

 

“Employment is the issue,” Jay Brinkmann, MBA’s chief economist, said during a conference call. “It’s not an issue with changes in payment structure or payment resets. As jobs disappear, first you see this type of home refinance features show up in subprime and bad credit mortgage programs. Eventually it migrates towards the prime home loans that lenders and underwriters deem less of a risk.

 

In Maryland, the share of borrowers who missed payments rose to a high of 8.5 % during the fourth quarter, the bankers group reported in its delinquency survey, which it has been conducting for thirty-years.  

 

About 91,160 home loans, out of just over 1 million mortgages in the state, were delinquent by at least one month but were not in the process of foreclosure.  The number of loans in the foreclosure process spiked 115 % in the state, compared with the fourth quarter of 2007, the survey showed. Those loans more than 28,000 represented more than 2.6 % of loans in the state and set a record for percentage of home mortgages in jeopardy of foreclosure.  “We had a housing market bubble that blew up,” said John McClain, a senior fellow at the Center for Regional Analysis at George Mason University. “Then the overall economy started down. You have people who knew they were in a potentially ‘upside-down’ situation [owing more than their home is worth]. Some have had salaries frozen or been furloughed or laid off.”

 

One in five U.S. mortgage borrowers owes more than their house is worth as of Dec. 31, First American CoreLogic said in a report released this week. In the Baltimore region, 12% of borrowers were “under water” as of December, the report said.  Maryland’s delinquency rate was higher than the nation’s overall 7.9%, which was adjusted for seasonal variations.

 

Still, Maryland has been cushioned somewhat from problems in states such as California, Nevada, Arizona and Florida, which had the biggest run-up in housing prices and now have the highest delinquency numbers, the bankers group said.  Maryland ranked 17th in the U.S. in delinquencies and 11th in the number of foreclosures started. New foreclosures during the quarter rose in Maryland to about 1% of all the loans surveyed by the bankers.  The number of mortgage loans on which lenders have started foreclosure has remained largely steady during the past three quarters, MBA statistics showed.

 

Brinkmann said problems with subprime loans are diminishing because the industry has stopped approving those loans and many of the subprime adjustable rate mortgage loans already have reset to higher rates. “The recovery will depend on when the jobs come back,” he said.

 

Experts and housing advocates said they felt hopeful about an Obama administration foreclosure-prevention plan unveiled Wednesday. The plan would expand mortgage relief to borrowers who have not missed payments and to others who have homes worth less than the current mortgage.  Also, the House approved a major change to bankruptcy law yesterday, giving judges new powers to modify home mortgages in an attempt to ease the foreclosure crisis.

 

The mortgage bankers survey represents up to 85% of the mortgage market. Officials cautioned that delinquency rates typically spike at the end of the year. As more foreclosure properties flood an already depressed housing market, prices get pushed down further.

Article Written By Lorraine Mirabella.

Category: Foreclosure news, Mortgage News, Published Loan Relief Articles | Tags:

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