Homeowner Affordability and Stability Plan
February 18th, 2009 categories: Real Estate News
I do not even want to begin to try to digest the President’s Stimulus plan that was passed, so I am starting with the portion that is near and dear to my heart, housing. President Obama is in Phoenix, AZ today to unveil his “Homeowner Affordability and Stability Plan”. Some details of the the plan are outlined on the White House Blog.
I have not read it word for word, but skimming it gives me a few insights.
The program is limited to loans that are held or securitized by Fannie Mae or Freddie Mac. The other interesting thing is that it is limited to loans where the 1st mortgage that is to be refinanced cannot exceed 105% of the current market value (including refinancing costs). While I am sure there are may that fall into that category, I feel that in many areas like Queen Creek, Buckeye or Surprise, it is not going to work for many. The reason is that many people bought in the 2004 – 2006 period where prices rose to their highest level. The market has over-corrected dramatically in those areas. Homes that appraised for $200,000 are selling for $90,000. Many of those people had 100% financing, so the mortgage amounts are going to exceed the 105% limit by a lot. From what I can tell, Obama plan will not help those loans. There is no plan for a principle reduction on the mortgage.
First, it will only be able available to primary homeowners. Investors or second home owners will not be able to take advantage of any type of loan modification.
Please read the details yourself as I truly “skimmed” but I was curious. I am not trying to be pessimistic, I am actually curious as to how many people this will help and if it keeps some of the homes from going to short sale or foreclosure, then I suppose it will help housing.
Mortgage lenders will begin accepting applications for this program after the program details are announced on March 4, 2009.
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