Hot Mortgage Deals

In most parts of the United States, Americans have lost hope that their homes will restore their value or that unemployment will drop significantly anytime soon. But in the westernmost corner of Texas, there's more than hope -- there's an unlikely building boom happening. The U.S. military base Fort Bliss, covering an area larger than Rhode Island, has become one of America's largest military installations, and that's having a dramatic impact on an otherwise depressed economy.

The years-long trend of Americans buying homes and expatriating to Mexico has collapsed, done in by a trifecta of the recession, swine flu and an epic crime wave.

Recent projections estimate that by June, over 5 million homeowners will be heavily underwater. Let us define that a little more precisely. You are heavily underwater if the current market value of your home is only 75% of the balance on your mortgage. Between you and me, this means you are pretty screwed. The scary part is that if this projection proves true 10% of all US homeowners will be in this pickle; not the place you want an economy to be if you are trying to dig yourself out of a recession.

This is why the Obama Administration is running about like headless chickens trying to find solutions to this problem, quick, mid-term, and long term solutions; any kind of solution that will get us out of this.

It was this kind of panic that caused the government to put all their weight behind HAMP, the government’s loan modification program. Loan modifications were and always have been procedures designed to help homeowners stuck with sub-premium loans. Sub-premium loans as you all know is a kind way of talking of usury, loans with interest rates so high they give you vertigo if just to think about them. However loan modifications are not, and never have been a fix for homeowners with great loans that are unemployed and cannot afford their mortgage.

What alternative solutions are there?

One proposal is to buy time by simply banning foreclosures until other options have been looked into by the homeowner and lender. You have to love that proposal, if you cannot stop homes foreclosing by economics just make it illegal. As crazy as this measure seems it is designed to buy time and allow homeowners to find ways of keeping their home. This would take the current guideline of asking lenders to evaluate defaulting homeowners for a loan modification to the next level by making it compulsory.

The Mortgage Bankers Association says its members are already following this principle, and that foreclosure is always a last resort when all other options have been exhausted.

Another plan sponsored by the Mortgage Bankers Association is to not modify permanently the loans of troubled homeowners that have lost their jobs but simply to reduce their mortgage payments substantially for up to nine months to give homeowners a chance of looking for a new job.

As you probably guessed the Banker’s Association is requesting Treasury to pay for the program. Nevertheless, it does seem like a good idea to provide a homeowners with a break until he finds a new job than taking forever to marginally reduce the mortgage payments of an unemployed borrower.

However, many are analysts are saying that the real strategy to follow is to find a way to improve the economy. A strong job market would pull out the housing market from the fix it is in. On this theme, there were some good news last week. The number of homeowners starting to default unexpectedly dropped in the fourth quarter of 2009. However, the government also reported that home prices dropped by 1.6% in December; making it clear that the economy still has a long way to go before it gets a clean bill of health.

Related posts:

1. Unemployment Home Loans, Are They A Real Alternative To Loan Modifications
2. Foreclosure Re-default Drops by 26.5 When Loan Modifications Reduce Loan Balance
3. Loan Modification Alternative by CitiGroup: Refinancing 30 Year Fixed Rate Mortgages

Related posts:

1. Unemployment Home Loans, Are They A Real Alternative To Loan Modifications
2. Foreclosure Re-default Drops by 26.5 When Loan Modifications Reduce Loan Balance
3. Loan Modification Alternative by CitiGroup: Refinancing 30 Year Fixed Rate Mortgages

The Great Recession has ravaged savings and boosted unemployment rates, forcing people become more conservative with their cash. It has also made homes a lot more affordable -- at least for those people still working.

Even Academy Award winners are suffering from financial woes this recession. Actor Nicolas Cage lost two homes in New Orleans worth a total of $6.8 million in a foreclosure auction Thursday.

Personal incomes and spending fell in September, even as a rise in the gross domestic product has economists declaring that the recession has ended.

Last Thursday the big news was Obama’s Loan Modification program, Making Home Affordable. The first target the program set out for itself, reaching 500,000 trial loan modifications by November was reached nearly a month early.

Critics stated that the target was of little importance in the big picture of things with foreclosures continuing to affect more and more homeowners. Mark Zandi, chief economist for Moody’s Economy.com said the help provided by HAMP was a help on the margin. “But it is not going to end the foreclosure crisis”.
So what should we think of Obama’s HAMP? Is it a success or failure story?

The Good.
Reaching the target was no mean feat. The first months were painfully slow in reaping loan modifications and many did not think even this first target would be met. The fact that it was is proof of Obama’s administration skill at cajoling and bullying banks and providers into meeting their expectations.

Whatever we think of the “Big Picture” 500,000 families have lower monthly mortgage payments, that has to be good news, right?
According to Timothy F. Geithner mortgage payments are now being lowered faster than homes are being sold in foreclosure proceedings and 40 percent of eligible homeowners (1.2 million of them) have been helped. Here the figures vary, other put this figure at 16% of eligible homeowners, but that just represents differences on the definition of what an eligible homeowner it.

The Bad.
Economists say the program and its current success will not be enough to prevent many millions from losing their homes before the Great Recession ends.
By Mr. Zandi’s calculations from this year to the next over 4 million households will go through foreclosure or short sales.

The 500,000 loan modifications are only trial loan modifications. If the homeowners fail to pay one of the first 3 months in the trial, the modification is void. Even if the homeowner completes the trial period they then have to supply more paperwork which opens the doors for loans not being modified due to bureaucratic slips.

We don’t know how many of the loan modifications actually modified the principal balance of the loan and how many simply lengthened the loan or reduced the interest rate to reduce mortgage payments. Reducing the principle is an important factor if you want to reduce the rates of re-default on mortgage payments.

The problem HAMP was designed to attack, subprime mortgages that cannot benefit from current low interest rates because the value of the home has dropped is no longer the main type of mortgage going through foreclosure. It is not only subprime mortgage that are suffering now. Prime mortgages with 30 year fixed interest at low interest rates are also defaulting because of the increase in unemployment. Loan modifications cannot help much on good mortgages with owners that cannot afford any payment because they are out of work.

So whatever your view is, this issue is still far from being solved and playing with loans is just not going to fix it. The question is do you try to use tax dollars to bail people out of the mess or just let the economy weed itself out of bad loans?

Related posts:

1. Loan Modification Success Report, The Truth Is Far Worse
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Delinquencies Fall As Banks Get Serious With Loan Modifications

Related posts:

1. Loan Modification Success Report, The Truth Is Far Worse
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Delinquencies Fall As Banks Get Serious With Loan Modifications

It looks like Ben Bernanke is right in saying the recession is ending: Today, Tiffany's advertised a $115,000 diamond and platinum bracelet in its page three New York Times spot -- and convicted swindler Bernie Madoff's Montauk beach house sold for more than its $8.75 million list price.

Farmer Brown finally got hit by the real estate recession last year, well after its impact had been absorbed by his urban countrymen.

It retooled before the recession and spurned bailout money. Now it's creeping up on its U.S. rival.