The whirlpool meltdown for housing is finally hitting home….right here in Orange County. Finally, Toll Homes and other local builders are finding it difficult to sell their new high priced products. In the meantime, those that are finding harder to make their monthly payments and stay in their homes are looking for help from Fanny and Freddie! These are called: “Loan Mod Agreements”! Whole neighborhoods, towns, cities and even States are being affected by the “Devaluing and Deleveraging” of those properties that were sold at inflated, top of the cycle property values.
A couple of troubling problems arise when write-down of property values and reduction in interest rates on these so called “LMA’s” are not being considered before anything else. Unless the property is “revalued at a responsible price” before the renegotiation of the loan…..the chances are that the in one or two years….these problems will have to be very much reconsidered. Governments are scared to death that should the actual value of the property be revealed….”Reassessment Districts” will have be created in order to bring market stability. The possible dominos in this regard could be immense!
Fanny and Freddy have come up with a knee-jerk plan which includes allowing people for “Loan Mod Agreements” that first are at least 90 days behind on their home payments and allowing them to utilize up to 38% of their monthly income as collateral based security for a suspended old loan and a renegotiated new loan. Additionally, even when the payments are reduced….the original loan contract is still in effect and due and payable in a lump sum, in the form of a balloon payment when the property is sold. The Banks still gets its pound of flesh in full.
Sadly, Fanny and Freddy are not using a more prioritized and scaled procedure. Let it be clear: A man and wife without children and both working…might be able to meet the monthly payment using 38%
of their monthly income if “motivated to stay in that home”. That means that the property value is stable and not looking to slide down further on the open market. Asking a family of four to utilized 38% of their monthly income for monthly loan payments….may be nothing more than blue sky dreams! Not letting people participate in this program without being 90 days behind in their payments invites diaster, rejections and human heart-break. Anyone should be allowed to participate in the “Loan Modification Agreements”. Anyone should be able to apply.
It would be an easy thing….to put those with less urgent needs to be put toward the back of the list of approvals. What happens when those
people get laid off or find there jobs are victims of a failed economy and are no longer there? This is nothing more than moving from a Jumbo to a Dumbo loan that is unsustainable again!
The point is that “everyone” with current loans are going to want reduced monthly payments, easy payment plans or deferred balloon adjustments. In the meantime, Foreclosures are accelerating beyond the scope that Fanny and Freddy can meet at this time. Is it going to wined up all being a matter of “too little too late”?
Again, these great minds refuse to use computer modeling to assess regional real estate values and renegotiate those values from lenders as suggested by Economists like R. Glenn Hubbard. Hubbard suggests we make across the board revaluations by regions and offer a standard 30 year Jumbo – Not Dumbo loan! We agree….a standard Foreclosure interest rate should be forthcoming…by someone!
In the meantime, AIG continues to ask for more FED TARP money as they continue to pay brokers, CEO’s bonus programs and all the things that they said they were not going to do. They are even having those same expensive “Executive Get-a-Way and Celebration Parties”! This cannot stand! They are also providing their bank buddies with float cash but can’t do the same thing for others that may need it more!
I want to know what actions any corporation that recieves federal bailout money is taking to reduce top compensations? Who got fired over this? How much those remaining at the companies make and how much of a cut they took? I’m sorry but these are not private matters anymore, not with my tax dollars going there they’re not. Where the hell are the newspapers on this anyway? The election is over start investigating the banking industry, lets see some mud! You cant tell me they can bring the world to its knees without a story there somewhere.