Realtor Coaching & Training: manager
I knew this was coming….but, I was hoping not this soon….
The ‘New’ idea to ’save housing’…..you won’t believe this…
NEW YORK (Reuters) – U.S. officials are weighing a plan to let borrowers who have fallen behind on mortgage payments avoid eviction by renting their home instead, sources familiar with the administration’s thinking said on Tuesday.
What am I missing….they can’t make (or won’t make) their house payment…but, somehow they will make a rental payment? Who will manage all of these hypothetical rentals?
Under one idea being discussed, delinquent homeowners would surrender ownership of their homes, but would continue to live in the property for several years, the sources told Reuters.
So, someone doesn’t make their house payment..and they actually believe they will make a rental payment….for UP TO 3 Years! How will this appear on their credit…will someone losing their home from not making their payment still have the same negative credit hit if they participate in this prgram?
Who sets the rental rates? (does anyone actually believe the rental rates would be market rent? No way, they would be set too low. Good times ahead for all of us who own rentals!
Can someone sub-rent the house out and keep the margin?
A U.S. Treasury spokeswoman said late on Tuesday that “we are constantly reviewing new ways to help struggling homeowners and stabilize the housing market. This is just one idea among many that has been considered, but no decisions are imminent on the matter.”
Heres a thought…..stop trying to artificially mess with the real estate markets for political reasons and let the market correct itself….
Officials have been frustrated as red tape and rising interest rates have slowed a housing rescue plan announced in February that was meant to refinance the mortgages of 5 million borrowers and lower monthly payments for 4 million more.
A housing crisis of record defaults began in 2006 at the end of a five-year housing boom of easy lending. But the current crisis is being driven as much by climbing unemployment.
Well, maybe. But, isn’t the real issue the fact that housing is….still overpriced? If you are in most housing markets renting is a BARGAIN vs owning.
Since one in five homeowners owe more than their property is worth, they have little cushion if they lose their job or face another crisis, said Jay Brinkmann, the chief economist for the Mortgage Bankers Association.
And getting worse….the simple fact is that what the folks in DC should be focused on is SHORTSALES and REOS. As in selling the homes through short sales (thus avoiding the foreclosures and REO) and forcing the banks to stop playing games and getting their REOs listed and sold!
“Foreclosure is a double trigger — does someone have a job and do they owe more than a home is worth?” Brinkmann asked.
On Monday, an administration official told Reuters that the Treasury Department is mulling new ways to save jobless homeowners from foreclosure as it continues to expand its mortgage aid.
Listen, I feel for all of those who have lost their jobs. Its horrible. But, what are the ramifications of making it so someone who has ‘lost their job’ no longer has to make their house payment. Sort-a sounds like a good deal to me!
The official told Reuters it was reasonable for policy-makers to consider terms for loan forbearance — letting borrowers delay, defer or skip payments — and that they should be in keeping with other aid for the unemployed.
Hey guys, lenders already do this. I am guessing that they don’t need you telling them. (deep sigh)
A PLAN WHOSE TIME HAS COME?
Two years ago, a liberal economist floated the idea that struggling homeowners could become long-term renters. Dean Baker, a researcher with the Center for Economic Policy Research in Washington, says his idea still has merit and overcomes the key moral hazards of helping troubled homeowners.
“It is a very simple, clean way to help these people,” said Baker, who has discussed his idea with White House officials.
Under Baker’s plan, a bankruptcy judge would help determine a fair rent for the property. Banks would be able to sell the occupied homes, but the renter’s lease would remain in effect.
“Borrowers would lose their stake in the home so it is hard to say that they’ve gotten a windfall,” he said.
Come on….really? How about all of those homeowners who are CHOOSING to walk away from their homes because they are so upside down?
Officials are mulling several ideas on how to swap a homeowner’s loan for a rental lease without disrupting mortgage markets.
The government could pay mortgage service companies cash to take part in the program — or encourage lenders to sell the homes to a third party that would write rental agreements — under two scenarios under consideration.
Many non-profit agencies manage affordable properties and might be interested in partnering in such a rental program, said John Taylor, the president of the National Community Reinvestment Coalition.
OOOPS…catch that one? In other words, these fellas want the management contracts for all of those rentals. THAT would be a serious cash cow. Talk about a sweet business to be in! So that we are clear…a non-profit can still make millions (and millions) for its owners, managers etc.
“It could be a ‘win-win’ for the homeowner, the lender who has a troubled borrower and the non-profit,” he said.
“It could be a ‘win-win’ for the homeowner….”….don’t you mean renter?
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California led the U.S. into the worst housing recession since the 1930s. Now the most populous state may be the first to find the bottom.
In Stockton, the U.S. metro area with the highest foreclosure rate, home sales more than doubled in the second quarter after prices fell by an average 37 percent. Across the state, sales rose for three consecutive months starting in April after 30 straight months of declines, the California Association of Realtors said. About 40 percent of those transactions were foreclosure sales, DataQuick Information Systems reported.
Discounts of as much as 50 percent will extend into 2010, helping clear a glut of foreclosures and leading to a more balanced housing market.
“Half off in a decent neighborhood is close to the bottom,” said Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., manager of the world’s biggest bond fund. Property markdowns of 30 percent to 40 percent give the market “price illumination if not sunshine,” he said. (Bloomberg.com)
`Beginning to Happen’
California led the U.S. in default notices and bank seizures for the 18th straight month in June and had seven of the 10 metro areas with the highest foreclosure rates, according to Irvine, California-based RealtyTrac Inc., which sells default data. That drove down prices and led to “discounted distressed sales,” with two-thirds of transactions under $500,000, compared with 40 percent a year earlier, the California Association of Realtors said.
The amount of time it would take to deplete the supply of homes decreased to 7.7 months from 10.2 months a year earlier, and the median price fell 38 percent to $368,250 last month.
Foreclosure sales accounted for 75 percent of June’s total in Merced County, home to the Merced metro area with the country’s second-highest foreclosure rate; 72 percent in Stanislaus County, home to the Modesto metro area with the third-highest foreclosure rate; and 66 percent in San Joaquin County, home to Stockton, data from DataQuick in La Jolla, California, and RealtyTrac show.
Sales of foreclosed properties equaled 63 percent of the total in Sacramento County, 62 percent in Riverside County, 58 percent in Solano County, 57 percent in San Bernardino County and 49 percent in Contra Costa County. Prices dropped as much 37 percent in those counties, DataQuick reported.
`Seen the Light’
About 1 million U.S. homes will be in some stage of foreclosure by the end of the year, and properties seized by banks will eventually sell at an average discount of 30 percent to 33 percent, said Rick Sharga, executive vice president for marketing at RealtyTrac.
Discounts will be higher in areas such as Stockton, about 80 miles east of San Francisco in California’s agricultural Central Valley, and Riverside, 50 miles east of Los Angeles, that experienced above-average levels of new construction at the peak of the housing boom and where lenders made a disproportionate number of subprime loans, Sharga said.
PMZ, the Stockton-based brokerage, closed 1,707 home transactions in the second quarter, about 80 percent of them foreclosure sales, said Michael Zagaris, the company’s president. Foreclosed homes are now getting multiple bids and the supply of homes for sale in San Joaquin and Stanislaus counties shrank to 4.9 months in June from 18.2 months a year earlier, he said.
“We’ve found the bottom,” Zagaris said. “The financial institutions have seen the light and are allowing the market to find its own level.”
Housing Bill
Banks will foreclose on about 700,000 properties with subprime mortgages this year, more than double the number a year ago.
Executives from Charlotte, North Carolina-based Bank of America Corp. and Wells Fargo & Co. in San Francisco told Congress last week that they’ve accelerated the pace of loan modifications and added personnel to help homeowners avoid foreclosure. Wells Fargo, which services one in eight U.S. mortgages, expanded its staff to more than 1,000 from 200 in 2005.
The housing bill signed by President George W. Bush yesterday is intended to stem foreclosures and includes a program backed by the Federal Housing Administration to insure as much as $300 billion in refinanced mortgages, including many subprime loans.
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Can Mortgage Borrowers Be Punished for Walking Away?
In a recent interview with the San Francisco Chronicle, Freddie Mac consumer outreach manager Robin Stout Migala claimed that there are many reasons why homeowners shouldn’t walk away from homes, including federal income tax liability and the chance that lenders may pursue walkaway borrowers.
Although Robin’s statements may be true in certain circumstances, it is equally likely that borrowers may not face the above-mentioned consequences.
As Mike ‘Mish’ Shedlock pointed out in a blog post Monday, some states (like California) are non-recourse states, which basically means that borrowers owe lenders nothing more than the house should they default. There are also non-recourse loans in recourse states with the same provision. As for tax liabilities, there are provisions in the Mortgage Forgiveness Debt Relief Act that allow tax free debt forgiveness.
The bottom line is that there will be consequences for those who do walk away–like a drop in credit scores–but the end result may not be as bad for borrowers as Migala implies.
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