Too Little – Too Late – For Too Few
I don’t know why I should be surprised that the new “Save The Homeowner” plan announced by the federal government is so lame. After all when was the last time politicians did anything that made any sense?
And if you are thinking that NO MORE FORECLOSURES IN MICHIGAN IN 2008 – I think the exact opposite is true for Michigan at least.
May be this plan will work in Boston or San Francisco but not in Michigan AND certainly NOT in metro Detroit.
Here is why:
1. This plan excludes anyone more than 30 days late at the time the mortgage would be modified or anyone who has been more than 60 days late at any time within the previous 12 months.
2. This plan also only covers borrowers with adjustable rate mortgages (ARMs) resetting beginning in 2008 and leaves out any who are judged capable of continuing to make mortgage payments at the higher reset rates.
Borrowers who can't afford the loan even at low introductory rates also will be ineligible, according to Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents lenders and mortgage servicers.
Those borrowers will have to work with servicers on a case-by-case basis to determine if their homes can be saved.
The kicker - Of the perhaps 2 million subprime ARMS that are expected to reset through the end of 2009, only 240,000 of those would be covered by the freeze, according to an analysis made by investment bank Barclays Capital as reported in The New York Times.
The Center for Responsible Lending, a group that promotes homeownership and works to curb predatory lending, estimates that only 145,000 households will qualify for the rate freeze.
Too little.
Too late.
For too few.
According to CNN as the foreclosure crisis deepened it became apparent that many sensible modifications were being shot down because investors (meaning BANKS) would not agree to them. An analysis by Moody's earlier this autumn revealed only about 1 percent of resetting ARMs had been modified this year.
If you are a national bank and you have a chance to modify a rate free on a loan effectively getting stuck with a low paying investment for the next five years and you have a homeowner calling from Dearborn Heights or Grand Rapids calling in for a $150,000 loan and two homeowners calling in from San Francisco, with a $800,000 home loan each…
Which file do you think floats on top of the case officer to get a fast decision?
Which file is ‘safe’ for the bank to hold on to for the next five year?
There is a tidal wave of foreclosures in Michigan that keeps on just rising. You are not going to find it in your cubicle at work. You are not going to find it in Google. Go and meet a REO broker in your Michigan City this week or post an ad in Craig’s List and see for yourself what is going on the ‘real world’ in Michigan.
You will be shocked at the number of good deals available right now.