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Gov't unveils plan to shrink some home loans

By ALAN ZIBEL and CHRISTOPHER S. RUGABER, Associated Press Writers31 mins ago

WASHINGTON – Under pressure to stem the foreclosure crisis, the Obama administration launched a plan Friday to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break.

Administration officials cautioned that the plan won't stop all foreclosures or help all troubled homeowners. Instead, officials said their goal is to meet their original target, announced last year, of helping 3 million to 4 million borrowers avoid foreclosure.

The new effort is designed to help two groups:

• Borrowers who owe more on their loans than their houses are worth. Nearly 15 million homeowners fall into this category, according to Moody's Analytics. About 10 million of them owe at least 20 percent more than their house's current value.

These people would be helped in either of two ways: Their mortgage companies can cut the total amount they owe on their mortgage. Or they can refinance into loans backed by the Federal Housing Administration, which insures loans against default. The FHA will get $14 billion in incentive money from the federal bailout fund.

• Unemployed borrowers. People receiving unemployment benefits would see their mortgage payments drop to no more than 31 percent of their monthly income — but only for three to six months. That's intended to give homeowners more time to find a job. Once they do, they may qualify for a loan modification that would permanently reduce their payments.

The administration's existing program to prevent foreclosures has failed to make a dent in the problem. A lack of planning and shifting rules on qualifications for it produced a huge backlog in the program, the special inspector general for the federal financial bailout fund told lawmakers this week. Only 170,000 homeowners have completed loan modifications out of 1.1 million who began the program over the past year.

On Friday, administration officials played down any notion that the new plan would solve the foreclosure epidemic. About 6 million homeowners have missed at least two months of payments.

"There's no intention here of tackling what may be 10 to 12 million foreclosures over the course of the next three years," said Diana Farrell, a White House economic adviser. But she said the plan would be "enough to provide help to those for whom help is worthwhile ... and to provide some kind of stability in the market."

The plan won't assist investors and speculators or "Americans living in million dollar homes or defaulters on vacation homes," an administration fact sheet said.

Some homeowners won't be able to afford to stay in their homes because they bought more than they could afford, officials said.

Mark Zandi, chief economist at Moody's Analytics, estimated the plan could help 1 million and 1.5 million homeowners avoid foreclosure, compared with about 500,000 if no changes were made in the program.

"The changes are wide-ranging and significant and have the real potential for bringing the foreclosure crisis to a much quicker end," Zandi said.

But preventing even a fraction of potential foreclosures could help stem the slide in home prices. That would encourage those who are "under water" — who owe more than their homes are worth — to keep paying their mortgages as prices stabilize.

Some are unconvinced.

"We remain dubious about government mortgage modification efforts," wrote Jaret Seiberg, an analyst with Concept Capital's Washington Research Group. "So far none have lived up to expectations, and we see little reason to believe the latest effort will turn out any different."

The plan announced Friday will require the mortgage companies participating in the administration's existing foreclosure prevention program to consider slashing the amount borrowers owe. They will get incentive payments if they do so.

It also includes three to six months of temporary aid for borrowers who have lost their jobs. And there will be additional payments to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans. That problem that has blocked many loan modifications.

The plan will also allow lenders to refinance mortgages that are under water with a new loan backed by the FHA. Lenders will have to reduce the first mortgage by at least 10 percent. And the total mortgage debt cannot exceed 115 percent of the current value of the home.

The four big holders of second mortgages — Citigroup Inc., Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — have now joined the government's program to modify second mortgages, after pressure from the Treasury Department. That program was delayed for months but now the major players in the industry are on board.

Rep. Barney Frank, D-Mass., said Friday that he would call top executives from the four big banks to a hearing next month. "We will be urging the banks to show full cooperation with this plan," he said in a prepared statement.

Top 10 Home Updates That Pay Off

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In a tough market, these projects are your best bet

By Dona DeZube, FrontDoor.com | Published: 2/01/2010

Wondering if you'll be able to recoup the cost of your next home remodeling project? It's tough to know in today's market.

With uncertainty ruling real estate, it's not surprising that seven of the top 10 projects in the 2009-2010 Remodeling Magazine Cost vs. Value Report are exterior upgrades. About 4,000 real estate agents and home appraisers were surveyed for the report.

It makes sense. With so many houses for sale, a fabulous exterior is exactly what a home seller needs to lure in potential buyers.

Find out what 10 projects have the best return based on their cost and the value they add to your home.

Update #1: Start with your front door >>

Value of Remodeling Projects Down

Overall, the average value of home improvement projects declined for the 33 projects in 80 cities that the magazine condenses into a single number for the Cost vs. Value report.

"That one cost-to-value ratio number has been dropping since 2005," says Sal Alfano, editorial director of Remodeling Magazine. "The rate of decline has slowed, which is a good thing, but this is such an odd year that the data is hard to interpret. Take the results with a grain of salt because of the unusual market this year."

Projects found at the bottom of the list include home offices (48 percent return) and sunroom additions (51 percent return). What do they have in common? Both are expensive and don't have broad appeal.

Sunrooms aren't used as much as kitchens or bedrooms. And, while a home office is great if you work from home, it won't add value when you sell, especially if you took away a fourth bedroom to create your workspace.

Check Local Figures Too

Along with its national figures, Cost vs. Value also offers complete regional and city data, which can be downloaded for free at www.costvsvalue.com. However, even the local information should be used carefully.

The survey, Alfano says, provides a baseline estimate of value, not a guarantee that you'll actually recoup any particular value for an individual remodeling project.

"None of it should be taken literally by a homeowner," he warns. "The fact is that they're averages and hypothetical and the areas we survey cover MSAs [Metropolitan Statistical Areas] that are huge and you have neighborhoods where prices fluctuate."

The best way to use to data is as a measuring stick. Decide whether you're in an upscale or mid-range neighborhood and then use the average local prices to make sure the price you expect to pay for your next project is reasonable.

To see the top 10 Improvements, click here

Michigan Ranks 5th in the U.S. in Foreclosures

Nevada leads the nation in percentage of foreclosed homes, but California records a massive 92,326 foreclosures!

In a recently released report, Michigan ranked 5th in foreclosures, based on the percentage of homes in foreclosure to non-foreclosed homes. In quantity alone, Michigan ranked 4th. Here is the breakdown:

#1 is Nevada with a ratio of 1 out of every 62 homes in foreclosure (17,902 total foreclosures

#2 is Florida with 1 out of every 140 homes in foreclosure (a whopping 62,401 total foreclosures)

#3 is California with 1 out of 144 homes in foreclosure (a massive 92,326 total foreclosures.

#4 is Arizona with 1 out of 150 homes in foreclosure (17,807 total foreclosures)

#5 is Michigan with 1 out of 234 homes in foreclosure (19,359 total foreclosures)

Believe it or not, many of these states have shown improvement in August over July, as some of the government & lender initiatives have helped cut this down.

What is your feeling or experience on the foreclosure crisis? Let us know.

12% of eligible borrowers helped by Obama plan

Almost 125,000 more people in program this month over July.

Mortgage lenders have placed 12% of troubled borrowers, or 360,165 people, into the government sponsored mortgage help program that started in February. This number is up from 235,247 last month, as lenders continue to accelerate their efforts to save homes from foreclosure.

Although the program did start off slow, it has gained ground in the past few months as mortgage companies are facing a wave of new foreclosures. Banks lose far less money by reducing or restructuring an existing loan than by placing a customer into foreclosure, so there is a definite advantage for banks to participate.

Some banks, however, are participating at varying degrees. Here is a breakdown of the top participating major lenders:

Saxon Mortgage Group: 39%
Nationstar Mortgage: 30%
GMAC Mortgage: 26%
JPMorgan Chase: 25%
Citi Mortgage: 23%
Wells Fargo: 11%
Bank of America: 7%

If you have any stories about receiving mortgage relief, please share them by posting a comment on this blog or email: info@erareardonrealty.com

Thanks!

Michigan Ranks 9th in the U.S. in Number of "1st Time Homebuyer Tax Credits" claimed so far

As of August 31st, Michigan ranked #9 in the U.S. in the number of tax credits claimed so far with 9,237. This number is made up of people who have closed on a qualifying home purchase this year and filed an amended 2008 tax return. Here are a list of the top 10 states:

California - 42,304
Texas - 29,536
Florida - 29,132
Georgia - 11,109
Pennsylvania - 10,250
Illinois - 9,918
Arizona - 9,357
North Carolina - 9,355
Michigan - 9,237
Ohio - 9,172

Pending home sales hit 6th straight increase

Index jumps by 3.2% in July, beating estimates and marking its longest streak on monthly increases on record.

Pending sales of existing of homes jumped up 3.2% in July, fueled by a combination of low interest rates, moderate home prices, foreclosure sales & the $8,000 tax credit. Good news for everyone!

Locally in Jackson County, sales of existing homes were reported to have risen 18% in the first half of the year over the same period in 2008.

Although the economic climate remains tough, there are signs of life! Foe every home sold, especially a foreclosure, that is a happy new homeowner filling a vacant home!

Pending Home Sales Rise for the Fifth Consecutive Month

According to the National Association of Realtors, pending home sales rose in June by 3.6% over May. The increase marks the fifth straight month that pending sales have increased. The last time sales posted five consecutive monthly gains was July 2003!

The combination of reduced home prices, low interest rates & the $8,000 Tax Credit have spurred people to buy up plenty of good values. In the Midwest specifically, sales are up 11.6% over a year ago, driven mainly by excellent values.

While many of these sales may be on distressed properties & foreclosures, that is actually a good thing! Owner occupied homes raise property values & the buying of foreclosures thins out the glut of housing inventory that has kept prices down all year.

Turn-around? We hope so!

New Bills Introduced to extend/change "Homebuyer Tax Credit"

Several new bills have been introduced in both Congress & the House of Representatives that would both extend the current $8,000 tax credit AND make it available to all buyers, not just "first-time" home buyers. This is big news & I will try to keep you posted on the progress of these bills. This just confirms that it will continue to be a great time to buy Real Estate for the next few years!

Matt

The verdict: "Hope for Homeowners" plan starting to get traction..

As we discussed last month, President Obama's "Hope for Homeowners" plan started out as a huge disappointment, mainly because of banks unwillingness to participate. After some tweaks, the new stats are starting to trickle in. More than 55,000 troubled homeowners have received loan modification offers under President Obama's foreclosure prevention program trough mid-May.

The administration also announced it was expanding the $75 billion program to assist more troubled borrowers. The government will provide incentives for servicers and borrowers to avoid foreclosure using methods such as short sales.

Servicers have also mailed more than 300,000 letters to homeowners who might be able to get modifications, the administration said. Mortgage holders who live in their homes and have loans of no more than $729,750 originated before Jan. 1 are eligible. Also, they must be in default or at risk of default for a reason such as a significant change in income or expenses.

Let's "Hope" that this program continues to save the homes of Americans, even your friends & neighbors!

Matt

Existing Home Sales for April Up 2.9%

It was reported today that sales of previously occupied homes rose modestly from March to April as buyers took advantage of prices that were 15.4 percent below year-ago levels.

The National Association of Realtors said Wednesday that home sales rose 2.9 percent to an annual rate of 4.68 million last month, from a downwardly revised pace of 4.55 million in March.

The results slightly beat economists' forecasts. Sales had been expected to rise to an annual pace of 4.66 million units, according to Thomson Reuters.

This is encouraging news! The buying market continues to get better as investors & residential buyers drive the market forward. This trend will need to continue in order to use up some of the excess inventory that is keeping prices down. There is currently a 10-month inventory nationwide of existing homes for sale, which means prices will continue to slide until that inventory is reduced.

What do you think? Is the market headed for a rebound, or is this just an anomily?

Matt