Just a few quick thoughts about the new Housing Stimulus Plan announced by the Obama Administration.
1. HARP cap to 125% of the value of your home is now gone. But is it real news or a statement that the program was not working as expected? A program which was supposed to benefit up to 5M distressed homeowners was enjoyed only by less than 900K families since its inception in 2009. The removal of the cap is a good step forward but only qualified homeowners will truly benefit from HARP. Also, many homeowners whose loans are not backed by Freddie Mac or Fannie Mae will be unable to qualify. This leaves a substantial chunk of underwater borrowers out of the loop. The real good news is that most of the refi fees (e.g. risk fees) will be waived or lowered, closing costs will be reduced and mortgage insurers will transfer coverage of old loans.
2. The Foreclosure Rift is not going to close anytime soon. No news for up to 6 million borrowers who are just enjoying their last few months in their soon-to-be-foreclosed homes. Everything trends towards the rise of the next Foreclosure wave: Notices of Default are up 26% in Q311 nationwide vs. the second quarter of this year. The Foreclosure lull is over, starting in California with BoA leading the charge, after months of investigation into Us lenders' foreclosure and home seizing processes. Settlement discussions with Attorney Generals are stalled (California is out), paving the way for long negotiations.
3. The US Housing Market needs landlords, not lenders. In other words, we need 'lendlords', ie lenders who can step in as landlords for the millions of homes soon to be unloaded onto the US Real Estate Market from the Shadow Inventory. The only way to prevent further home price declines is to avoid 'The Triple Dip' which would be undoubtedly triggered by flooding local real estate markets with foreclosed bank-owned homes. Cash investors saw the opportunity costs of buying up property all over the US to rent them out. Why should not lenders capitalize as well on high rental demand and sustainable ROIs? Many homeowners and first time home buyers may not qualify for refi or a new mortgage, but everyone needs a roof over their head and can afford to rent.
To a great extent, the way US lenders will manage their current distressed housing inventory in the next few months will determine how the US economic recovery fares in the next few months. Obama Housing Plan will help homeowners upstream, lenders have a responsibility to salvage the US housing market downstream.
© Sophia Delacotte CDPE, SFR, CHS
San Jose Realtor
Cell: (408) 717-2575