New “Hope” program to help homeowners… seriously
October 14th, 2008 Categories: Real Estate News, San Diego County Fixer of the Week, San Diego county Real Estate News
“Hope never abandons you; you abandon it”– George Weinberg
SAN DIEGO– I track notice of defaults to use as an indicator of future trouble for areas. See, this is the first step of the foreclosure and usually, if a notice of default is filed, the home will be going to bank owned. The exception to this are properties that are listed and the owner is actively trying to short sale the home.
However lately, I noticed a drop in the filings and while my head told me the economic picture hasn’t improved, I could not deny what I was seeing. Facts are facts.
What I had forgotten about was new state legislation that requires lenders to spend 30 days attempting to workout a loan modification before filing the notice of default.
Sean O’Toole, the founder of Foreclosureradar.com summed up this new legislation correctly;
”It’s probably less immediately painful, but I think you get to the same point,” O’Toole said. “It kind of comes down to how you prefer to take your medicine —- do you want to have more pain up-front and recover faster or have less pain and take longer to recover?”
When asked if the new legislation would help stem the tide of foreclosures, O’toole went on to say;
“It doesn’t change any of the fundamental facts, which are that homeowners stopped making the payments” because the loan’s principal —- the amount of money borrowed —- was too high, he said. “It’s all about the principal balance at the end of the day, and they aren’t addressing that problem.”
Here is the good news for those that can qualify.
The newest government program, Hope for Homeowners, h
as the best chance of impacting our situation in San Diego and because it addresses the free fall of equity we have experienced. If you qualify, “the new mortgage will be no more than 90 percent of the new appraised value including any financed up front Mortgage Insurance Premium.” -HUD.gov
Let’s say you purchased your Clairemont home in the summer of 2005 for $610,000 and it is now worth $475,000. You like most people used a 100% or a very low down loan. Your payment on the $610,000 @ 6%, interest only, is roughly $3100 and it’s killing you.
Under the HOPE for Homeowners program, your new refinanced loan would be at 90% of your current homes value, $475,000, which in this scenario would be $427,500. At the same interest rate of 6%, your interest only payment would be $2150, which save you roughly $1000 a month. An additional savings would be your tax base value change of $125,000 saving you an additional $120 a month, approximated.
Now while in my opinion this is a GREAT option, there are many guidelines that have to be met and one big condition of the program is equity sharing with the previous lender and /or FHA. It is on a sliding scale but this is from the HUD website.
If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.
For all the information on this program go to the HUD website here.
If you are not able to keep your home and have looked in to loan modification, please give me a call to discuss all your options.
