You are hereIs there any Mortgage Relief for the Average Homeowner?
Is there any Mortgage Relief for the Average Homeowner?
November 4, 2008 --
BLOOMFIELD, MI – The media headlines have new updates and wrinkles about the Federal Bailout of banks daily. All this talk of aid for banks and for distressed homeowners has the average homeowner wondering and hoping there’s something in all of this for them.
The latest figures show that roughly 90% of homeowners are paying their mortgage on time and are not a financial risk for foreclosure. So, why are these homeowners worried and looking for some type of aid? Maybe it's because an estimated 20% of homeowners bare “upside down” in their homes – owing more than the homes are worth. Values are predicted to drop another 10% in the coming year, which will put 25% of homeowners upside down.
From a pure financial perspective, it makes no sense to keep throwing good money after bad on an asset declining in value. Especially when you can buy that same asset, next door at a steep discount. Homeowners everywhere, from the well-off to those cutting corners to make their mortgage payments, are wondering why should they keep making their payments.
Our office receives several calls a day from homeowners who are not delinquent on their mortgages, but are upside in their homes and looking for some type of relief. Most want to know if anything can be done to reduce the amount of their mortgages in light of the falling values of their homes. Sadly, there are no easy answers for them.
Every program and relief effort announced so far is targeted at helping distressed homeowners avoid foreclosure. Loan modifications are reserved for those facing a viable hardship and even then, a reduction of mortgage balance is not very likely. Lenders understand keeping people in homes is about affordable payments.
A lot had been made of Hud’s new Hope 4 Homeowner program, but it not only requires a homeowner to be delinquent to qualify, it also requires the servicer/lender of the mortgage to take a loss on the mortgage amount that exceeds 90% of a property’s current value. Lenders are not falling over themselves to do this.
So, why should the 90% of homeowners that are not delinquent continue to make their mortgage payments and not walk away from their upside down homes? Besides the arguments that they have to live somewhere and a foreclosure trashes your credit record, we can find viable answers in analogies.
How fair is our tax code that shifts more of the tax burden to those that do well and gives some of that back as welfare to the poor? Why are so many leaving their money in the stock market, which has dropped as much as many home values, willing to take a long-term view there? Beyond those examples we have the fact that something has to be done to break the vicious cycle we’re now in – foreclosures cause nearby property values to drop, resulting in more foreclosures, which drives values down further, etc…
The latest figures show that roughly 90% of homeowners are paying their mortgage on time and are not a financial risk for foreclosure. So, why are these homeowners worried and looking for some type of aid? Maybe it's because an estimated 20% of homeowners bare “upside down” in their homes – owing more than the homes are worth. Values are predicted to drop another 10% in the coming year, which will put 25% of homeowners upside down.
From a pure financial perspective, it makes no sense to keep throwing good money after bad on an asset declining in value. Especially when you can buy that same asset, next door at a steep discount. Homeowners everywhere, from the well-off to those cutting corners to make their mortgage payments, are wondering why should they keep making their payments.
Our office receives several calls a day from homeowners who are not delinquent on their mortgages, but are upside in their homes and looking for some type of relief. Most want to know if anything can be done to reduce the amount of their mortgages in light of the falling values of their homes. Sadly, there are no easy answers for them.
Every program and relief effort announced so far is targeted at helping distressed homeowners avoid foreclosure. Loan modifications are reserved for those facing a viable hardship and even then, a reduction of mortgage balance is not very likely. Lenders understand keeping people in homes is about affordable payments.
A lot had been made of Hud’s new Hope 4 Homeowner program, but it not only requires a homeowner to be delinquent to qualify, it also requires the servicer/lender of the mortgage to take a loss on the mortgage amount that exceeds 90% of a property’s current value. Lenders are not falling over themselves to do this.
So, why should the 90% of homeowners that are not delinquent continue to make their mortgage payments and not walk away from their upside down homes? Besides the arguments that they have to live somewhere and a foreclosure trashes your credit record, we can find viable answers in analogies.
How fair is our tax code that shifts more of the tax burden to those that do well and gives some of that back as welfare to the poor? Why are so many leaving their money in the stock market, which has dropped as much as many home values, willing to take a long-term view there? Beyond those examples we have the fact that something has to be done to break the vicious cycle we’re now in – foreclosures cause nearby property values to drop, resulting in more foreclosures, which drives values down further, etc…
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