Chase Finds 16% of Mods Are 'Permanent’?A recent article highlights that JPMorgan Chase has over 140,000 borrowers in the HAMP program currently, and that only 16% will be or have been approved for “permanent” modification as they announced in Congress. Additionally only 29% of those made all of their payments on time during their 3 month trial and so now are ineligible for permanent mods. Begging the question, so is even the 16% number accurate?This along with other examples of the fallacy of HAMP I have given in the past conjures memories of an advertisement from my youth… “Where’s the Beef”?HAMP sounds nice, People love acronyms, best intentions and all but like so many things in our society these days no one wants to look beyond the surface. We long to be placated. We want to feel better, eat our government endorsed Hostess products and watch dancing with the stars until our Ambien kicks in. All you are required to do is look at two factors to determine HAMP was NEVER going to work as it is currently configured.1. Out of control unemployment. The numbers are staggering and nowhere close to reality when one factors the numbers of people still employed but on reduced hours, or those that have fallen of the unemployment rolls entirely. You can’t qualify if you have no, or even reduced income.2. The amount of mortgages that are upside down more than 10-20% allowable. Borrowers in California, Florida, Arizona and Nevada are doomed even before they announced the program.In all actuality the servicers are making only a half hearted effort in these programs. The lenders know their hands are tied, Congress and the Administration know this as well. The only ones who don’t? John and Sally Homeowner in Eugene Oregon who actually need and think they are going to get a mod. Adding more fuel to the noxious mix of those who know, the vultures who prey on John and Sally. Telling them their lender will take too long, work with us and we will get you your mod…just give us $995. They believe this right up until me or someone like me shows up at the door with the sheriff. Julia Gordon from the Center for Responsible Lending said as much in her address to congress, saying that HAMP had the “theoretical potential” to help but servicers either would not or could not do what is asked of them.What to do? Do we as a nation bite the bullet and “bailout” the borrowers as well. Should we do a white board erase of all current mortgages and start over as some have suggested? Highly unlikely! Can you imagine the lawsuits generated by those who have previously been foreclosed on and are left to wonder “why was I not bailed out”?I am interested in this group’s insight. What would you propose? I have outlined my ideas here in prior blogs so I won’t beat that drum too loudly but these are the basics (how we create jobs is a blog post unto its own).1. Mod only those who can, and quickly. Release all other inventory on to the market regardless of how far values fall.2. Waive the 3 year restriction on all foreclosed or bankrupted borrowers and allow those that are TRULY qualified to re-enter the market.3. Lift restrictions on the amount of properties investors can purchase.What say you?
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The FHA is catching up to the where the market place currently is. YOU NEED TO BE QUALIFIED TO BUY A HOME.It still surprises me when I get a new prospect and give him an initial assesment and they say that they either don't have a job right now or they have a minium wage job or no money in the bank.Right now, although you can get a loan with 3.5% down, your offer is seldom accepted anyway because there are better qualified buyers with more money to put down and therefore present less risk that they will lose their home. Agenys have a rsponsibility too to be sure their buyers can afford a particular home...recently I had a client that wanted to know what the payments would be on a particular home, after I told her , the mom which is helping her started to question how they could pay that type of payment on her daughter's income (daughter's husband does not work), after discussion, we agreed we would look at a lower price point of home. Makes me wonder how Wells Fargo preapproved her for that higher amount in the begining!The FHA will soon require a 5% minimum down. Yes, it will eliminate some buyers from the marketplace, but those buyers will have a hard time getting anything at the minimum level anyway. Buyers will also have to have a better credit score from a minimum of 580 all the way to 620. The thing we are missing though is that most banks want at least a 680 anyway, so again, the marketplace has thinned the weak out already. You need to see also that many listings specify already that they want credit reports and financial proofs. Yes, too they look at the size of the downpayment as well. THE MARKET IS ALREADY THERE!The downside to this that credit repair will start to flourish and people will once again get sucked into a scheme that produces little or nor results. We saw what happened with loan mod business in California. That business has now tanked. They are now barred by the California Department of Real Estate from taking upfront fees. Most credit repair and loan mods can actually be done individually as the techniques are fairly simple...just time consuming!The extension of the homebuyer credit for first time buyers ($8000) and buyer/sellers ($6500) will help to have a decent real estate market into the spring but again like others have said, this is just a band-aid and will cost future generations somehow. These credits in my opinion have caused price inflation that actually discourages buyers, not to mention potential appraisal issues. Imagine going to the store on black friday to get a $99 patio heater only to be disappointed and dismayed when you get to the check out that it now costs $199 because everyone wants one. I even get feedback on a Broker Price Opinion (BPO) that they don't believe me when I say the market is depressed...it still is and the financial powers are just manipulating the market to keep things from "sinking" too fast. Yes, we have price apprieciation, but it is artificial, until the economy is healthy once again.Let's all be responsible players in the real estate arena.
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