President Obama released information on his new plan to help homeowners stay in their homes.
It may have a different name than the plan put in Place by President Bush;
Homeowner Affordability and Stability Plan (Obama) vs. Hope for Homeowners (Bush) but them both seem fairly similar.
Both plans make it voluntary for lenders to participate, Obama's plan offers financial incentives for the lender to do so. Neither plan reduces the principal balance owed on the loan, and this is the core of the problem as far as the homeowner is concerned.
When I listen to the media they talk in very broad terms and say that millions of people will be helped and on the surface it sounds good. However, when I am talking to people who own homes in Cape Coral, FL and Lehigh Acres, FL they do not just want to refinance their home into a lower fixed rate payment, they want their principal balance reduced.
One family I know who lives in Cape Coral, FL built their home several years ago, before the real estate boom, they refinanced in 2005 and took lots of equity out, built a pool, bought a business. They now owe $200,000 on their home and the homes around them in N. Cape Coral are selling for $50-$60K. They can afford their payments, they just don't want to keep the house. So they are choosing to walk away and either rent or borrow money from relatives to buy another home cash. This is the reality of the situation for many homeowners in the hardest hit areas of the country. I heard 5 versions of this same story this week alone. People do not want to keep paying for something that is upside down in value.
The new plan allows you to refinance your first mortgage if you owe up to 105% of the value on your first mortgage loan. If you have a second mortgage, that lender has to agree to remain in second position. It does not appear to modify that loan or reduce the principal.
They key to the sucess to this program will be the desire of the homeowner to keep a home that they are upside down on, which I fear isn' t very strong for many.
Lee County, FL (Cape Coral, Fort Myers, Lehigh Acres, Bonita Springs, Estero, Sanibel, Captiva) has a large backlog of foreclosures and the court system has put a plan in place to push thru this case load so expect to see many more foreclosure homes listed on the market in the months to come.
Lee County Rocket Docket (click for article)
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Franziska Smith
Broker
Coastal Elite Properties
239-390-1150 office
239-940-2995 cell
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