 Although it is too early to tell how President Obama's plan to rescue the housing market will play out, we can at least start by understanding the general outlines of the plan scheduled to take effect March 4, 2009. As we all know, details can be devilish, so I am sure there will be occasion to write follow-up articles on this topic as the plan is implemented and the relative strengths and weaknesses become more apparent.
The plan has essentially three components:
(1) Primary Residence Refinance. The first component is targeted at homeowners who are still current on their primary residences, have unbearably high interest rates but cannot refinance and take advantage of current interest rates because their loan amount is too high relative to the value of their homes (known in the industry as the loan-to-value ratio or LTV Ratio). Typically, if your loan is owned or guaranteed by Fannie Mae or Freddie Mac, you cannot refinance unless your LTV is below 80%. The first part of the plan removes that restriction and allows people whose LTV is as high as 105% to refinance. One issue with this aspect of the plan is that most of the people in trouble have LTV's higher than 105%.
(2) The Loan Modification Program. The second component is designed to incentivize banks to modify at-risk loans. Basically it works like this: The bank would have to make concessions to get your monthly payments to 38% of your income (extension of the amortization period, reducing the interest rate, reducing the principal, etc.). The government would then match dollar for dollar the amount needed to further reduce the monthly payments to 31%, which is deemed to be the point where the mortgage payment is affordable. Here is where the details become extremely important. Question one will be how willing will banks be to get the monthly payments to 38%, because the matching money doesn't kick in until that point. Keep in mind that much of the money that has already been thrown at banks was intended to incentivize them to begin lending again. What they have primarily done instead is use the money to shore up their financial position injecting very little money back into the marketplace, relatively speaking. Question two will be what underwriting criteria will be used to determine who qualifies for the modification. Question three will be how do you deal with lenders in second position (e.g., home equity loans), which the administration acknowledged are not addressed by the plan.
(3) Keep Rates Low. By purchasing the mortgage securities of Freddie Mac and Fannie Mae, the government plans to try to keep interest rates low by keeping the market liquid. Of course, we all know that the Fed really controls interest rates, so hopefully they will stay on board. Lower mortgage rates will help new home buyers get into the market, which in turn will help the excess inventory problem.
Price Tag: $75 billion in direct assistance to homeowners and as much as $275 billion for the GSE's.
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LOL - Laughs OnLine
"U.S. Military launches new nut protection unit"
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What's The Big Idea? 
Return of the Tiger.
This is not a reference to a martial arts movie with bad lip syncing; this is a brief comment of the return of Tiger Woods to golf. I think if Tiger Woods can win the U.S. Open with one leg, it is unfair to allow him to play with both arms now that his knee is fixed.
A-Rod and Steroids
I have been asked to comment on the recent steroid controversy in baseball and my opinion is this. For those of you who are outraged by this conduct and believe that sanctions should be more severe, consider the following. Steroids make your head bigger without increasing your intelligence while at the same time shrinking other parts of the male anatomy. You can at least take comfort in the fact that steroids seem to take the initiative in reprimanding its users.
Phelps and the Bong
Phelps apparently was not popular as a child. It is, therefore, possible that he didn't actually inhale from the bong but simply posed with it to score cool points.
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Share If You Care
Our goal with this newsletter is simple: Cover every important topic that might help homeowners and investors make more informed decisions concerning real estate. You can help in two ways:
1) Send us any articles or information you come across that might be of interest to other readers
2) Forward this newsletter to anyone and everyone you know that owns or plans to own real estate!
Sincerely,
Kwame J. Granderson
Equinaire
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Free Loan Modification Webinar
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When Should You Walk From Your Property?
Learn About...
1. The cost of reentry
2. Short sale vs. foreclosure
3. Primary vs. investment property
4. Personal considerations
Date: Tuesday, April 7, 2009
Time: 7PM - 8 PM
Register by clicking here
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Upcoming Webinars
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Be on the lookout for upcoming webinars on the following subjects:
· 2009 Market Trends
· How do I know when the market has bottomed out?
· When should you walk from your property
· The Granderson Composite Index
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Investor Tip
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Regarding evictions, everyone living in the house must be served not just the person on the lease. If a tenant has family members or a significant other living with him or her you need to ensure that all residents are served notice.
The court might determine that other residents have established a right to possession and if they are not served, you will not be able to remove them from the premises.
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Need a Loan Modification?
AmeRestart Can Help
Old Int. Rate: 6.625%
Old Payment $1,929.83 (+ approx. $1,200 negative amortization)
New Int. Rate: 4.25%
New Payment: $1,244.84 (interest only)
(Savings of $685 per month w/no neg. amortization)
These are real numbers!
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Call 877.619.3258
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