Obama Unveils Homeowner Affordability

Revised February 20, 2009


President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes.

The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than their home is worth. The second program attempts to lower monthly payments for homeowners at risk of losing their home. In addition, the plan includes a third initiative to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.

Many of the plan's details are still being worked out and will not be announced until March 4, here is an overview of the plan's main components.

Refinancing Initiative
Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. Therefore, the refinancing initiative in the new plan provides refinancing help for homeowners with less than 20% equity in their homes or who owe more than their home is worth. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac, and who owe up to 5% more than their home is worth.

According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.

As with the rest of the plan, details about this initiative will be released at a future date-including what, if any, credit score requirements will be included.

Stability Initiative
This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their homes because prices have fallen significantly.

The goal of this initiative is simple: "reduce the amount homeowners owe per month to sustainable levels." To accomplish this, lenders are encouraged to lower homeowners' payments to 31 percent of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs.

Homeowners who are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.

Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify. This initiative also includes a number of additional elements and incentives that benefit homeowners and lenders alike, including:

* Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.
* Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.

Supporting Low Mortgage Rates
As part of the Homeowner Affordability and Stability Plan, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability. This portion of the plan will use using funds already authorized in 2008 by Congress for this purpose.



Questions and Answers for Borrowers about the
Homeowner Affordability and Stability Plan
Borrowers Who Are Current on Their Mortgage Are Asking:
1. What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?
Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.
2. I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
3. How do I know if I am eligible?
Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.
4. I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
5. Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
6.
What are the interest rate and other terms of this refinance offer?
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
7.
Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
8. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?
To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.
9. When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.
10.
What should I do in the meantime?
You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:
•information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources
•your most recent income tax return
•information about any second mortgage on the house
•payments on each of your credit cards if you are carrying balances from month to month, and
•payments on other loans such as student loans and car loans.
Borrowers Who Are at Risk of Foreclosure Are Asking:
1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
2.
Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.
4.
I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.
5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.
6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.
7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.
8. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
9. How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
10. Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.
11. I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.
12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.
13. What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes
•
information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources
•
your most recent income tax return
•
information about any second mortgage on the house
•
payments on each of your credit cards if you are carrying balances from month to month, and
•
payments on other loans such as student loans and car loans.
14.

My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility. We support this effort.

Does Disney Have Its Eyes on Livingston Parish?

This story is adapted from WAFB

"It'll be bigger than Wal-Mart. I can say that." The population boom in Livingston Parish has Parish President Mike Grimmer excited about future developments. He says they may even attract a Disney theme park. "In 1954, Walt Disney actually looked in Louisiana in Livingston Parish. Things just weren't happening then, so they didn't go there. What a change it would be today huh?" he says. "We're taking preparations for sites with a study." Grimmer says the Livingston Economic Development Council paid $100,000 for a Disney site study. He's hoping to hear from Disney within the next couple months.

Livingston Parish is the fastest growing parish in the state, with nearly 115,000 residents, and it's going through some major development changes.

Don't Wait on Foreclosures to Hit Baton Rouge

Brian Andrews with the Baton Rouge Business Report's "Real Estate Weekly" (1/29/08) offered the following on foreclosures in the Baton Rouge market. Buyers are missing great real estate opportunities and Andrews explains why here:

Headlines in the national press would lead most observers to believe that residential foreclosure levels are at historic highs from coast to coast. The truth of the matter is that while foreclosure levels are high, the lion's share are limited to certain geographic areas that do not include Louisiana.

According to a recent report by the Mortgage Bankers Association, new foreclosure rates in the third quarter of 2007 were the highest in Nevada, Michigan, Ohio, Indiana and Florida. The mortgage type with the highest default rate, adjustable rate subprime loans, is the worst in California and Florida, which together account for 33.8% of all foreclosure starts in the category. Previous data implies that if you take out the top five or six states in terms of foreclosures, the remaining states are fairly stable.

There is no doubt that there were subprime loans made in Louisiana that have gone or will go bad. It appears, however, that the levels are consistent with previous years and certainly not the epidemic level being experienced elsewhere.

The unfortunate consequence of the mistaken impression that foreclosure rates have spiked in Louisiana is that local homebuyers are delaying purchases, thinking that prices will drop as lenders take back properties. I just do not see this price drop occurring in the Interstate 10/12 corridor and I feel that homebuyers are unnecessarily delaying purchases.

With interest rates continuing to be at historically low levels and home prices returning to pre-Katrina levels, creditworthy homebuyers really have no reason to wait out the South Louisiana market. If, however, you are looking for a steal of a deal, considering picking up a foreclosure in Flint, Mich. You might want to wait until the temperature gets above freezing.
--Brian Andrews

Baton Rouge Home Pricing on Par with SEC Cities

Thanks to the Baton Rouge Business Report's "Daily Report" for the following:

LSU’s football team might lead the SEC Western Division, but Baton Rouge home prices are in the middle of the Southeastern Conference. A Coldwell Banker report that ranks home prices in college towns found that a 2,200-square-foot home with four bedrooms and two-and-a-half baths costs $250,444 in Baton Rouge—just above the SEC average of $246,123 for the same house. Columbia, S.C., home of the University of South Carolina, was the least expensive SEC housing market, with a similar home costing just under $200,000. Gainesville, Fla., home of the University of Florida, was the most expensive, at $305,750. That’s nothing compared to Palo Alto, Calif., home of Stanford University and the most expensive housing market in a college town, where the standard home would cost nearly $1.7 million. Muncie, Ind., home of Ball State University, was the least expensive market, with an average home price of $150,000.

TNDs Gaining Popularity in Baton Rouge

The popularity of TNDs is in full swing in Baton Rouge. TNDs, the acronym for Traditional Neighborhood Developments, are attractive to homebuyers and retailers alike because of the sense of community they help foster.

TNDs successfully attract homeowners and retailers alike for a win-win formula. Homeowners enjoy being able to choose a home which fits their needs in a range of housing spanning condos to high-end single, family residences--all within blocks of each other. That often means families with children can have their retired grandparents living conveniently nearby.

Retailers look forward to locating in TNDs because of the more personalized customer service they can offer while enjoying a more loyal clientele.

To top it off, green spaces within the TND make leisure time more accessible to residents and the commercial spaces on site mean not having to fight traffic to get things done. The developments become a village within a city, hence the name "traditional neighborhood development."

Here in Baton Rouge, two TNDs currently under construction, Perkins Rowe (Perkins at Bluebonnet) and Willow Grove (right off Perkins Road) may soon be joined by Rouzan. Rouzan, which will be built on the 119-acre Ford Pasture site, will feature 800 residential units, split evenly between single-family homes and condominiums/townhomes, along with 45,000 square feet of office space, 45,000 square feet of retail space and 10,000 square feet of restaurants/cafés/delis. It also will contain a 20,000-square-foot library, 100-student Montessori school, a church and 23 acres of open space, including a village green and small parks. Plans for Tommy Spinosa's Rouzan are set to go before the city-parish Planning Commission on Oct. 22

Redeeming Airline at Bluebonnet

Have you watched the old Plantation Inn at the corner of Airline at Bluebonnet get bulldozed into oblivion? Probably not too many tears shed.

No big-box store here. That corner is being developed into a 50,000 square foot shopping center. The $10 million facilty will fill in the shopping "hole" and draw shoppers from Airline and Jefferson highways.

Expect commercial development to now move forward on the stretch of Bluebonnet between Airline and Jefferson. Click here for the Baton Rouge Business Report's link to the architect's rendering of what the shopping center will look like.

How is Baton Rouge Real Estate Doing?

If I'm asked anything as a realtor, I'm asked what I think about what direction the local housing market is going in terms of value. My answer is always positive because from what I see in the market, the Baton Rouge metro area simply isn't feeling the pinch being experienced elsewhere in the nation.

The forecast for home prices going up in Baton Rouge is milder, though, at 4.1% when compared to other Louisiana markets. That's largely due to the fact that Baton Rouge home prices have rallied substantially ever since Katrina, perhaps in greater measure than the rest of the state. Click HERE to see a current forecast of the various Louisiana markets along with analysis.

People I talk to still have the jitters that the impact the housing market nationwide is going to create a domino effect for Baton Rouge. But the folks at HousingPredictor.com seem to think that the U.S. has already turned the corner on the softening housing market. According to that website:

The tide is turning and the worst may be over in the national housing market slowdown, according to the latest assessment by Housing Predictor. The real estate slowdown experienced in the majority of the U.S. is signaling a change.

Housing Predictor continually updates its more than 250 local housing market forecasts in all 50 states, and at least 18 states now have housing markets that are appreciating, many with increased sales volume as a result of lower prices than in 2006.

Overall 56% of the nation's housing markets are appreciating or have stabilized, according to the study. Ten states are experiencing markets that are stabilizing.

Just in cases you were wondering, Louisiana is indeed one of the 18 states in the nation with appreciating values. To see just what HousingPredictor.com is saying about the state of the nation's real estate market, click HERE.