I am constantly confounded by the way Government runs and handles programs. While this is not a partisan attack of one administration or another, it is certainly an attach of the current one creating the process.
The current housing market is a “prime” (pun intended) example of just such.
The process of rewriting or reworking a mortgage for a home owner is onerous, confusing, and shrouded in mystery.
I can attest to that, as I have tried in vain to get some resemblance of help on my house in Chicago. The company I have currently- American Home Mortgage, is in receivership.
That means not only can they not attempt a modification, they have- according to the Obama scorecard- helped exactly ZERO homeowners.
Yes, there is indeed a problem.
The following article does a good job of outlining the issues and challenges.
http://www.msnbc.msn.com/id/35062033/ns/business-mortgage_mess//
Take a look at the following paragraph for the steps in sequence. I especially like the use of the word “simple” in the first sentence. If it were so simple, why is nothing getting done?
“Saving a home from foreclosure can be as simple as rewriting a costly, high-rate subprime loan to prevailing mortgage market rates. If that doesn’t bring the payment to within roughly 31 percent of a homeowners’ monthly income, HAMP guidelines require mortgage servicers to follow a step-by-step process to cut mortgage payments further. First, they can write down the interest rate to as low as 2 percent and then stretch the term of the loan to 40 years. If that doesn’t work, lenders can cut the amount of principal owed.”
My suggestion is to turn the entire program UPSIDE DOWN!
That doesn’t mean throw it out, it means start from the bottom.
If the government would “force” the mortgage companies to rewrite all the current mortgages at “current” market value, you would be able to take a fresh approach.
For instance- if a house was worth $900,000, and is now only worth $600,000- take the write down and create a new mortgage at that amount, and into a fixed interest vehicle
The lender could then look at the new payment amount and quickly determine if the current homeowner could afford the property.
Under the current program, the loan is modified at the current amount owed- which in the end, really gives little incentive to paying on a property.
The Government’s solution? Let’s give the lender $4K in a bounty to try to rework a loan? Funny?
What a disaster.
Why not find a why to really help the homeowner in a way that makes sense for them.
Is that going to happen? No, it seems the Governments next big solution to this problem is……..to give more disclosure of the guidlines…that in and of themselves aren’t working.
Ahhhh, you have to love big Government.