Thoughts for 2010...Your opinions welcome!

Posted by Carolyn A. Capalbo on Saturday, January 2nd, 2010 at 9:15pm.

Happy New Year and Welcome 2010

What is in store for 2010?  That is a huge question.  2009 was a year of tremendous Government intervention.  We realized the implementation of the TARP program (which seems to still be defining itself); the HARP program (Home Affordable Refinance Program) which is limited to Fannie and Freddie owned loans, non-delinquent owner occupants, and for loan to value ratios up to 125%; HAMP (Home Affordable Modification Program) which is eligible for owner occupied borrowers who are delinquent on their mortgages or facing imminent risk of default, whose loan balance is less than $729,750, and have a loan origination date before January 1, 2009; HAFA (Home Affordable Foreclosure Alternative) which allows borrowers who are not eligible for HAMP or are in default of their modifications, the opportunity to work out a streamlined short sale or Deed-in-Lieu of foreclosure.  In addition, the Fed continues its aggressive purchase of mortgage bonds at very tight margins keeping interest rates artificially low.  This trend is forecasted to end as early as March 2010.  With the Feds out of the mortgage bond market, expect interest rates to rise to true market rates.  WHEW…What does all this mean, besides higher taxes?  It means that the Government is intervening with banks to stall, delay and hopefully reduce the number of foreclosures in the market place.  Since the inception of these alternatives, the actual success rate has not been nearly as high as initially anticipated.    The Treasury Department has made a blanket commitment to support the administration's HAMP program through Fannie and Freddie.  So anticipate additional Government intervention in the hopes of delaying or eliminating many foreclosures.

I anticipate a quick rush by lenders to complete foreclosure activity on a large pool of files that are currently in foreclosure; but, not yet foreclosed upon.  This will be some of that illusive shadow inventory that we have been hearing about; but, not seeing on the market as REO inventory for about a year now.  This foreclosure activity might be the catalyst to prompt additional government policy to once again put the squeeze on the banks to improve upon their participation in HAMP and HAFA.

Has the Federal Government actually looked at the cost of these programs and the long term effect this will have on America?  Has the Federal Government considered the anger and potential backlash from those that pay their bills and are current on their mortgages even though they are (or are not) upside down?  There is a large pool of homeowners that just don’t feel like paying their mortgages because their home’s values have plunged and it is no longer a good investment.  Is the Federal Government going to allow for principal reduction to everyone that complains about their monthly mortgage payments?  What will the Government do about the borrower that purchased their home with the assumption that the market will always rise?  Many of these borrowers intentionally inflated their incomes to purchase properties that they could not afford otherwise.   In addition, many of these homeowners purchased their homes with pay option arms and took advantage of negative amortization loan programs.  Is it fair to ask the American tax payer to bail out these homeowners that committed fraud, miscalculated the market, or invested unwisely by allowing dramatic principal reductions through HAMP?   

There are many Americans today facing serious hardships and need assistance.  Streamlining the short sale process and credit counseling are a necessity to assist those with hardships by getting them the help they need and giving them the opportunity to reexamine their housing requirements and monthly housing budgets.   Approximately 70% of the homeowners I meet that go through foreclosure did nothing to prevent the foreclosure.  They did not look into modifying their loans nor did they try to sell their homes through the short sale process.  Most do not understand the far reaching implications of the foreclosure.  If you or anyone you know is having financial challenges, please have them reach out and learn about the options currently available…I will always provide free and confidential real estate advise in an effort to help struggling homeowners avoid foreclosure!  It is important to note that a foreclosure stays with you on your credit history forever.  A borrower can recover from a short sale in about 2 years and be able to purchase a home again providing they maintain good credit. 

Carolyn Capalbo,
Northern Virginia REALTOR®

 

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