When the program starts there will be numerous issues that will have to be worked out and resolved to have any real impact. Between new buyers with piggybacks and older homeowners that HELOCed all of their equity the number of second liens will be troublesome.
Obama's three-part plan unveiled this week has sparked hope - but also many questions - for millions of homeowners nationwide who are trying to save their homes or gain access to attractive lower interest rates.
The Obama administration plans to issue guidelines March 4 when the program starts. Included in the plan is a change in lending rules to help as many as 5 million homeowners refinance, $75 billion to help up to 4 million homeowners most at risk of foreclosure, and a pledge of $200 billion to mortgage giants
Fannie Maeand Freddie Macto help keep mortgage rates low.
While the plan is the most aggressive yet to attack the housing crisis, many people on the front lines remain skeptical. They've witnessed a series of highly touted plans that have done little to stop the downward plunge in housing prices and the wave of foreclosures that has left neighborhoods with vacant and boarded-up buildings. More than 950 foreclosures were recorded in Massachusetts in January alone - a 22 percent increase from the same month in 2008, according to data released yesterday by Warren Group, a real estate data firm.
The program requires that the owner of a second lien agree to the deal, but many lenders already have balked at similar requests.
For the most troubled borrowers - most at risk of losing their homes - Obama has set aside $75 billion to give incentives to mortgage servicers to negotiate more affordable loans, and money to borrowers to keep current on those loans. To encourage such loan modifications, the Treasury Department will issue guidelines for lenders and require those accepting federal bank bailout funds to implement those guidelines.
Terry Moore, a managing director for the consulting firm
Accenture, said the incentives will be helpful in spurring more loan modifications. But he said many servicers are under equipped and understaffed and face a myriad of challenges to helping troubled borrowers.
Another point that we have discussed is that the lenders have not adapted to the new requirements of renegotiating existing loans. There already was a process in place for those that defaulted on their loans - foreclosure. Lenders were set up to make money not figure out how to lose the least amount. The new mind frame has to be adopted by the lenders to make an impact.
Hopefully March 4th brings about a good plan that will stabilize the housing market....