Monday, March 16, 2009

Obama's Housing Plan Complexities

Is the housing plan that complex? Or are these the same people that did not bother to read or understand the ARMs and Pick-A-Payment mortgages they signed? An article in The Record titled Pulling housing out of its slump tries to simplify different parts of the plan. Lets take a look -

The [new $8,000 first-time home buyer tax] credit is one of a recent flurry of government actions aimed at jump-starting the housing market and stemming the foreclosure tide. And while the tax credit is great news for people like the Kinnes, other initiatives aren't so popular, or so clearly understood.

Housing counselors and mortgage brokers in New Jersey are fielding a barrage of inquiries from people hoping to get in on the new Obama plan for mortgage refinancing or modification.

"We're overwhelmed with calls," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, the state's largest HUD-certified counseling program. "Everybody thinks they qualify for everything. Very few people understand that, in the Obama plan, certain parts are for people current on their mortgage. Certain parts are for people whose mortgages are through Fannie Mae and Freddie Mac. We're spending hours just doing triage."

The refinancing part of the Making Home Affordable program is aimed at helping people in their primary residence who are current in their mortgage payments but who have been unable to refinance to a better rate because their equity evaporated as home prices have dropped.

The program applies only to mortgages backed by the government-supported mortgage giants Fannie Mae and Freddie Mac, and only to mortgages that are between 80 percent and 105 percent of the home's current value. So if you are seriously "underwater" – your mortgage is more than 5 percent greater than current home value – this program won't help you.

The $75 million-plus federal mortgage modification program aims to bring down payments on struggling homeowners' primary mortgages to no more than 31 percent of their income.

One woman who's been fighting foreclosure on her Bergen County home and who asked not to be named said she is confused by the new federal housing programs.

The federal loan modification and refinancing programs are expected to help keep a mass of people in their homes and potentially protect neighborhoods from the blight of vacant and vandalized homes. But what about jump-starting the housing market?

The Record sums up the three parts with a handy chart just below the picture here. The first part is for new homeowners. The second part is non-delinquent home owners whose Freddie and Fannie mortgages are either underwater or close to it that they can not refinance. The last part is for delinquent mortgage payers who have a financial possibility to stay in their home.

Of course all of the programs have income limits, mortgage limits, etc. If one is confused by the actual program that is one thing. If they are still confused after reading The Record's chart perhaps home owning is too complex. It's not rocket science but it is a bit harder than coloring within the lines.

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