That's pretty much how I see it...of course it depends on the buyer's present rate and situation, but given the requirement for being current on the mortgage, it just doesn't seem like this is going to save all that many people who are in real danger of losing their homes, just represent a modest monthly payment decrease but at the cost of all the normal refinancing expenses.
I guess it would help some people who are facing doom when a looming balloon payment comes due on an underwater house, but I'm not sure that translates to a particularly large number of borrowers.
I doubt there are many who still have ARM's to come due. Most buyers did one or two year ARM's and those would have come due by now, because most lenders stopped ARMs in 2008(?). I had 3 5yr ones and they worked out great for me. Even if there are still some out there, the interest rates are so much lower now, they will probably not get the reduction (banks don't like to reduce
) but neither will they get an increase as the ARM interest would most likely be the one locked in.
The only ones I can see this helping, are people who are way upside down in their home value, just because of market conditions, not because they have had financial problems. Or someone who has lost their job - or job transfer and can't sell their house- or spousal income due to divorce, illness or death. Most importantly that they have not yet missed a payment.
Most people that are trying for loan modification, have missed one payment...and while they are trying to get their lender to adjust their payments, the lender's foreclosure department has already started the foreclosure process.
The other bad thing about people who are going through loan modification....they make the reduced payment for 3-6 months, in order for final approval. HOWEVER, and most important....is during this time, the homeowner is actually in default because they are not making the full payment!!! It's incredibly screwy! The entire time the homeowner receives nasty letters from the foreclosure dept of their lender. One couple I know that went through it last year (he's a realtor, and she's a restaurant manager) were terrified they would lose their house, even though they were doing exactly what the loan modification dept was telling them to do, they were getting a letter at least every other week then every week for 6 MONTHS from the foreclosure department!! It finally worked out, and they were able to get a reduced interest rate (what they were asking for - not a lowering of the loan amount), but she was a basket case in the meantime.
The banks could have stopped all this "under water" issue months - years - ago, if they had been willing to work with homeowners, instead of going straight to foreclosure, and giving themselves huge tax write-offs (losses)!!!!! The whole thing is a vicious cycle that is only getting worse because of continued foreclosures, short sales, or people just turning their keys over in lieu of deed.
A woman I work with at JTV and also is an agent in my office, just lost her husband in July due to a combination of Alzheimer's and he then had a stroke in June. They had already downsized to a nice 3br condo, that she could manage rather than the big house they had, when she had to put him in assisted living after the stroke. After he died, she found out, that he had done "something" with all their investments, his retirement, life insurance... he'd had the Alzheimer's symptoms for abt 3 yrs. She now has to move, but can't sell the condo for what they paid for it a couple of years ago!! And because she is just turning 59 in December, she can't collect his SS until she turns 62 (if it's still available!) and their income has been reduced 2/3's. After 30 yrs of marriage, and a comfortable life....she's now screwed.
A friend's parents relocated from KY to down near Chattanooga. They've had their house in KY, on the market for almost 2.5 YEARS and can't sell it. They are now turning it over to the bank in lieu of deed, because they can't continue to make the payment their and on the property in TN that they have had for many years (it's a family farm) and they are just giving up whatever equity there is on the property in KY which is the only reason it supposedly isn't going to affect their credit. I will be surprised if it doesn't have a credit affect even though the bank is telling them it won't.
A guy I work with, is giving his house back in AL because it hasn't sold in 2 yrs. He had rented it out on a lease purchase when he moved up here about 4 years ago and the renter then couldn't get loan approval because they couldn't put 10% down. He then had a short sale contract, but after 6 months, couldn't get the bank to agree to it. Now he's giving it back rather than go through the foreclosure process, because it won't be as bad on his credit.
The more houses that go into foreclosure because people can't sell their home - because of market conditions whether it be a saturated market(there is a 3.5 YEAR housing supply on the market right now in my area), or houses are selling for tens of thousands of dollars less than what the homeowner paid for them, or they are competing against houses that were foreclosed on then purchased by investors and totally renovated (hard to compete against at fair market price) or too many foreclosures available within a specific radius of one's home - the market is only going to continue to deteriorate.
"Obama's Plan" might look good to some, but it's only good as far as words being said, in reality it's just another scam to benefit the banks and not benefit any homeowner who's in trouble, or for that matter the homeowner who can afford his payments as long as nothing - absolutely nothing - changes in his life (job, health, marital situation, children). How many people never have changes in their lives? Not many. All one has to do is read what happens to CC members and we are just a very small percentage of the general population, to realize that changes happen every day.
