If you are having trouble paying your mortgage and trying to stop foreclosure, you probably know that things are very tough for many borrowers. At Lender Rate Match we have been monitoring thousands of loan programs over several years, and we’ve seen extraordinary changes in mortgage loan programs and what it takes to qualify.
If you have decent credit, equity in your home or a good sized down payment, and a job that pays you a steady W-2′d salaried (meaning taxes are withheld), then plenty of good loan programs still exist and we encourage you to compare mortgage rates.
But if you are someone who is self-employed, you owe more than your house is worth or your credit is bad (maybe you’ve missed payments), then your options are more limited.
In particular, it’s the homeowners who are “under water” - meaning they owe more than their house is worth - that are really in a tough bind.
The new housing legislation is supposed to help that with an FHA option that allows lenders to write off some of the balance of the loan now in exchange for a share of the appreciation of the home later.
But it’s a voluntary program, and that’s the big problem.
Many lenders simply are not working with borrowers on long-term solutions. They are only plugging the leaks temporarily, and they need someone with some authority to help right the ship. That person could - and in my opinion should - be a bankruptcy judge with the authority to direct a lender to restructure a bad loan to give the consumer the opportunity to pay off a loan based on the current value.
The New York Times agrees. In a recent editorial, they called for the same reform that many consumer advocacy groups have been pushing for:
…lawmakers should be ready to reform the bankruptcy law so that homeowners can have their mortgages modified under court protection. That is arguably the best way to prevent foreclosures, but it is also the policy most reviled by the mortgage industry
It’s a solution that costs taxpayers nothing, yet can save millions of homes from foreclosure and halt the downward spiral that vacant homes are causing, even for homeowners with no trouble making their payments.
While the media and the market scrutinized every word of the Federal Reserve Board’s message last month, it seemed to overlook the most important signal - which was there loud and clear for anyone reading between the lines.
It went like this: “Refinance your adjustable-rate mortgage now, if you can.”
That’s the logical interpretation of the Fed’s current position…
I was interviewed on this topic for a story by Chuck Jaffe of Marketwatch and if you are in an ARM I hope you’ll take a minute to read it and heed the warning.
Posts
