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Mortgage plan gives people runaround
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Steve Chiotakis: We're just about an hour away from the latest Case-Shiller Home Price Report, and economists expect property values have dropped around 18 percent in major metro areas from a year earlier. It doesn't take a housing expert to deduce that declining home values and widespread job losses have, in part, led to a big rise in foreclosures.
Now, the Obama administration has been trying to do something about the mess. But a loan modification program to keep people in their homes hasn't had the results many were hoping for. Mortgage servicers will be at the White House today to explain why. Marketplace's Mitchell Hartman reports.
Mitchell Hartman: Mortgage servicers -- companies like Wells Fargo, Bank of America, and GMAC -- can get $1,000 from the government for each loan that they modify. The idea is to help cash-strapped borrowers stay in their homes.
Stuart Brown of Valley Mortgage in Newburg, Ore., tries to help his clients negotiate with those big lenders:
Stuart Brown: They can negotiate for a reduction in the principal balance, for a temporary or a permanent reduction in the interest rate, or a reduced payment with deferred interest so they can get back on their feet.
But Brown says many people have gotten the runaround.
That's also the charge from critics in Congress and housing advocates. They accuse mortgage servicers of delays getting the program off the ground. And, of misinformation: like telling homeowners they have to default before they can get a loan modification, and charging inappropriate up-front fees.
I'm Mitchell Hartman for Markeptlace.
Instead of a rental payment, let the homeowner make the payment toward the mortgage and the government can cover the difference in a mortgage assistance program which will be repaid over time.
Here is an example of how it could work.
• Mr. and Mrs. Z have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest).
• The Z’s lose their job and can only pay $470, so the government pays the difference of $700
• The Z’s remain homeowners and work through their problem. It takes the Z’s 10 months to get back on their feet, the government paid out $7,000 and now the Z’s owe the government.
• But the government says okay, you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.
I had a subprime loan. Credit scoring system is bad. worked on credit for years. Lost great sales job then Wells Fargo auctioned home.Dont blame subprime its the ECONOMY and greedy banks. We still have to live somewhere and pay 1000.00 month rent why dont the banks take that. They are still useing old credit and loan ways! times have changed they need to as well. PMI what a scam. Title search wow that is difficult was the title lost and why should it cost so much. Many problems. Achieved the American Dream of Home ownership and LOST it ALL!Including Savings
I agree. The Mortgage Servicers do not have a strong incentive to follow Obama's plan. What I would really like to see are statistics of how many people were targetted vs. how many people were actually able to utilize the Loan Modification and Loan Refinancing Plans? Amit.
I think that the federal government is missing the boat on all of these new mortgage plans. I recently did a refinance on my home with www.MortgageRefinancing.com and when I spoke to them and asked about these government plans they said that the lenders won't do them. The plans are great in theory for homeowners but the lenders are just not driven to mark down there assets for a $1000.
