Sunday, November 16, 2008

Hope for Homeowners....not so much

Remember the October bailout "Hope for Homeowners". This is the one the offered FHA backed loans to struggling homeowners. The banks were to write down the principal balance to 90% of current value and the FHA would then insure the loan. When the borrowers sold the FHA was to get 50% of the profit. It was hyped that this would help 400,000 people stay in their homes.

Now for the reality part
by Diana Olick

I’ve just seen the latest numbers on the recently launched government Hope for Homeowners program, and I’d call them laughable if the whole thing weren’t so blatantly sad.

Hope for Homeowners was launched Oct. 1 as part of the Housing and Economic Recovery Act signed into law on July 30,2008. Proponents used a Congressional Budget Office estimate of 400,000 homeowners that could be helped over three years. The latest projection was that 19,000 applications would be received in the first year.

The program works like this. A borrower in trouble contacts the lender, and the lender agrees to write down the principal to 90 percent of the current value of the property. They then get a new FHA insured loan. In return, when the borrower eventually sells the house, the government gets half the equity that is created after the new loan begins: in other words any appreciation. FHA will insure up to $300 billion in new loans.

Well I doubt we’re all going to have to worry about that $300 billion. Here’s the reality: In the last two weeks, FHA received exactly 69 applications to the H4H program. Since the start of the program, a little over a month ago, it has received 111. Now I’m no mathematician, but that doesn’t exactly extrapolate out to 400,000 over three years or even 19,000 over one year or even over a few months. In fact, HUD took the projections out of the release.


Paige said...

I just wanted to jump in and say that we finally bought a home in Riverside. Yes, there is that knowledge that prices will most likely go down, but we feel we found one where the price was right, for the zip code we wanted. This house at one time was going for $600,000 and we got it for half of that, plus we're comfortable with our payment and that's the most important thing.

Anyway, thanks for writing this blog. I've enjoyed reading it and will check in on occasion.

Martin Burtin said...

Hooray Paige! Very best wishes for you and your new diggs.

golfer_X said...

Congrats, Which tract did you buy in Paige?

OSA said...

if this program was mandatory and included everyone (not just those in foreclosure)would this not work. pretty much take away the artificial high of the bubble and start everyone at a more realisitc base price. Without principal reduction, why would anyone do any of the other programs that want to change amortization to 40 years or reduce interest rates. most people want to get realistic prices. also how many people really saw this coming?

OSA said...

is there amywhere that lists the 10 most desirable zip codes in the ie (for an average homeowner)?

Mike said...

I watch the sorry antics in DC - especially after reading your posts and I wonder what do we do about this mess these fools created?
So we just let the market take care of it? looks like that could pull way too much down. Do we ratchet up interest rates? well that could cause a true depression.
I think Paulson is giving our money away without strings to complete jerks who ruined everything in the first place -- so what should he do? I sure don't know and I'm gradually getting more and more p^^^ed off as our market goes to hell, our indebtedness is right behind....