Helping Homeowners

How many homeowners have been watching or reading the news and wondering when will I get a bail out – or at least some help? I know this thought has gone thru my mind a few times over the past year, and I am sure not to be alone there. Although it seems most of the help and stimulus has been designed to assist people looking to buy homes, there are actually a fair amount of programs the government has put together to assist current home owners. And even though they are not getting the same sort of publicity as the homebuyer stimulus programs, they actually should be more effective in helping individuals and our economy overall.

The first step taken by the government that has been put into action is not only encouraging lenders to modify loans, but in fact subsidizing the modifications for existing home owners. This is a huge help to a great deal of home owners who do not want to lose their house, but are facing increased payments or even foreclosure. As well, the criteria for modification is rather basic, requiring that you can qualify at the reduced payment, are in fact experiencing a hardship & have depleted savings and assets necessary to make payments, along with few other restrictions. I encourage any of you fitting this basic criterion to either contact your lender directly to see what can be worked out, or to work with a trusted professional to help lower your payments and even possibly lower your principal balance or eliminate a 2nd mortgage.

Another great plan that has been put into action is that the government is subsidizing some loan refinance transactions. Starting April 4, anyone with a current Fannie Mae or Freddie Mac loan can apply for a refinance of up to 105% of the current homes value! This is a great deal for people who have little or negative equity but do want to stay in their home. We all know interest rates are down, but until now if you didn’t have significant equity in your home there was no ability to refinance without paying down your loan balance drastically to qualify or acquiring costly mortgage insurance. For example, if you had bought a house for $500,000, put 20% or $100,000 down payment, but now find the house worth only $380,000 what would you do? Well recently a lot of these people would just walk away since all of their equity is gone, now owe more than the property is even worth and typically have seen their payments increase due to an adjustable mortgage. But as long as you can qualify for the new loan, the government will help you borrow up to 105% of the homes current value on a fixed rate mortgage, effectively allowing you to stay in the house with much better loan terms and or a decreased payment – and all of this without requiring mortgage insurance.

Also, aside from seeking government aid, for those who can fit the requirements, interest rates are extremely low right now and refinancing is a great option for many home owners. Recently the jumbo-conforming loan limit was raised again, and that brings us back up to over $729k for the Bay Area. We have been seeing these loans with rates as low as 4.5%, and averaging closer to 5%, but still are extremely cheap for a 30 year fixed. Although requirements have tightened, a lot of these loans are being done and we are seeing homeowners saving significant amounts of money through refinancing. And not only are these government backed loans looking great, some really strong jumbo financing for loans up to $2M and even home equity lines are coming back around.

Lastly, homeowners need to feel encouraged by all that has been done to promote buying opportunities. Even if you do not want to sell your home, the fact that buyers are getting more confident will help create a floor on housing prices. The sooner we can find that bottom, the better it is for all home owners. That said, for those who may be looking to sell, the fact that there are more buyers out there will help you to sell faster, negotiate better terms on your sale, and even help prop up home values. As we have seen in years past, when there are multiple people bidding for your home the chances of you getting your asking price is a lot great than when having one bidder.

Although a lot of what we hear on the news has been of a doom & gloom scenario, there have become many reasons for homeowners to be quite optimistic. The government is doing all they can to assist current homeowners, they are encouraging new home buyers and overall people are feeling a lot better about the economy than they did 6 months ago. Combine that optimism with the ability to capitalize on these record low interest rates - or even a loan modification for those who thought they had no options left - and it’s obvious why homeowners are getting more excited. Although these programs can’t help everybody, they sure are helping a lot of people already, and will help many more in the future.

If you have any questions about your particular scenario and would like further assistance please do not hesitate to contact George at 650.558.5326 or George@RedOakCorp.com.