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Foreclosures mount as govt expands Making Home Affordable program to help more troubled homeowners
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As more homeowners continue to face foreclosure, the government is stepping up their mortgage assistance program. When it first became available, the Making Home Affordable program was limited to those homeowners who owed no more than 5% of the current value of their property. Unfortunately, as home values continue to plummet this has made the program unavailable to the majority of homeowners looking to refinance their mortgages. Realizing this, the government has announced an adjustment to the program.
On Wednesday, Housing Secretary Shaun Donovan said the program will be expanded, allowing homeowners who owe 25% more than their homes are worth on the market to get refinancing help through the federal agencies. Owing more on a home than it's worth is referred to as being "underwater." Source: USA Today
While this is definitely a step in the right direction, analysts are skeptical about what impact it will have on the overall problem. They cite rising interest rates as the reason refinancing activity has dropped over the past month.
Refinancing activity has already dropped off as rates have risen. The refinancing share of mortgage activity decreased to 46.4% of total applications from 54% the previous week, according to a report Wednesday by the Mortgage Bankers Association. The MBA's refinance index, which measures refinancing activity, is at its lowest since November. Source: USA Today
There are other factors in play here aside from rising interest rates. As housing values continues to decline, the number of people who owe more than their home is worth continues to rise. Almost 22 percent of all mortgage holders were underwater by March 2009, according to real estate site Zillow.com. The government is trying to pull the housing market out of its current free fall and is hoping the new loan modification guidelines will bring more borrowers into the program. At the same time, at what point do homeowners decide it just doesn't make sense to keep paying into a property that continues to lose value? While foreclosure and/or bankruptcy do not carry the social and economic stigma they once did, do we have a moral obligation to pay our mortgage, aside from the legal one?
Homeowners used to do whatever they could to stay in their homes because they didn't want to lose them. They wanted to keep their "American Dream" of owning their own home. For those who bought at the height of the market boom, that dream has become a nightmare. Some have seen their property values plummet 50% or more in some areas of the country. Many have decided that they would be better served to just walk away from their home and mortgage. They even have a name for it. The phenomenon is known as "jingle mail" where the homeowner mails the keys to the home back to the lender, giving up the property.
Other homeowners simply have no choice. Job losses have forced many to choose between buying food or making mortgage payments. It is easy to sympathize with people who've lost their jobs, however what about those homeowners who can afford their mortgage payments and stop paying because they fear they'll never recoup their losses? Is that fair to the rest of those who faithfully paying their mortgages?
Those lucky enough to have bought at the right time may think they have escaped this economic tsunami but they haven't. We are all suffering from the housing crash in some form or another. Whether from families forced to leave their homes or half completed construction projects, our neighborhoods are deteriorating. Small business are finding it impossible to get loans for inventory. Banks are trying to recoup losses on defaulted accounts by raising fees and interest rates on all accounts including those who pay their bills on time. Like it or not, we are all in this together.
We keep hearing about reaching a bottom. Are we there yet? How do you feel about this? If you could walk away from your mortgage, would you? Please share your thoughts.
To learn more about Obama's expanded mortgage rescue plan and it's impact thus far click here.
To check the current value of your home go to Zillow.com
I can be reached at cheryl3539@yahoo.com Follow me on Twitter
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