So . . . What Do You Think? (foreclosure, loan, interest rate, value)
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It's really a bait and switch. They went through all the trouble to make everyone think they're getting assistance, but when you look at it, banks don't have to do anything they don't want and the criteria are almost impossible to meet for someone that's already having financial issues.
Ladies and gentlemen....welcome to the next four years! Say one thing, do another.
I thought there were a few bright spots in the plan. However, one thing that I think is a Catch-22 is that the re-fi's to lower interest rates are only available if the amount owed on the home is less than 105% of it's market value. That means that homes purchased with 90% to 100% financing (which was typical in 2005/2006 could not have lost more than 5-15% of their market value. Sorry, but most markets have seen drops of much more than that from their peak in 2006.
Ex. Homebuyer purchase home at peak in 2006 for $300,000.
Put 5% down (pretty typical) <$15,000>
Loan balance $285,000.
Market value for refi must be no less than $271,000. (If they went 100% financing at the outset, then the market value would have to be at least $285,000 in order for them to re-fi.)
Current market value in many areas will probably be anywhere from $270,000 (10% drop in home prices from peak) to $180,000 (40% drop in home prices - such as Las Vegas, Phx, and So. Cal.)
In other words, I don't see how this plan is going to help homeowners in the areas hardest hit by the downturn and high foreclosure rates).
I thought there were a few bright spots in the plan. However, one thing that I think is a Catch-22 is that the re-fi's to lower interest rates are only available if the amount owed on the home is less than 105% of it's market value. That means that homes purchased with 90% to 100% financing (which was typical in 2005/2006 could not have lost more than 5-15% of their market value. Sorry, but most markets have seen drops of much more than that from their peak in 2006.
Ex. Homebuyer purchase home at peak in 2006 for $300,000.
Put 5% down (pretty typical) <$15,000>
Loan balance $285,000.
Market value for refi must be no less than $271,000. (If they went 100% financing at the outset, then the market value would have to be at least $285,000 in order for them to re-fi.)
Current market value in many areas will probably be anywhere from $270,000 (10% drop in home prices from peak) to $180,000 (40% drop in home prices - such as Las Vegas, Phx, and So. Cal.)
In other words, I don't see how this plan is going to help homeowners in the areas hardest hit by the downturn and high foreclosure rates).
I agree. It would have to be at 125% of value to help those folks and more in those really hard hit areas.
This looks very significant to me, what am I missing?
That was a couple of bytes from the package. There were other things in the plan that I thought would possibly be of more benefits . . . and a couple of things that may prove pretty useless here in the trenches.
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