This fix is illusory. In all fairness, someone who is current on their mortgage, and has been that way historically, is unable to refinance at the now low rates because the appraisal will show they are underwater (debt more than value of home). While this allows them to refinance at lower rates, it doesn’t address the real problem. As long as these people will stay in the house for many years, their debt will ultimately be less than the value via amortization.
The real problem is those that don’t pay. I know, the big bad banks made them sign those notes and take all that money, but they are dumb and didn’t know what they were doing. In the meantime, they are living rent / mortgage free and the courts, state governments and the feds are protecting them. As a lender, you simply can’t foreclose in any reasonable time frame.
The answer; give the holdover $2,500 (you pick a number) to vacate and have money to put down a deposit on a rental. Sell the now empty house to a qualified buyer at market prices and move on. The lender is taking the hit anyways; the quicker the better. Sure, this isn’t fair to the people who pay; but it is the only way to get the housing industry bottomed out and moving again.
In your plan you say give the holder $2500 dollars to vacate , then sell the house at market Prices.
That idea doesn’t make sense to me.
Why not just write off the present mortgage, have the house appraised and let the present occupant buy it again at market price, if he can make the payments?
I agree - and hell, the $2500 payout would be a lot cheaper than what they’ve been doing.
I don’t see the problem. I bought in 2007 and am underwater. So what? I promised to pay a fixed amount over 30 years. I am 5 years in and have 25 years to go. It sucks for those that lost jobs and can’t relocate, but why should I be given a refinance? If people bought their house as an investment and not as a home, why should they be bailed out? I know a lot of young people are stuck in have empty condos in sketchy neighborhoods, $300k in debt for a unit worth $125k, and they want to get out so they can start a family, but they should have thought of the possibility they would be there for the long run when they bought it.
Excellent points. Le me expand. What is never mentioned when poeple arfe allowed to remain in their homes, paying nothing, for years, is that absolutely NO maintenance, repairs, etc, are done to these homes..thus, when the lender finally gets possession, they are often faced with tens of thousands of costs...(people remove all appliances, as an example) for repairs, water damage, etc...or have to lower their price accordingly..
Lots of lenders have a (little used) Cash for Keys program. Little used because you need a desirable property AND a cooperative borrower.
The Answer. Give struggling homeowners the option to refi at 2% regardless of equity.