Incoming Maturity of ARMs Signals Another Wave of Foreclosures

Posted on December 11th, 2008 in Foreclosure Crisis by Mary

Adjustable Rate Mortgages (ARMs) are time bombs threatening to explode in the already devastated economy. By mid-2009, a new wave of ARMs will reset.

ARMs initially offer affordable monthly payments. What the borrowers do not know is that deferring their mortgages would only cause their debt to pile up. Then, when the time is up, or the mortgage matures, interest increases making payment more difficult. When the borrower can not pay anymore, foreclosure comes in.

Economist Elliot Eisenberg and the National Association of Home Builders (NAHB) believe that the whole housing industry must be fixed first to help our economy recover. They consider foreclosure as the root of the economic downfall.

With that being said, ARMs must be targeted too since this home loan product usually ends up to foreclosure.

Furthermore, Eisenberg warns home builders that 2009 is not yet the fresh start for housing with the upcoming reset of ARMs. Home builders cost cut through reducing their inventory and letting go of some employees.

Eisenberg does not mean to scare the builders, businessmen, lenders, borrowers and the government. He just wants to educate. If your ARM is about to reset, he suggests to:
Do something now! Talk to your lender and fix it together.
If that does not work, find local lenders that are willing to help you save your home from foreclosure.

Eisenberg reiterates: If the housing industry does not recover, more jobs will be lost, businesses will fail, homes will devaluate, and tax revenues will also decline forcing the government to save up by cutting off areas like social services and public safety.

This constant flooding of foreclosures brought nothing good to our economy. Let us be reminded that giving attention to the foreclosure problem is a great leap in solving the economic depression.

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Foreclosure Crisis Watch: Hope for Homeowners Hopeless?

Posted on November 12th, 2008 in Foreclosure Crisis by admin

There will be an expected three million failed mortgages this year and 8,500 homes threatened for foreclosure per day. This is despite the 300 billion dollars allotted for the Bush administration’s Hope for Homeowners program. The scheme which has been in effect since last October 1 has gotten only 42 applications. In fact, the U.S. Department of Housing and Urban Development is expecting only 20,000 applicants for loan modifications come next autumn.

One can argue that homeowners and lenders have yet to be aware of their options under the said program. However, Hope for Homeowners itself is insufficient to help those with troubled mortgages. The program is limited since eligibility is confined only to those with mortgages taken out before January 1 of this year and to homeowners who are paying a home loan equivalent to 30 percent or more of their income.

Aside from this, it does not cover those who deliberately miss payments, those who provide false information to be eligible for the first mortgage, and those with second homes.

The so-called federal assistance is also not beneficial for bankers or lenders. 30-year mortgages insured by the Federal Housing Administration must be renegotiated into by bankers; while lenders, who should set new loans at 90 percent of the present property value appraisal, are taking losses. Also, prepayment penalties and subordinate liens are not allowed.

Added to these discouraging limitations, the program doesn’t allow for easy modification. Speculative investors who own already vacant properties, economic problems and repackaged mortgages bought by other parties are also not helping to make viable deals.

In this present state where brokers and bankers refrain from taking credit risks and interest rates have not been exactly appealing, the only solution for homeowners facing housing foreclosure or troubled mortgages is a revitalized market. It seems that current conditions are clamoring for an alternative plan.

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Foreclosure Crisis: Why It Keeps Getting Worse

Posted on October 30th, 2008 in Foreclosure Crisis by Johnny

For the period of July to September, there are over 2,700 Americans losing their homes to foreclosure each day. Such a huge number will make one think if the government is really doing anything to end the foreclosure crisis.

Foreclosure Crisis: Why It Keeps Getting Worse

Unfortunately, the federal government has been working over time – creating and approving mortgage rescue programs left and right – in order to address the problems in the housing industry. It is possible that the government has underestimated the foreclosure crisis and did not expect them to be quite as serious.

Some experts believe that this underestimation could have been the reason why the nation is having trouble keeping up with the foreclosure crisis. In addition, there are also certain factors that have made it nearly impossible to save the housing industry. They include:

For housing and consumer advocates, the government responses were also narrow and slow. Last July, a $300 million housing rescue program was launched in order to help at most 400,000 distressed homeowners. Obviously, the amount is not in the same league as the $700 billion bailout plan recently approved to help troubled financial investment corporations.

  • Plummeting home prices especially in states like California, Nevada and Florida.
  • Speculative buyers and investors who are walking away after their investments in real estate properties fell through.
  • High unemployment rate which is the primary reason why many homeowners were not able to meet their mortgage obligations. According to Freddie Mac, over 45 percent of all mortgage delinquencies cited job loss or unemployment as the cause.

The huge difference has already outraged a lot of politicians and resulted to a promising settlement with Bank of America, amounting to $8 billion earlier this month. The said settlement will take effect on December 1 and is designed to provide assistance to 400,000 Countrywide troubled borrowers in 11 states.

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