THE GOVERNMENT is trying to fix the housing market!
We know there’s a major problem when the National Association of Realtors not only requested, but is already planning to host a Housing Summit in DC in October. Businessmen, economists, and policymakers should be in attendance. The purpose is to find a solution to the housing industry disaster.
Keep in mind that a problem is not going to be fixed, like a leaking water faucet, in one session. This crisis is too large and has never happened for lawmakers to have a solution to act on. Therefore, we are still in the fixing mode now and could be in it for another couple of years.
“Key Word” time line depends on your location some will take longer to cure and more than some areas will take much longer to recover.
First try : tax credits
The things that have been tried (some with a modicum of success, others, not so much), haven’t exactly done a whole lot to fix the housing mess. We had the First Time Buyer Credit, which also could apply to move-up buyers.I believe this sort of got all of us excited and got the market to react nicely but soon after the credit was gone, the market fizzled and did nothing on its own to keep the high running. Therefore, with the tsunami and the European crisis we are actually took two steps backward.
Second attempt: loan mods
There have been both government and individual bank programs for loan mods, in which interest rates, principle, and missed payments could all be reduced. Also included with the loan mods are programs for the unemployed and underemployed, initiatives to streamline short sales, and billions of dollars for states that are “hardest hit.”
While millions and millions of owners have not been helped as promised when bank and government sponsored programs rolled out, only a small percentage of people are getting modifications. And , they are also redefaulting at an alarming rate. That proofs that the first stages of the loan modification program has failed and they are implementing a new programs changing some guidelines to hope to make this new program work.
Attempt three: government programs
Fannie, Freddie, and other banks even had foreclosure moratoriums. A temporary fix, obviously. Then, of course, there was TARP, which, only helped the banks so they wouldn’t fold, and they’d have capital to lend. How’d that work out again? They are still not lending because of the new stringent policies of their own making.
We also have new departments in the government like the Consumer Financial Protection Bureau and a boatload of new rules thanks to the Dodd-Frank Bill. Since most of these have either just gone into effect or have yet to begin, it’s too soon to say what will come of them. Overall, the success rate has been dismal.
New ideas?
Some of the new, and fresh ideas bouncing around, are Fannie/Freddie REOs being turned into rentals, mass refinancing for loans backed by Fannie/Freddie, extending jumbo loan-limits, flood insurance, and let’s not forget the ever popular, but rarely done, principle write-downs for those filing bankruptcy, or for those who are underwater.
I believe this isn’t a housing problem, it’s a jobs problem. If a borrower or homeowner has little income or is on unemployment, if their credit scores are in the tank, they have zero dollars for a down payment, and their prospects for the future are bleak, who in their right mind would lend them money to buy or re-fi a house?
Now, I believe the once that are conservative enough to have saved money now would be able to buy nice properties for what it was worth back in early 2000, prices have fallen and out medium home pricing in CA is $304,520. In some areas, you could rent a home worth $100-150K for about $1,300-1,500 a month, which will get you a positive cash flow average 4-7% -- depending on financing.
Most of the investors are out looking for good deals and they are buying. Therefore, this is the time for you to buy if you have some money and a steady job.
Interest rates are at its all time low again, I have been saying that every two weeks, but it’s absolutely true – rates keep falling and making record lows. Let’s take advantage, refinance your mortgage, shorten terms and or cash out if you can buy another house.
A quote from Warren Buffett says: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
We believe in the US economic recovery now or later so we do what we can to prepare for it.
Feel free to still call about your loan modification concerns, I would like for you to read an LA Times article, dated August 19 about “State suing lawyers, alleging they defrauded homeowners.” You can also go online and research this topic.
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Thanks for your inquiries and feedbacks, please call Ken Go of 1st Innovative Finance Group at (562)508-7048 or write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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