Obama's Big Plan!

Well, finally we have something from the feds that can have a big impact on the housing crisis! Team Obama has scored a big win with the new stimulus plan that is set to take effect sometime in March.

Here are a few highlights...

• Enabling 4 to 5 Million Responsible Homeowners to Refinance. If you're underwater on your mortgage and it's owned by Fannie Man or Freddie Mac, you may be able to refinance into a much lower interest rate, given that you've been paying your mortgage in a responsible fashion. -- If you intend to stay in your home for the long haul, this sounds really attractive.
• Reducing Monthly Payments. There will be a low cost refinance for those who don't have 20% equity in their homes. -- This sounds good if you've been thwarted in your attempts to refinance.
• Helping Hard Pressed Homeowners Stay in Their Homes. This initiative is to help those struggling with mortgage payments because of an interest rate increase, yet cannot sell their homes. -- I assume homeowners will be allowed to apply for some sort of loan modification. Exactly how remains to be seen.
• Protecting Neighborhoods. When a home is foreclosed on all of the surrounding properties are affected negatively. There is some plan to help the surrouding homeowners retain their home values. -- I don't know how this one is going to work.
• Support for Responsible Homeowners. This plan will help homeowners get loan modifications before they start missing payments. -- How will these people be targeted?
• Shared Effort to Reduce Monthly Payments. This is a plan to bring a homeowners mortgage payment down to 38 percent of his monthly income by reducing his interest rate. Furthermore, there is incentive to get the mortgage payment down to 31 percent. Lenders will also be able to reduce the principal to bring down the monthly mortgage payment. -- This sounds like a winner, which is simply just modifying the mortgage to make it reasonable for the homeowner to pay each month.
• "Pay for Success" Incentives to Servicers. Mortgage servicers will get an up-front fee of $1,000 foe each eligible loan modification meeting guidelines established under the initiative. They will also receive monthly fees for three years, up to $1,000, as lon as the homeowner stays current on the loan. -- This sounds like a winner. There's no incentive greater than money to get the job done.
• Incentives to Help Borrowers Stay Current. A monthly balance reduction plan is proposed to those who pay their mortgage on time. -- For obvious reason this sounds like a winner too.

All in all, I think this plan is ambitious and can help a whole lot of folks who are in trouble, however there may still be a whole lot of folks who are left standing outside in the storm. If your mortgage ain't owned by Fannie or Freddie, what do you do? Are Alt-A and subprime loans eligible for the plan? It doesn't sound like it just yet. How will second mortgages be affected? How will the PMI companies handle insuring the mortgages?

What I'm really saying is I don't know what's going to happen. Things are still very much up in the air. We in the mortgage industry are anxiously awaiting guidelines from banks, investors, etcetera. This housing problem is so complicated that even if the President seems to have a perfect solution for it, it has tidal wave effects throughout the entire economy, the ramifications of which are obviously undetermined at this point in time.

But, aha, I did look into my crystal ball this morning. What did I see? My prediction is that this plan is going to help a lot of people and do a great job, but implementing it might be a pain you know where. It all seems to be one giant loan modification. The question is who is going to do all of the modifying???

Anyway, if you have any questions or concerns, contact me.