Beyond the Math: More Hardships, Rubbernecking & Kleenex Ahead
The statistics are reported everywhere we turn - 3.3 million loans which may qualify for loan modification have actually resulted in an incredibly meager number of modifications, helping only some 31,000 families. You do the math on that one, and don't spend too long looking for a calculator that can handle 15 digits. Off the top of my head, it sounds like the White House HAMP program to date has failed miserably for the millions of families who qualify but remain underwater.
Under the Obama plan, borrowers who meet the standards, rules and regulations enacted by the United States Treasury Department in 2009 should be able to modify the loans which they refinanced and purchased in 2005 and thereafter, during the "boom times." You can do the math on that one too, but I would say that considering the declining property values, destroyed credit ratings and uncontrolled unemployment, the Obama process just doesn't seem like it is working.
Richard Wilner, in last Sunday’s NY Post's article "Options to Keep Home Yours" announced that a new, untouched, unexplored and unreported crisis is the multi-billions of dollars that banks are carrying on their books for second mortgages. "Bank of America is exposed to $154.2 billion dollars; Wells Fargo is exposed to $127billion; JP Morgan Chase $124.8 billion; Citigroup $59 billion.” If banks do give the mortgage a serious rate cut to keep a family in place, then the value of the second lien on the home - which the banks carry on their books- could be wiped out. And that could be enough to make several banks insolvent. Perhaps that is why B.Of A. has concluded just 98 permanent modifications. The same is true of every major bank." Do the math on that one and I don't even have to comment.
It gets even better. Open the financial pages, go do your shopping on the internet and call your mortgage brokers. You’ll hear that mortgage rates in the United States have dropped to their lowest rates in the past 70 years. It’s just another well intentioned plan with fantastic mathematical possibilities down the drain. Borrow at lowest ever levels, yet deny access to these historically low interest rates. Like the old, yet trusted expression, it’s like giving away ice in the winter.
For any of those of you who have looked into the possibilities of re-financing or purchasing, you have personally witnessed some of the most expansive and intrusive questioning into your personal and professional lives. Refinancing could save you hundreds and thousands of dollars but yet this traditional source of credit is scarce and difficult to find, even for the very best and elite, much less the first time homebuyers or middle class families.
Taking this another step, Mr. Wilner extends a well pointed finger.."In an ironic twist, the only thing worse than HAMP's failure would have been the absolute success of HAMP. Can you image saddling the banks with 2 percent 40 year mortgages should there be inflation? If you think the banks are bad at lending money now, they would never lend money under those circumstance."
The rumor mill is working overtime. Neighbors are sitting at their kitchen tables and wondering if the little signs of disrepair in their neighborhoods are signs of foreclosure and arrears. When our friends are unemployed and tales are told in our elementary schools and upper grades of their moms and dads unemployment, it's a sign of the times. The super growth of mortgage arrears have created huge rubbernecks and tie ups for our major lenders to handle, even during their unprecedented struggles to remain viable and productive.
Go past the math and statistical reports. Look around and witness the unparalleled demise of the American home ownership program as we know it. My advice for Realtors, bankers, buyers, sellers, landlords and tenants, or anyone with a keen interest in the economy and a sharply honed desire to strike it rich is-----buy Kleenex. Simply stated, until we get the math working and producing loan modifications, we will all see a steadily growing demand for tissues to wipe away the tears.
As a post closing note to those of you following Judge Spinner's "Horoski Dismissal Case,” Carl MacGowan in Saturday's Long Island Newsday, reports that OneWest, the parent company of IndyMac Mortgage Services, admitted that it erred in sending the family a demand letter even after the judge dismissed the case." This case will be followed closely as it winds it way thru post judgment and appellate practice. Keep this one right on your radar screen because it may prove to be our modern day version of David v. Goliath.
