President’s Plan Short on Details Big on Hope

I just read the executive summary of President Obama’s Homeowner Affordability and Stability Plan. After getting through the smoke, all that’s left is hope. The way the plan stands now, it is no more than a psychological ploy to make people hopeful. I don’t see how it can be executed anything soon.

I really struggled with whether I should write this article. It’s a bit of a rant, but I’m frustrated with politicians grandstanding instead of working to solve problems. Ah, what was I thinking?

I was hoping for a real plan that would deal with some the issues we are all facing today, like falling prices and mortgage money availability. Instead, we get a plan for increased funding of what are essentially government owned mortgage companies – Fannie Mae and Freddie Mac.

Freddie Mac and Fannie Mae make out great. Here are some quotes from the executive briefing:

Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.

Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.

Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.

So the bailout of Fannie Mae and Freddie Mac continues but it’s going to cost more. The briefing states that these moves are designed to “maintain mortgage availability.” Well rates are currently very low, but availability is not. So, if we maintain the current rates, there’s no progress.

The conditions for home owners to stay in their homes and modify mortgages are very vague, but by the time the rules are written, most struggling homeowners will not make the cut and may not want to. They require government / lender cooperation. Why would the mega lenders choose to do anything other than accept the payouts they are currently receiving from Uncle Sam. Here’s what the “take” has been to date:

So the plan for homeowners is less than the amount given to Citibank and Bank of America to date. Wow.

The briefing also touts the mortgage mitigation program designed by the FDIC. This is the program used at IndyMac that has resulted in 50% default rates on the workouts. Less hope they learned something.

I’m slowly resigning myself to the belief that the market will fix itself through the efforts of individuals and small businesses. Politicians will continue to grandstand and give out money to those who contribute most to their campaign coffers and offer the best payback after they leave office.

In the meantime, people in Arizona, California and Florida suffer. Everyone who owns Daytona Beach and Ormond Beach real estate has seen the value of their homes fall way too much. The market will adjust in the end and we’ll be OK – until the next time.

The Affect of the Next $350 Billion Bailout for Daytona Beach Real Estate

Yesterday, the $350 billion in bailout or TARP funds were release by Congress. The release came in response to requests from the incoming Obama administration to help the national economy.

Part of the conditions of the second release is that financial institutions receiving funds work with home owners on mortgage modification or mitigation to help them stay in their homes.  Up to $100 billion of the $350 billion is targeted to individual home owners.

So What?

We have been advocating for mortgage mitigation as a necessity to the rebound of the Daytona Beach real estate market. Why?

1. There are too many homes on the market
2. More foreclosures are immanent unless action is taken
3. Too many homes drive down prices
4. Banks dumping properties through foreclosure and short sales drive down prices

Mortgage mitigation should help all four of the factor listed above. There are over 5700 Daytona Beach homes and condos listed for sale in the MLS as of this morning.  We sold less than 3,000 homes and condos last year. That’s not a pretty picture. Foreclosures and short sales will continue at a high rate until 2010-2011 unless more people can stay in their current homes.

Yes, it’s a hard pill to follow for those who continue making their payments. Helping people who many consider “irrepsponbile” angers many. I’m not going to take sides, but merely say, unless something changes, prices will continue to fall and more homes will become distressed properties. This action should help all home owners if prices stop falling and homes go off the market.

I’ve created a new page that on Daytona Beach Real Estate Mortgage Modification so that we can all keep current on the issue. Please visit that page for more.