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Refinancing change offers help for more in Vegas
Now, homeowners who are underwater — to a certain depth — may get new loans
Monday, July 6, 2009 | 2 a.m.
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Washington — The Obama administration’s announcement that it is loosening equity requirements for mortgage refinancing provides sizable relief for homeowners in Las Vegas, where so many loans are underwater.
The question is, will it be enough?
Housing Secretary Shaun Donovan made national news last week when he announced the new plan in Las Vegas, which he called ground zero of the housing crisis. Nevada has led the nation with the highest foreclosure rate every month since January 2007.
One of the most vexing problems for Nevadans under the original Obama housing rescue plan is that it failed to account for the equity problem that has left nearly 70 percent of Las Vegas homeowners owing more than their houses are now worth.
Without equity, most homeowners could not qualify for refinancing.
Under the original refinancing option, only homeowners whose mortgage was no more than 105 percent of the home’s value could qualify, say $210,000 on a house now valued at $200,000.
That option was of little help in Las Vegas, where housing values are half what they were in June 2006 and an estimated 67 percent of homeowners are underwater. Owners who want lower rates or out from an adjustable loan are stuck.
The change announced this week tweaks that requirement. Now, homeowners who owe as much as 125 percent of a home’s value can qualify for refinancing of their government-backed Fannie Mae or Freddie Mac loans. That means help for those who owe, say, $250,000 on a home now valued at $200,000.
President Barack Obama’s administration has been working on the adjustment for some time.
Just last week Obama told the Las Vegas Sun during an interview that it was considering lowering the equity requirement.
Democratic Rep. Dina Titus had written to the administration twice suggesting the change, and more recently Senate Majority Leader Harry Reid also called on the administration to adjust the equity requirement.
However, bankers and economists had warned against the government taking on too much risk.
Some skeptics worry the government-backed mortgage giants Fannie and Freddie exposed themselves to potential losses if newly refinanced homeowners default.
But Julia Gordon, a senior policy counsel at the Center for Responsible Lending, said the government faces greater risks if more homeowners go into foreclosure.
“From everything we know, the most important move we can make is to prevent people from defaulting at all,” Gordon said. “Once people get into trouble it’s proving extremely hard to get them out of trouble.”
The bigger question, she said, is: “How much it’s going to help, especially in the most underwater states — yours being more premier among them.”
Even though housing prices in Las Vegas have recently slowed their downward spiral, Gordon said the problem is that housing prices have dropped so precipitously that people who bought homes more recently face the biggest equity problems.
Many of those newer homeowners are also those who have adjustable rate loans that hit their peak of popularity in 2004 and 2005, when housing prices were also up. Las Vegas is one of the top areas in the nation for adjustable rate loans.
To be sure, Obama’s initial plan had been an improvement from the 20 percent equity requirements once on the books. But Nevadans complained it failed to go far enough to help them, and may be wondering about this next step.
“We’re hearing it won’t reach that many more people,” Gordon said.
Donovan said the Obama housing plan has already helped more families save their homes than any previous effort. Initially, the $75 billion plan aimed to help nearly 4 million to 5 million with refinancing and 3 million to 4 million with another aspect of the program for those in imminent risk of foreclosure by writing down their principal or interest to no more than about one-third of household income.
But the administration has been unable yet to provide a full accounting. Estimates are that tens of thousands of mortgages have been refinanced or modified and 200,000 offers for modifications have been made.
But millions of homes have fallen into foreclosure nationwide, with more expected. In March alone there were defaults on 10,000 mortgages in Nevada, a record.
The real estate Web site Zillow.com estimates that one-third of the nation’s mortgages are within the 125 percent equity range that would qualify for refinancing under the plan, though not all of those are held by Fannnie and Freddie.
Interest rates have inched back up from their lows when the plan was first announced earlier this year, making refinancing less attractive to some borrowers.
Fannie and Freddie estimate that another 2 million home-owners could be helped with this week’s change, sources said.
Scott Talbott, a senior vice president at the Financial Services Roundtable, an industry lobby representing the nation’s major banks, said every little bit helps.
“The point is to help people stay in their homes,” he said. “It will help a lot.”
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So this is July of 2009 and we going to get our next version of an Obama housing rescue plan.
While every little bit helps it is of no use to those that lost everything over the last 6 months.
This change should have been part of the Obama housing rescue plan from the get-go.
Another huge issue to that only 1/2 the people those with Fannie and Freddie bought mortgages get the benefit. What about the rest?
RE-FI by underwater LV homeowners has been a problem since early 2008.
Did Too Big To Fail Harry Reid'm and Weep forget to tell Obama about RE-FI 101.
But as Joe Biden said the Obama administration "misread how bad the economy was" and did not take the appropriate actions.
FU Obama, I'm walking away from my NOW $230,000 home I paid $485,000 for. You bail out everyone except the lil guy taking it up the @ss!!!
125 percent???????????? LMFAO!!!!
Keep smoking the weeed B.O. and Reid!!!
vegasj,
So a "little guy" could afford to go into a home valued, at the time, at $485,000? Really?
Comment removed by staff.
I love republican posters who continue to blame this situation on the current administration. Being a die hard republican I paint the problem on our party for failing to stop national builders from overbuilding, overcharging and now over-DUMPING new homes in our community.
This practice will keep prices down for the next five years, continue to push more people into foreclosure, destroying equity value for all homeowners and destroying any chance of coming out of this economy ditch for Clark County.
Here is a true republican that still believes we can have a government "Of the People, By the People and for God Sakes for the People....
IF we just push for a five year "Moratorium on New Homes"
Come on posters ... lets debate it here... today!
vegasj: Be sure you save your money cause in Nevada the bank can come after you for the difference in what you owe. They have the law on there side. You could be facing pay garnishment and collections for years. What makes you think its ok to agree to pay an amount and then later decide not to pay that amount? You and the other people who bought what they could not pay for are not going to get any respect from me when you walk away. You are the kind of dirt bag that has caused this housing crisis in the first place. Please pack everything up and move back to where ever it is you deadbeats hail from. You dont even deserve to live in a $230,000 home you should have remained a renter. You are the problem people like you are the cause of all of this.
in NV, 125% won't help at all. obama thinks his housing plan is gonna help that 7-9 million people? really?
"What makes you think its ok to agree to pay an amount and then later decide not to pay that amount?"
It seemed to be perfectly OK for Wall Street.
P.S. I tried calling Bank of America to see if I qualified (I actually met all the criteria). They told me they would have to call me back because "Phase 2 procedures" weren't in place yet. This was exactly the same response I got when I called six months ago - so I am now filled with confidence.
I also got through to a HUD-approved counselor who promptly informed me that they only handled modifications not refinances. Sigh.
Vegasj didn't cause this crisis, greedy mortgage lenders and greedy wall street weasels did.
I believe the 'sue for the difference' rule in NV has a 6 months statute of limitations. No bank is prepared to make that deadline considering how backed up they are with foreclosures. And I doubt any judge would rule in the bankers favor all things considered.
So LasVegas2009 are you a greedy banker/mortgage weasel or a greedy ARM backed securities dealer?
Vegasj can also eliminate that possibilty, as well as dispose of the tax liability, by filing a Chapter 13.
Your debt collector fear mongering won't work here.
AngryReader: Several people who walked away have been sued and are paying the difference back. The Banks have set-up departments to chase down the deadbeats. And nobody made the losers sign the contract in the first place.
To Vegasj and AngryReader,
It is attitudes like yours that has caused the value of my home to drop 30% since I purchased it less than 2 years ago. Maybe the banks were greedy and deserve to lose money, but I certainly wasn't greedy and I don't deserve to see my 25% down payment wiped away in a flash because some losers are voluntarily walking away from their promise to repay what they borrowed. And yes, I am using the term "losers" to describe those people who have jobs but are choosing not to pay their mortgage because their house has declined in value. I pray that those losers get their come-uppance somewhere down the line.
lasvegas2009, if the person walked away with the means to pay his mortgage, banks will sue. but if someone can hardly pay his mortgage, risk/close to foreclosure, you really think the banks are going to be suing any of those people who decide to just walk away?
i'm all for homeowner responsibility myself, i mean, come on, why sign a contract without reading it. your fault for signing it. how dumb can you be to sign a contract that you know where your payment is going to jump to something you can't afford in 5 years? if you want to say that you were going to sell beforehand, you were dumb to believe that you could do that when the market was in no way going to support it for long. people can try and blame the banking industry for the problems when for the most part, they are just as responsible, if not more, for not making a sound decision.
but still, if people walk away from their mortgage that they end up not being able to afford and would likely end in foreclosure anyways, the banks aren't going to sue you for money you don't have.
jaesun: The banks have 9 months to get a judgement its a simple filling. Then they have 7 years in which to collect. So they can come after these deadbeats later after they think they have gotten away with it. The banks will watch these peoples activities and send in the collectors when they see money. Most banks will more than likely just sell the debt for 10cents on the dollar to debt collectors who will track people down and hound them to pay. The point is whats the point of walking away if your gonna have to pay the difference anyway? Stay put the value will come back in 10 years and you have to have a place to live anyway. Why is being a deadbeat even acceptable in this country? Those who walk away should be and most will be held accountable. Pay now or pay later but you will pay if you walk away. Hard to get a job when you credit report is all messed up with collections.
I think this really proves that Biden is correct when he said the Obama adminstration has no freaking idea about the economy.
My condo is down 50%, and it won't recover its full lost, ever. I am still paying my mortgage, but looking to re-fi/mod with any chance I get.
I understand some people feeling that folks should not walk away from their homes, but folks like lasvegas2009 and jaesun are so unbalanced with their angry at the people who walk-away,that I wish they can channel some of that anger in to action against the banks/CEO's that got the bail-out/bonus in millions, but who in turn are fighting transpancy regulations and tightening up lending.....be fair. you're paying/paid a lot more for the bail-out than you will for the people who walked away.
I don't know the law in which the banks are going after people,but it sound like lasvegas2009 is hoping and praying the banks who got bailed-out, success in going after peoples' pay check. I wish you fetl the same way when you paid for their bail out/bonues.
Listen to your selves. Who caused this mess to begin with? Banks, r.e. investors, wall streeters, your government, and lets not forget the real estate agents. Put youself in the shoes of these "losers": Mr. and Mrs.Casey bought a small fixerupper home for $221,775 in 2006, it was all they could afford. They cleaned it up and painted it etc... Well by 2008, Mr. Casey lost his boom fed, high paying constuction job and has no other useful skills. He eventually got a new job at K-mart for less than half his old salary. They are making it, but BARELY. The old house needs a new roof and the a/c is acting up, but it will have to wait. Then the day came the foreclosed house across the street sold for $32,125 to a rich investor(from China). Today a "for rent" sign popped up out front of it "$950 Per Mo." Its reads. That $1700 a month payment just doesnt make sense anymore to the Casey's. Is it worth it? Perhaps they were dumb for wanting that home, it seemed right for them at the time... There are so many variations to this story and so many that have a similar story. If you think prices will rebound in less then 10 years your are dreaming. You will be lucky if you break even with what you owe/what its worth in 10 years. For those of you who wanna keep pointing fingers, and being upset with your neighbors, FINE. But while you are distracted with this crap the real problem tears on. The governemt is waisting our time and our money. And the same scum that created this mess and screwd soo many families are the same ones getting rich off of it again.
Like pissing on a forest fire,
We have one option
Add more gasoline!
These people wont be happy until we GIVE them a house.
Dead beats on a mission.
Foreclose and sell to an honest person this time.
No more handouts!
Nice observation mschaffer. Nice ;-)
no one should get a hand out or a free house and no one should get a bail out plus a million dollar bonus for bankrupting a company either,,,lets be fair Nick.
I was aginst the bailout but now everyone thinks its an excuse to not live up to their obligations. No matter what you offer these people they keep their hand out and want more. It is ridulous to buy a house and then tell the bank you will keep the house but not the loan.
The banks have done an awful job but that does not mean tax payers should fund endless welfare for people who do not deserve it.
What other city in the U.S. do Waiters and waitresses live in 2 story 2000 sq ft homes? No college, but want to live better than professionals across the U.S.
Las Vegans are not realilistic.
These homeowners have been enjoying a tax break for years. What happened to that money? They did not pay for their fair taxes and now want to weasel out of paying for the commitment to live in the neighborhood for 30 years paying their mortgage instead of rent.
Anyone who goes through foreclosure should lose the mortgage deduction on income taxes and pay back the tax break they enjoyed for in previous years.
A home is not a piggy bank!
Comment removed by staff.
AngryReader,
Las Vegas is the Land of Misfit Toys and every dead beat who grabbed a valet job and raked in $90K in 2002 through 2005 thought that a $485,000 KB/Lennar/Beazer/Any Other Beige House was a worthwhile investment that they could afford - especially at 120% LTV. Sure, the lenders are culpable but in the end, no one forced Joe Blackjack to sign the documents. Or the ATV payments, F150 payments, jet ski payments etc etc...
Stevphel, try the modification first, wait a few months, then try the refinance. The game will change when the lenders realize there are less players.
By the way, B of A is federally owned now, so they are kinda forced to play the game, which serves them right for not playing nicely to begin with....
Why on this earth did you buy a home priced at almost half a million dollars?
This is to whomever is thinking about walking away from their mortgage(s). I have two co-workers who are also friends of mine. Both of them got caught up in the buying frenzy and over leveraged themselves-too much borrowing and way too much spending. One bought two homes here in California. Classic tale of simultaneous falling value and rising mortgage payments. He collapsed and filed ch. 7 about a year ago. He had almost 100,000 in credit card debt trying to keep the ball rolling on his obligations. He actually was able to save his own house and come away unscathed. My other close friend bought two homes in Rhodes Ranch valued at about 800K. He also collapsed. In comparison he's trying to file bankruptcy but now he's being sued. These guys aren't going away the number they're suing for just gets larger. Today his kid's savings accounts were frozen..it's getting way harder to walk..be careful.
The mortgage originator got 1/2% of each loan that he made. Thus a $400,000 loan paid $2000 commission.
The appraiser didn't get any work unless his appraisals came up with a market value that enabled the loan to be closed. Don't tell me about market value. Anyone in the industry knows market value is dependent on comparable sales. Depending upon comps you select you can vary your market value by 20% either way.
The builder wanted to sell as much house as he could so he encouraged purchasers to buy as much house as the could get financed.
Buyers wanted all they could get.
The federal govt through its liberal loan programs and Freddie Mac and Sallie May programs put people in the market place that didn't belong. Which is to say they couldn't come up with a significant down payment.
This created an "artificial market" which raised values because of artificially created demand.
Other people borrowed annually to live on perceived equity beyond their means.
The victim in all of this is, as usual, middle America, who will end up paying the freight for the entire country.
I hate to say it, but Obama's programs are only going to exacerbate the problem.
The govt needs to deal with the problem. I am not sure how you do it, but I know this you don't give billions to bankers with no strings attached. Somewhere, somehow some of this relief needs to find its way to the poor homeowner that has gotten caught in this financial vise.
Anybody could have gotten shafted in the boom to bust real estate economy. If you didn't, its because you didn't buy your house in the last six or seven years. That doesn't make you smarter, it just means you entered the market earlier. Its really not about being a deadbeat, as some people seem to think... Its more about being a victim of system built on greed.
glad to be a renter - don't expect HUD or anyone else to bail you out - AIG well they have it all. Yes greed is a basic component here. I notice that there is some discussion about regulating the oil and energy speculators and oil went down about 15% - interesting! I wish you all well!
xlasvegasx,,,,,I don't believe your story