WE'RE FROM THE GOVERNMENT AND WE'RE HERE TO HELP. . . 

ALL WE WANT IS YOUR MONEY AND YOUR HOME!! 

* * * * HARD CORE REAL ESTATE TALK * * * *

The new Fannie Mae program to "help" home owners in trouble is, IMO, the biggest fraud to come from the government in recent memory and there have been, IMO, a serial bombardment of government perpetrated frauds on the American home owner in the past year.   

Trademarked the Deed For Lease, or D4L, a reading of the guidelines for this program along with the concomitant Deed In Lieu of foreclosure guidelines, the bottom line of the result of these programs, whether intended or not is:  THE HOME OWNER LOSES THE HOME. 

"Honey, did the government agree to help us keep our home?"

"Not exactly Dear, but the government says that they might agree to take our home and let us rent it for a year.  They'll let us know after a credit review, but there are a few things. . . . . "

NOT ALL BORROWERS WILL BE ELIGIBLE.  The guidelines require that the borrowers (home owner) agree to certain occupancy rules, not unreasonable on first reading.  However, some of the details will limit elegibility, such as: 

1. Marketable title is able to be conveyed (a title insurance policy is required).
2. If there are subordinate liens secured against the subject, lien releases can be obtained.

1. Everyone has title insurance, don't they??  Sounds simple enough, right?  Perhaps, perhaps not.  Title insurance policies are always a condition of a mortgage loan.  However, they are optional for a borrower.  Over the years, I have spoken with many home owners who did not obtain title insurance for their property, often at the advice of their agent.  Go figure. 

2.  What might that subordinate lien be?  

• Subordinate Lien:  Subordinate-loan. mortgage whose priority is below that of another mortgage, like a second or third mortgage or a home-equity loan.

Could it be a HELOC or simple Second Trust?  During the years that FannieMae pushed, yes pushed and purchased the Alt-A loan and the numerous Sub-Prime loans, a plethora of subordinate liens were created and used.  Often created at the time of purchase or later through subsequent borrowing against equity or refinance.  The funding sources, often private investors, made these loans and recorded a proper lien in good faith based on the qualifications of the borrower at the time.  Second Trust Notes are a commodity.  They are traded, discounted, bundled and traded again and again.  Sooner or later, someone is going to want to collect on that note.  What's the incentive for the second trust holder to release?  Recent experiences with Short Sales would indicate that second trust holders are becoming quite recalcitrant when asked to release a second trust note. 

Second mortgage:  A mortgage obtained by a home owner for a loan against equity or in excess of market value (often up to 125% of market value).  The second, or third mortgage is subordinate to the first or primary mortgage.

WHY DID FANNIE MAE MAKE RELEASE OF ANY SUBORDINATE LIENS A CONDITION OF THE D4L (Deed For Lease)?  Is this condition of the D4L the usual "government guideline glitch" tossed in to decrease the numbers of borrowers who would qualify?  Or, is it simply a reflection of the "guideline stew" that can usualy be used to describe any of the government program to help home owners in trouble that have been promulgated in the past two years?   

WHY ARE HOME OWNERS IN TROUBLE ALWAYS SUBJECT TO LOSS OF THEIR HOME?  The American home owner isn't looking for a handout ala TARP, created to help banks in trouble to the tune of about a $Trillion Dollars, give or take a few $Billion Dollars. 

TARP:  Troubled Asset Relief Program (TARP) Information.   The operative word to describe TARP is "Relief".  Where is the "relief" for the troubled American Home Owner???  The banks qualifying for TARP got into trouble by trading in securities that were primarily backed by sub-prime mortgages, often mortgages that should not have been written.  The mortgage instruments were then bundled, converted to marketable securities, MBS,and sold to investors in the USA and around the world.  Investors clamored for more, more, more of these wonderful securities.  Fannie Mae and mortgage investors created more and more and more such instruments secured by the primary residences of American Home Owners.   

O.K.  SO WE GET IT.  The government was there to help the Wall Street and Main Street banks that invested in and sold the MBSs to the tune of multi-Billions of Dollars of tax payer money. 

FAST FORWARD TO 2009 and THE FANNIE MAE, HUD and any government program to help distressed American Home Owners.  The one theme that is pervasive is that THE HOME OWNER LOSES THEIR HOME.

MORTGAGE MODIFICATION IS A JOKE.   The programs designed by HUD and Fannie Mae may do one of several things. 

• They may REFINANCE your loan to a lower interest rate.  The home owner still owes far more than the market value of the home and will probably not be able to sell for many, many years. 
• They may MODIFY your loan to a lower monthly payment.  The home owner still owes far more than the market value of the home and will probably not be able to sell for many, many years.

Is it any wonder that, to date, the government programs to "help"the American Home Owners have failed?

THE INSIDIOUS NEGATIVE EQUITY.  The only true mortgage modification that would help the American Home Owner would be a REDUCTION OF THE PRINCIPLE BALANCE of THE MORTGAGE.  Is there any government backed, financed, promulgated or regulated program to reduce the principle balance of mortgage loans secured by home owned by distressed home owners??  NO.

The government now says, through Fannie Mae, that if you own a home that is not FHA, VA, etc. financed or insured, the government may take your home and rent it back to you for 12 months.  No doubt the government will find some way of spending more tax money to create a new program to market these "assets" that were formally HOMES.

For folks who hold the opinion that the American Home Owner doesn't deserve any help to keep their home, after all, they signed a contract, didn't they, it's an opinion that has my respect.  However, what was the opinion of the same folks when the government gave Wall Street and the Big Banks a $Trillion Dollars or more???  Oh, I forgot.  The government didn't ask for our opinion.  That was the biggest "cram down" in history.  I propose that a "cram down" for American Home Owners is long overdue.

One thing for sure.  I believe that the American Home Owner would be a better partner in saving the American economy than the average Wall Street Investment Bank or Big Bank.  The American Home Owners will again become a consumer.  They will buy and sell real estate.  They will go to the mall.  They will take vacation.  They will help the national economy.  What did the Wall Street Gangs do with the $Trillions of tax money handed to them through TARP? 

Later.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.