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Its October 1 - So What about the "Bailout Loans" for Homeowners?

By Susan Manning

Real Estate Agent with Realty Executives

October 01, 2008 10:02 AM

I'll admit it. I don't know the answer to this one, so I'm reaching out to the AR community for a response. I've been asking around and still have yet to find an answer with which I am satisfied. The Bailout Bill for Homeowners was passed this summer but is there anyone qualified to do this modification?

Here's what I think I know so far:

A bill was passed this summer to back basically loan mods for owners who want to do a short pay refi to stay in their homes.
Only homeowners who have the Option Arm payments qualify for the loan.
Only 400,000 of distressed homeowners will be able to qualify.
There is a monetary cap on the amount of money the government has to back these modifications.
The banks will have to agree to the modification terms just like in a short sale so there are no guarantees that the refi will work.
The charge for this service is around $3000.

So I've been asking around for qualified individuals to help clients with this process. I've asked loan officers that I trust and respect. I've also asked other real estate professionals. The problem is that this is a brand new modification opportunity that no one really has experience working yet. Who do I refer my clients to? The clock is ticking and there is a limited number of opportunities. What is your opinion on the best course of action for those in need?

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Anonymous

Loan Review Inc

Hello Susan,

Nice posting!

Why is there going to be a bailout?

Bush, Paulson, and the Administration are concerned about the fallout from the housing slump. If many people fall behind on their mortgages and have to give up their houses, there will be a series of negative repercussions. First, tens of thousands of Americans could be forced to leave their homes. They would lose whatever equity they had. Consumer spending more broadly would likely slow, hurting the economy overall. In addition, home prices could fall even more quickly than they are now. That could hurt consumer confidence well beyond those people directly affected.

Is the bailout going to be enough?

It depends on your definition of enough. The deal will add some stability to the housing market, but it won't stop all the problems in the troubled sector. The same day Bush unveiled his plan, the Mortgage Bankers Assn. said that foreclosures had reached a record high in the third quarter. The share of mortgages that have entered foreclosure hit 0.78% in the quarter, up from the previous high of 0.65% set in the previous quarter. At the same time, delinquencies for all mortgages rose to 5.59%, from 5.12%, in the second quarter. None of the people who are delinquent or facing foreclosure will be helped by the plan.

The deal almost certainly won't stop the decline in housing prices. Investors are betting that there will be double-digit declines in home prices in nine of 10 major markets over the next year. The only exception is Chicago, and there the estimate is for a 5.6% drop in home prices.

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Loan Modification Processing

Oct 02, 2008 02:42 AM

Elizabeth Weintraub Sacramento Broker

Elizabeth Anne Weintraub, Broker - Sacramento, CA

Put 40 years of experience to work for you

I refer all my FHA clients to my mortgage broker and let her explain the new program to them. A few submitted loan apps prior to October 1, just to get into the system. I don't try to explain financing in depth because it's not my specialty, just like my mortgage broker doesn't try to explain real estate.

Oct 03, 2008 02:59 AM

Susan Manning

Realty Executives - Temecula, CA

Elizabeth, thanks for the advice. I'm just concerned on who to refer my clients to, how skilled and capable they are, and that they are not being taken advantage. Several lenders I talked to didn't have a clue where to start on this either. I do think I've found someone now though. Yes, I agree, I only do real estate for a reason!!

Oct 04, 2008 07:26 AM

Its October 1 - So What about the "Bailout Loans" for Homeowners?

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Susan Manning

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