The Emergency Economic Stabilization Act just passed on October 3rd is not the cure-all you might hope for. The Act authorizes the creation or expansion of governmental entities and departments to deal with the housing crisis. Implimenting these provision is what will create the "cures". Assuming the "cures" are in place, there are going to be effects upon Realtors, Mortgage Brokers and Distressed Homeowners. This is how I see the Act helping each group.
Realtors -
Opportunity is the catch-all phrase. Opportunity to take a part of the disposition and management of loans purchased by the government through loss mitigation services of property management of abandoned properties. Opportunity to service REO properties. Opportunity for disposition (sale) of REO properties. I don't see a huge opportunity short term for the re-establishment of any strong new home or re-sale market in the traditional sense. But the programs introduced could reduce inventory of unsold homes and REO at an accellerated pace, and free up limited amounts of funds for traditional (ie: conservative) acquisition financing once again.
Mortgage Brokers -
What a huge opportunity!!! Refinance Opportunity is for the placement of FHASecure loans under the HOPE program. The HOPE Program enhances FHASecure - A possible Opportunity for brokers to negotiate restructuring of the existing loan under the new Act that mandates reductions of principal and recasting of interest and term of loan. Key to making this easy is who is owning the paper that needs modification or refinance. If it is the government entity it would supposedly be easier to negotiate and structure. But I am not so sure on this supposition since the pricing of the purchase of non-performing paper by the government will theoretically involve the same loss to the lender as doing the write-down through a refinance. The REALLY BIG news is that lenders are encouraged to renegotiate principal amounts and keep the owner in their home!!!!!
Distressed Homeowners -
Primary Homeowners have the most options, which include the Hope program as well as renegotiation of the existing terms of your mortgage so that the mortgage again becomes affordable. This is NOT designed to be a windfall and you can expect the government program to have strict guidelines for qualification so there is no "profiteering".
Investor Homeowners should expect limited help, but there is no distinction in the Act for the renogiation of existing loans to make them more affordable and allow cashflow from what were to be income producing rental properties. Expect some "shared appreciation mortgage" concepts to be used where the government lender shares with you the "upside" profits on the sale or refinance of the property in the future.
The goals of the Act are two-fold. One is to create some economic stimulus through "freeing up" locked illiquid assets held by investment firms and lenders, so theoretically they can again extend credit or buy up "safer" mortgage backed paper. The other is to create a slow down in the rates of foreclosure by giving alternative plans to homeowners and lenders that were to foreclose, and thereby reduce the inventory of homes on the market because of the need to unload properties that homeowners cannot afford and lenders have to re-sell.
How this will actually occur is going to be created in the next few months - there will be a flurry of activity and we all need to keep a keen eye on this developing opportunity.
What is your opinion on how the Act might affect you and your business or personal problem?
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@FLORIDA-COUNSEL.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Webpage www.florida-counsel.com
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