A record 11.18% of mortgages at least 30 days late
Take a look at the graph below about the mortgage rate resets. Many of the people who are hoping that the new administration's plan "Making Homes Affordable" will help them, may soon learn that they will only qualify when their rates reset. And by then, it will probably be too late. Additionally, the new plan is only for those with mortgages under $759,500 ( who thinks up these things?). That won't help anyone overextended with luxury property in this state, to be sure!
According to the Mortgage Bankers Association and an article put out by Reuters, a record 11.18% of one to four unit residences were at least 30 days late on their mortgage payment.
And while some people, and I'm not one of them, may find some solace with Obama's $275 billion sweeping housing and mortgage plan, it is worth noting that despite previous loan modification efforts, nearly 60% of loans have re-defaulted within 8 months after having been modified, and that was before unemployment hit critical mass. Why would this plan be any more successful?
What we are going to see is that foreclosures, regardless of loan modifications, will be coming to the market at an alarming rate over the next couple of years. Credit Suisse is predicting over 8 million additional foreclosures over the next four years.
In the absence of new investment demand for real estate, these foreclosures will continue to sit on the market and drive down home values which in return will punish the banking system and ultimately the broader economy.
Despite the housing market being already flooded with foreclosures, the Obama administration has taken the stance that they are going to attempt to patch the failed levee system with loan modifications despite the city being underwater.
What they have failed to recognize is that they can't fix the levee system while the city is still flooded, they need to pump the water out first and stabilize home values. And in order to do this, you need to stimulate demand for real estate.
Unfortunately, their efforts to plunge mortgage rates and offer a $8,000 first time home buyer tax credit have been woefully ineffective, not surprisingly.
The solution is to provide Americans with an incentive to invest in real estate. However, everything that Obama is proposing has been anti-investment.
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