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Why the Stimulus Package doesn't help People who deserve help!

By MARTY HANCOCK

Mortgage and Lending with LINCOLN MORTGAGE

April 27, 2009 03:12 AM

One of the great frustrations of today's market, from a Loan Officer's point of view, is the seeming unfairness of the structure of the bailout package. People who bought completely beyond their means and are now delinquent, bankrupt, or worse, can get a loan modification, while the people who are holding on, managing to stay current, even sacrificing lifestyle or their kids' college savings to do so, are being penalized for having FICO scores under 700.

There are bumps to rate for almost anyone in the 670-680 range, even for Rate & Term Refinances with up to 30% equity! I have several clients in this position. All they want to do is take advantage of the 4.5% rate so that they can get a little breathing room. I see the credit reports; no 30 day lates, no collections. At the worst, they may be a little maxed out on their revolving credit, which, unfortuntaely, is nearly as detrimental as having derogatory accounts.

These people often have no choice but to go FHA, which is a good program but requires MIP regardless of LTV. And FHA doesn't fit every situation, due to certain restrictions and maximum loan amounts.

A prime example: I've recently referred a couple to a loan modification company. These people have a 2 year old Chapter 7, are in credit card counseling (AFTER the BK!!), and have fallen behind in their mortgage payments. The loan mod rep already discussed their situation with his underwriter, and they're sure they can get them a reduced rate and monthly payment.

I'm glad these people are getting help. Its not for me to judge whether or not they deserve it. But when I can't give people who've never missed a payment, or declared bankruptcy, a good fixed rate because their FICO misses by a few points, I've got to scratch my head.

Again, this is an example of politicians pushing through legislation but not tailoring the program to do what its SUPPOSED TO DO!

The sad truth is that the people we entrust to vote on these issues have their own agenda: GET RE-ELECTED! They are not interested in saving the economy. They are not interested in seeking advice from the professionals in our field. Had they, this gargantuan package, which is nothing more than a huge marker to be paid by our kids and their kids (with interest, to China) may have been structured in such a way that it would help the guy who is doing his best to stay afloat. Politicians have one objective: to stay at the feeding trough as long as possible (Bob Ingle's phrasing), to repay the special interest groups they sold out to, and to set up their families so that they never have to experience what my clients are going through.

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Marcus Valdez

Berkshire Hathaway Rocky Mountain Realtors - Fort Collins, CO

I 100% agree with you. I am an investor as well as a realtor. I have about 40 properties. I would love to refi all of them which would be a loan officers dream. 40 loans right now. However i can't touch the rates and get any help. However someone with a BK can be right back in the game 2 years later.

Apr 27, 2009 03:19 AM

Cherry Wings Realty

Cherry Wings Realty - Traverse City, MI

Your Traverse City Michigan Realtor

Marty:

My thoughts exactly. We are helping a large percentage of people who got into their financial mess on their own while the average person who has a great credit score and would love to lessen their interest rate, cannot. I thin we should go back to the old days when you could not get a home for 7 - 10 years after a BK. Perhaps that would deter some of this irresponsible behavior out there.

Apr 27, 2009 03:22 AM

John Mulkey

TheHousingGuru.com - Waleska, GA

Housing Guru

Marty, you seemed to have summed it up. All the machinations from DC will have little positive effect on the average, bill-paying person. Even the programs they have set up to help homeowners avoid foreclosure, such as Hope for Homeowners, don't work. All we've done is prop us several businesses "too big to fail," and contributed to our political leaders future.

Apr 27, 2009 03:23 AM

Ethan Carlson

Advantage Lending Corp. - Rochester, MI

Licensed Loan Officer

I 100% support what you say as well. Politicians knew they had to help the economy so they pushed the stimulus so fast they didn't think about the "little things" - like ensuring the money doesn't go towards giving executives bonuses *cough*. Politicians should be required to have a law degree as well - trained to look for the loopholes so they know how to close them - if only...

Apr 27, 2009 03:41 AM

Anonymous

Marty Hancock

Marcus, Christine, John,

Thanks so much for your comments. There has always been a certain inequity between BKers and people who struggled but managed to get through. Often, within two years, the person who BK'd has a higher FICO score than the person who eventually paid it all back. One of the quirks of the system, I guess.

The shame of it is, this time Washington had a chance to get this right. Doesn't the guy who's hanging on by his fingernails deserve help too? Not a handout, just the going rate so they can start digging out. But due to the tightened underwriting guidelines re FICO scores, (the guidelines for people who DO pay their bills) I often cannot give it to them.

As the old saying goes, "A camel is a horse drawn up by committee."

What we have here is a very expensive humpless camel.

Apr 27, 2009 03:48 AM

MARTY HANCOCK

LINCOLN MORTGAGE - Sewell, NJ

Ethan,

You're correct that it was pushed through too quickly. In fact, there was a report that very few of them even READ the package.

It was in THEIR best career advancement interests to push it through, and that's all they had to know. Why bother actually READING it?

Of course, the answer to that SHOULD be:

1) to ensure that they truly believe it will help, before they plunge our children and future generations into incalculable debt, (rather than just voting for it to secure their own station, re-election or advancement)

2) to ascertain that its structured in a way that will best benefit ALL.

3) to search out and question all the 'pork' programs that allowed it to be pushed through in the first place.

But, again, most if not all pols do not consider the common good. Their agenda is re-election/ advancement. The best way to secure this is to play the game. "I'll vote for your pork program if you vote for mine. I'll placate your special interest demographic if you'll placate mine." As for the economy, they're all eating steak and buying bigger yachts.

Its all a matter of perspective.

Apr 27, 2009 06:10 AM

Anonymous

Jennifer D. Michaelis, Presidential Title Agency Inc.

Marty:

Thank you so much for putting into words what we are all thinking. I just wish, as we all do, that the Politicians would read this and and wake up. I have spoken to a few legislators about these issues and I get the head nod, I look into it. Well while they are looking good people are hurting, and it is getting harder every day to figure out how to pay the bills. I have so many questions for the government, as I am sure a lot of people do. We can't give up! We have to fight on this one and I hope they hear us.

Thank you so much for you insight. I am forwarding an e-link to several coligues.

Jennifer D. Michaelis, Presidential Title Agency, Inc.

Apr 29, 2009 02:25 AM

Colleen Craig

Southern California Mortgage Professional - Santa Clarita, CA

The Mortgage Ninja

Hi Marty,

Great blog - I agree and would also like to add that so many people's credit scores are lower now b/c the banks have decreased their limits to their balances which now made them maxed out when they weren't maxed out before! So they are getting hammered with lower fico scores at no fault of their own. I'm hearing more and more often "I might as well go bancrupt - it's no difference anymore........wihich is so sad - but true.

Apr 29, 2009 03:07 AM

MARTY HANCOCK

LINCOLN MORTGAGE - Sewell, NJ

Hi, Jennifer,Hi, Colleen,

Thanks to both of you for your thoughts.

Jen, not to be cynical, but I don't think the pols care. The only time the average Joe matters to them is when they need his vote.

As I type this, I'm looking at a notice that I received this morning from Bank of America. It states they're raising fees pretty much across the board.

Here's what you gotta love: While our tax $$$$ are bailing out these banks, they're sticking it up our noses with increased fees and decreased maximum limits. I love irony, except when the joke's on me.

You just couldn't make this stuff up if you tried.

Great to hear from both of you.

Colleen, judging by your picture, California agrees with you.

Regards,

Marty

Apr 29, 2009 04:17 AM

John Novak

Keller Williams Realty The Marketplace - Las Vegas, NV

Henderson, Las Vegas and Summerlin Real Estate

Washington's mistake was trying to implement a plan before fully understanding scope of the problem. In Nevada, many homeowners were ineligible for loan mods because they were too upside down.

Yesterday's LA Times had a story about the Hope for Homeowners program, which is targeted to those with first and second mortgages. Good for owners, but lenders could be writing off some huge amounts, and somehow consumers will end up paying for it.

Apr 29, 2009 05:03 AM

MARTY HANCOCK

LINCOLN MORTGAGE - Sewell, NJ

Thanks for the heads up John.

I'll check out that article as soon as I get a minute.

Marty

Apr 29, 2009 05:20 AM

Nick Hancock

Dover, DE

"I might as well go bancrupt - it's no difference anymore..."

Colleen, with that quote you summed up a thousand volumes of work about the inefficiency of socialism, or the "mixed economy," or whatever we're calling this farce. There is no call for performance. The incentives are gone. Your energy becomes better spent in proving that you're inadequate than in trying to be better. It doesn't help the little guy. It helps certain little guys at the convenience of the big guys.

Dad-Hell of a post. It's interesting to hear the ground-level perspective of these government whims. Hopefully they stop throwing money at problems before they run out, because it's our money they're throwing.

Apr 30, 2009 05:12 PM

MARTY HANCOCK

LINCOLN MORTGAGE - Sewell, NJ

Thanks Nick,

That is a good comment.

"Energy is better spent in proving that you're inadequate than in trying to be better."

Did you know that there has been a quiet but growing interest in the philosophy of Ayn Rand? Maybe there's hope yet.

May 01, 2009 01:37 AM