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New Initiative Announced For Underwater Mortgages

By Bonnie Vaughan

Real Estate Agent

September 07, 2011 08:10 AM

NEW HOPE FOR UNDERWATER MORTGAGES

Globe Newswire reported on July 25, 2011, that an innovative approach to "fixing" delinquent mortgages had been announced by Ocwen Financial. Ocwen is a mortgage service provider.

They are going to offer a program designed to help underwater homeowners by forgiving part of their debt and bringing their mortgages current.

The program allows the resetting of the mortgage to 95% of the current market value. This gives the homeowner an instant equity position.

The deficit amount is forgiven in stages over a 3 year period as long as the homeowner stays current on the new lower mortgage payment.

If the homeowner sells the property they agree to participate with Ocwen and share appreciation at the rate of 75/25. 75% to the homeowner and 25% to Ocwen. The investors at Ocwen are banking on our real estate market taking an upswing and restoring some of its lost value.

Homes which might otherwise fall to foreclosure are going to be saved. Investors who would receive pennies on the dollar are now going to receive a larger return on their investment. If equity grows through the revival of the real estate market, and the home is sold at a profit, the investors share in that appreciation. It's a win win for the homeowner, the market and the investors.

This is the kind of proactive "real" solution we need to turn around our housing markets and our economy.

You can read the full article here: Solution for Underwater Mortgages

The solution to our economic and housing disaster in this country has to come from the private sector. Government has been a dismal failure at managing "Make Your Home Affordable", or any other placebos they have offered.

Our country was built and thrived for generations on the backbone of small business and innovative solutions to challenging problems.

While this new initiative is not available in every state it is a business model which should be seriously followed.

This innovative model should serve as a beacon to our lawmakers in Washington. A sane and sound approach to getting things back on track. We don't need more regulation. That's all Washington seems to do is debate and regulate. We need private enterprise to pitch in unfettered by cumbersome governmental hoops, to grow and restore our economy.

Opinions expressed here are solely the opinion of the author and not endorsed by any other organization of Brokerage.

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Broker Nick

South Florida Real Estate & Development, Inc. - Coconut Creek, FL

Broker Nick Relocation Broker Service

Congratulations - This post is now featured in Silent Majority Group of Active Rain!

Sep 07, 2011 08:38 AM

Bonnie Vaughan

Scranton, PA

CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Thank you Nick for the feature. I've been MIA for a while. Hope to be a more frequent visitor out here again.

Sep 07, 2011 10:00 AM

Ted Baker

Carmody and Associates LLC - Winter Haven, FL

MidFloridaMediation.com

MEET YOUR NEW ROOMMATE - The Bank

Hi Bonnie - nice to see you

I like the idea of a shared appreciation mortgage but I will ask what about the homeowners who have managed to make their payments and have not gone into default. Where is their opportunity to get the modification. Are we going to reward the folks that failed to pay their obligations and not the folks that kept things together?

Also, it will be interesting to hear the homeowners at their next closing when they are tagged for 25% of appreciation. Is that based upon the appraisal or sales price net of expenses and closing costs?

But I always appreciate out of the box thinking and this plan offers what has been missing from the loan modification process - that is principle reduction to reflect the current value of the property. This approach gives the homeowner a break based upon the reality of the market while giving the note holder an opportunity to recoup his losses from future appreciation. Remember the homeowner did not purchase their home from the lender. The lender put up real dollars on behalf of the homeowner and is entitled to be paid.

Sep 08, 2011 05:34 AM

Bonnie Vaughan

Scranton, PA

CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Hi Ted: Nice to see you again.

I am not clear as to all the details on the program. I do not know if this would include those homeowners who are current, but underwater from a resale stand point.

From what I read it would be based on sales price. At least that is what I gleaned from the announcement.

In the last 2 years I've seen so many people adversely affected by circumstances beyond their control that I try not to be judgmental if they in fact got behind on their mortgages. I know that if this program had been available to several of the homeowners I've encountered, they would have jumped on it rather than let their home go into foreclosure.

Sep 08, 2011 05:49 AM

Bonnie Vaughan

Scranton, PA

CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Georgia - Hello long time no see.

This is certainly a topic to be debated. If all foreclosures were due to irresponsibility I would agree a bailout if you will would be enabling more irresponsible behavior.

Since post World War II ( which is about as far as I can speak to first hand - even though some might say I'm old as dirt) we have not seen home values plummet so drastically or stretching from one end of the country to the other. There is no hope on the horizon that people who bought homes at market value 5 years ago, will ever be able to sell them without bringing money to the table. Is that their fault? I'm not taking about 120% financing. Just ordinary people more than capable of affording their homes.

There is not a one size fits all causation factor in this mess. Unemployment has played a huge role contributing to the escalating foreclosure rate. If you could afford your mortgage when you were employed but could not once you were unemployed - I can't put blame on those folks.

Yeah I know all the cliches' - work 3 jobs - pick up aluminum cans etc. Many of the people I know in this boat are doing everything they can to keep their kids fed, gas in their cars, and keep the utilities on.

As far as our economy is concerned it is better for the banks to get something a month than nothing a month and have another derelict property on the market.

Sep 08, 2011 09:46 AM

Bonnie Vaughan

Scranton, PA

CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Georgia, you are a sweetie. The only thing I'll add to our discussion is that this program has nothing to do with the government. This is not one of Barry's brain storms. It's a private company. I was giving them a Kudo for actually doing something without being forced by government.

I agree that people who invest in the stock market or other investments should be able to afford to lose. No quarrel there. I never look at a primary home as an investment. Shelter is a basic necessity. 2nd homes or rental properties yes they are investments.

Perhaps I am looking at this emotionally. It has touched my family as well. All too many people I know are one paycheck away from financial disaster.

Compare where we are. As I recall you are in northern Virginia. I'm in coal country now. Wealth and affluence have never been part of the landscape. The middle class here in no way compares to the middle class where I used to live in Virginia. The average hourly wage is about $10 an hour if you are lucky. Utilities, food, gas, clothing, cars all cost the same here. Real estate taxes are outrageous. A 90k house could be 1400-1800 a year. My home in Va was worth about 250K when I left and my taxes were 1400 a year.

And remember dear Georgia, I'm a recent convert. I'm not a lifelong conservative. Perhaps I still harbor some of my liberal tendencies when I see my fellow Americans hurting and homeless.

Sep 08, 2011 02:30 PM

Anonymous

Georgia

i should have read abou the program more thoroughly!! That this program is a private venture makes a world of differene They aren't being leaches from the public. i apologize for misreading. i was raised not that far from you and have plenty of relatives in the area. So i know what you speak of.

what i would like to see is every bank that took our money be made to modify every loan they have to current fixed rates and forgive x amount of the loan.

Sep 08, 2011 03:41 PM