Should Obama slash debt of struggling homeowners?

Today President Barack Obama signed a $787 billion bill to boost the sagging economy, but some housing watchers are more interested to hear what he has to say Wednesday, when he is expected to provide details of a $50 billion proposal to help homeowners avoid foreclosure.

Some experts say the only way to dramatically reduce foreclosures is for government to use taxpayer funds to reduce the amount struggling homeowners owe to the bank.

Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., which also tracks O.C., said borrowers who owe more than their home is worth face a “psychological barrier” to keeping up their payments.

Up to now, loan modification programs have temporarily reduced monthly payments for borrowers while keeping the total debt intact. Kyser said those modifications have a high rate of failure. Indeed, govenment data shows many loans modified in the first quarter of 2008 went back into default within five to six months.

However, the idea of giving people a break on their debt strikes some as a “moral hazard” — people are being rewarded for bad behavior (buying more home than they could afford) and will do so again unless they are punished.

But Kyser said homeowners who miss payments suffer a loss in their credit scores and so will pay more in interest the next time they borrower money to buy a home or car, if they can get credit at all.

“They will be punished sooner or later,” Kyser said.

What do you think?

How Obama would change bankruptcy law for mortgages

In all the hoopla yesterday over President Barack Obama’s plan to provide up to $75 billion in mortgage aid, there wasn’t a lot of attention to a line in his strategic plan about giving bankruptcy judges the power to modify home loans, including a reduction in the balance owed to current market value of the property. Such a change requires a vote by Congress. Sounds Good but lets see how that goes once congress gets a hold of it..

National Mortgage News has a few more details:

President Barack Obama is endorsing changes to the bankruptcy code that will allow judges to modify mortgages that were made in the “past few years” and don’t exceed the $417,000 conforming loan limit, according to the president’s foreclosure prevention plan. “This provision will apply only to existing mortgages under the Fannie Mae and Freddie Mac conforming loan limits, so that millionaire homes don’t clog the bankruptcy courts,” the summary says. The bankruptcy legislation being proposed by the president is designed to help families that have “run out of other options.” But they must certify that they tried to get a loan modification and worked with a servicer before filing for bankruptcy. The legislation also provides authority for the Federal Housing Administration and the Department of Veterans Affairs to pay partial claims in the event of a bankruptcy or loan modification “so the holders of loans guaranteed by FHA and VA are not disadvantaged.”
February 19th, 2009, 8:07 am . posted by Mathew Padilla, Reporter

How to Buy a house in a Real estate market Fueled by FEAR

Are you having a Hard Time pulling the trigger finger on the HOUSE of your dreams?

You’re not alone, Many home buyers are looking, waiting ,looking, drooling … looking, longing … looking and wanting to buy a house.

Why don’t more make a move, when it’s a fact that in many real estate markets throughout the country, Prices are LOW the lowest in 6 yrs. here in Phoenix.

Fear turns the dream of homeownership into the perceived nightmare of high risk. In most cases, fear is the number one culprit in letting go of your housing dreams:

Fear of Wall Street worries.

Fear of employment security.

Fear of buying at the wrong time

Fear of the current state of finances in the country.

A lot going on in your head.

There’s a little bit of fear (in the real estate market). It is always hardest to react when you’re afraid. All the money to be made is when you go against the trend.

This is when you want to buy, FACE the FEAR and Do It Anyway's

How do you buy a house in a real estate market fueled by fear?
It will take a little courage these days to buck up and buy your dream house.

It will take a little courage these days to move from the wish list to the shopping cart.

It will take a little courage these days to shut out the noise of worry and negativity and follow your own path.

The first key is to realize your intention..

1. Write it down.

2. Verbalize it.

3.Visualize it.
4. Next, gain knowledge.

5.Get at least three referrals for a mortgage broker from your local real estate agent and from trusted friends or co-workers who have made a recent move.

6.Visit a mortgage broker and get pre-approved. Then sit down with your pre-approval and work out what the numbers..you don’t end up overextending yourself.

7.Can you still buy groceries, pay your utility bills and maintain your desired lifestyle without a big drain on your finances?

8.You must speak to a real estate agent who has a pulse on local neighborhood values - for current and past markets.

Don’t settle for less than someone who does their due diligence and housing homework.

For a buyer right now, inventory is higher and in Phoenix Arizona, current real estate prices are at 2002. It is TIME to Buy your Dream HOME .... Send me an E-mail