Today’s breaking housing news is centered on two historic events:
- The Economic Stimulus Package – President Obama signed the $787-billion economic stimulus package in Denver, Colorado, just moments ago, in an attempt to revive the hard-hit economy and slow the tide of foreclosures.
- President Obama’s Housing Rescue Plan – Tomorrow the President will unveil his much-anticipated plan to 1) rescue troubled homeowners, 2) cut down on foreclosures and 3) pressure lenders to shrink monthly payments for borrowers facing foreclosure.
OBAMA’S HOUSING RESCUE PLAN EXPLAINED
Now for a closer look at Obama’s soon-to-be-revealed housing rescue program and what it could mean to you. Here’s an up-to-the-minute snapshot of what we can expect:
1. LOWER MORTGAGE RATES/PAYMENTS
Obama’s plan is expected to lower mortgage interest rates for existing homeowners with financial backing from government-subsidized lender matching programs.
How would subsidized lower interest rates work?
The lender and the government would each pay matching amounts to lower an individual’s monthly mortgage payment. But how much? As much as several hundreds of dollars per month, reports indicate.
Critics fear Obama’s effort to put pressure on lenders won’t be enough to rescue homeowners teetering on the brink of foreclosure. The question remains: Will hyper-cautious lenders remain reluctant to restructure risky home loans?
How will the Obama administration persuade lenders to come around?
With an arsenal of government incentives. Exactly what will those carrots-and-sticks be? White House officials won’t say … until tomorrow. What we do know is that President Obama and his advisers are acutely aware of the utter failure of President Bush’s voluntary loan-modification programs, which barely had any impact on the deluge of foreclosures that began hemorrhaging onto the market in 2007.
How will the plan help homeowners’ bottom line? Here’s a financial breakdown:
The plan would reduce the average person’s mortgage to 31 percent of his or her income. The average homeowner’s mortgage accounts for up to 38 percent of their income.
According to ABC News, under the plan “a family with a household income of $50,00 will, on average, put $19,000 toward their mortgage. Under the President’s plan, they’d pay $15,000 toward their mortgage for a savings of $3,500.”
2. EMPOWERING JUDGES TO LOWER PAYMENTS & RESTRUCTURE LOANS
Obama’s housing rescue package will reportedly include an aggressive push for legislation that would give bankruptcy judges the power to reduce a borrower’s mortgage payments and reorganize their loan(s).
“It turns out you can’t modify that mortgage if you’re in bankruptcy,” President Obama said earlier today. “Now, that makes no sense. What that’s doing is, it’s forcing a lot of people into foreclosure who potentially would be better off, and the bank would be better off and the community would be better off, if they’re at least making some payments.”
3. AT LEAST A $50 BILLION PRICE TAG
The (estimated) price tag for Obama’s plan to stop the flood of foreclosures and help struggling homeowners? At least $50 billion, but possibly up to $100 billion, according to the President’s top advisers. The Obama administration also has the authority to draw on the Treasury Department’s financial industry bailout fund—to the tune of $350 billion, if needed.
When will we know more about Obama’s housing rescue plan? Tomorrow, when he travels to Phoenix to publicly share the details. Check back soon for an update.
In the meantime, feel free to contact me for the latest critical Southern California foreclosure market news and information.
Your trusted connection to Southern California’s foreclosure market,
Sincerely,
Mark Shandrow
REO Broker-Associate
Keller Williams Realty
markshandrow.com
