Homeowner Stability Initiative=Obama’s Housing Plan

We in these hard-hit states with many foreclosures [CA, FL, NV, AZ] have been waiting for this plan and now we have it. It’s not what we expected, at least not what I expected, but what creative ideas on how to handle the foreclosure crisis and not reward the foolhardy or the fraudulent.

The Obama Homeowner Plan has three distinct parts:

1. Help those who are CURRENT on their mortgages to refinance. They do NOT  need to show a hardship.

2. Help for those who are BEHIND on their mortgages get loan modifications. They DO  need a hardship, but that is broadly defined.

3. Help for HOME BUYERS by providing tax credits and low interest rates.

The main complaint that stable homeowners, especially those in areas, like ours, hit hard by foreclosure is that their tax payer dollars are going to “save” the imprudent, the insolvent and the extravagent. This plan tries mightily to avoid helping those kinds of borrowers. When introducing it, President Obama was very determined to point out that this does help even good payers who have never missed a payment. “Every foreclosure reduces neighboring home values around 9%,” he said, “and this will help prevent foreclosures.”

I do hope he is right. I do know that nationwide foreclosures are up 81%  over 2008 and 226% over 2006. This crisis hits about every state with the BIG FOUR, California, Nevada, Florida and Arizona, leading the plunge.  It’s also estimated that by 2012 8.1 million homes or 16% of all homes will be or have in foreclosure. That’s frightening.
foreclosure-next-exit

In sum, I don’t know whether this plan will work. I can see already that more people, even those upside down on their home value will be able to refinance as this plan makes it more palatable for the lenders. If they can’t refinance, they can get a loan mod more easily.  Failing those remedies, the plan even smooths the way for short sales which can take forever.

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