Obama’s recently announced Housing Stabilization Plan is good as far as it goes, and it goes $25 billion worth. California will get a good chunk of that taxpayer dough, but many homeowners here will not be able to benefit from the plan.
Refinancing becomes an option for some because Obama’s plan allows for refis up to 105% of equity. Say you owe $300,000 on your home. You could borrow up to$315,000. That’s a better deal than the normal 80% of equity allowed for a refi, but it’s hardly going to help much in California where prices have tumbled 25% to 50% or even 70%, depending on the area, in a bit over a year. Plus, of course, anyone who refinances must have the income to qualify.
Then, there’s the loan modification option, also sweetened considerably by Obama’s plan. For one, borrowers who have struggled to stay current are now eligible for loan mods as well as those who have missed payments. Here’s the problem, though, if you want a loan mod, you need to show income and unemployment is not acceptable. With California’s zooming unemployment rate, many who need loan mods won’t be able to get them for lack of income. Across the country, nearly 12% of homeowners are in arrears on their mortgages or already in foreclosure. This is a disaster not only for the homeowners, but for all of us . In California, the latest figures show 13% in arrears or in foreclosure as compared to, say, Florida where 20% are in that position. .
Besides job loss, another huge factor is loss of value. Estimates of homes with negative equity vary, but it’s around 12 million homeowners, about 25% of all homeowners in the U.S. either now owe more than their homes are worth or are within 5% of being so. Almost 2 million Californians are in that unfortunate situation with about 300,000 in the L. A. area. A research firm, First American CoreLogic, estimates that 723,000 California mortgages are in “severe” negative equity with loan amounts 125% or more of the home’s value. That’s about one-third of the country’s 2.2 million such loans.
Other states have greater percentages of loans in trouble, but smaller populations and so fewer loans. Nevada, for instance, has 330,000 underwater loans, very similar to the L.A. area, but that represents an astounding 55.1% of all loans in Nevada. Michigan, economically sick for a long time, has 459,000 such loans or 40% of all loans in the state. Arizona has 31% of its loans underwater or 407,000. Florida, far more populous, has 30% of its loans in negative territory, but that’s 1, 284,000 loans. California, as mentioned, has 1, 900,000 or 29.5% of its loans underwater. Thus the Big Four which account for almost half of all the foreclosures in the nation. Rounding out the top ten are Georgia [23%, 335,000], Ohio [23%, 435,000] Colorado [21.5%, 225,000], New Hampshire [20%, 33,560] and Virginia [19.6%, 219,282].
Obama’s plan will help California, but, clearly, with our gigantic population so many cannot be allowed to go under. Obama and company need to come up with more creative ways to help California’s underwater homeowners.
Related articles by Zemanta
- Nearly 1 in 5 Owe More Than Homes Are Worth (time.com)