Pres. Obama's new housing initiative has brought intense reaction from many Americans who are not happy that those who didn't meet their mortgage obligations will be bailed out. Here are a few more tidbits to enhance
Clark's original discussion of the plan:
• Beginning March 4, people who are current in their loan but upside down in their home may be eligible for a refinance.
There are a few stipulations to know about. First, the new mortgage can't total more than 105% of a property's current value.
Second, your loan must be underwritten or insured by Fannie Mae or Freddie Mac -- and that info is not easy to come by unless your lender specifically tells you.
Finally, you can't have a jumbo loan. Jumbo loans are typically above $417,000 throughout much of the country -- with some notable exceptions such as California where the limits are higher.
• When it comes to loan modification, this is a method of marking down a loan so that the payment is affordable -- usually 31% of your monthly income. However, it's instructive to look back at the results of the HOPE NOW loan modifications. What we learned from HOPE NOW is that there's a tendency for people to return to default even after concessions are made on their loans.
On the one hand, it's easy to feel compassion for families that are facing a home loss. But from an economic perspective, the reality is that somebody gets an unfair shake if concessions are made to non-payers at the expense of those who do pay.
One other fact that hasn't been widely reported, but Clark sees as a very positive sign: Housing starts have hit their lowest level since right after WWII. This is actually great news for recovery in the housing market. After all, we have way too much inventory and not enough people to buy the houses.
In the end, all the programs and proposals amount to nothing if you don't look at the fundamentals of supply and demand. You can't outlaw economics.
