Ok, so the word is out, the doctor is in, and the medicine is… Loan Modifications. Specifically, principal write-downs.
Interesting.
Loan Modifications… A Solution For Negative Equity?
The Hope for Homeowners initiative passed by Congress in July and officially launched a month-and-a-half ago to much acclaim, is a potentially positive FHA insurance package aiming to insure $300B of new mortgages for borrowers in a “negative equity” position.
Negative equity, meaning that most of these properties are worth less than the balance of the loans.
If the home owners have a DTI of 31% or less and made at least 6 payments on time, they can qualify for a Loan Modification.
What do they get if they meet those magic criteria? (Oh, by the way, if I had to hazard a guess at the average DTI for loans originated in 2007, it would probably be 40-45%, and most of these loans are non performing mortgages).
Loan Modifications – Who Qualifies?
A small number of people.
When the program first started, it had 49 applicants. None of them were approved.
NonPerforming Mortgages Included In FHA Secure Program
Just as difficult to qualify for, out of 203 applications only 49 borrowers were approved for the FHA Secure program.
In that same time in California, approximately 1,300 homes saw a Notice of Default filing.
If the H4H program needs more time, can’t we just wait?
Of course.
Remember that H4H, along with the lenders participating in these loan modifications will be looking for federal backing on these 90% principal reduction plans.
So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 notes that were just turned down?
There will be a whole lot more non-performing mortgages (to buy) where those come from.
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