Foreclosure Prevention Plan Guidelines Revealed

Earlier this week, the Obama administration released the guidelines which enable lenders to begin modifications of eligible mortgages under the administration’s Homeowner Affordability and Stability Plan. Here is a summary of the guidelines, direct from the Department of Treasury: http://www.treas.gov/press/releases/reports/guidelines_summary.pdf.

This “foreclosure prevention plan” (dubbed by the media as such) is estimated to help some seven to nine million homeowners make their mortgages more affordable and help to prevent the continuation of the devastation that foreclosures have caused in this country.

According to the U.S. Department of Treasury, “The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

“GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

”The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.
With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that at-risk borrowers can better afford their payments.”

Industry online magazine, RISMedia, weighed in on the plan this week and offered this insight that I thought would be helpful: http://rismedia.com/2009-03-04/how-to-help-homeowners-understand-obamas-foreclosure-plan/

I know that many clients have a lot of questions right now and we are working to gather some communication tools to help. One good option in the meantime is a consumer-friendly Q&A recently put together by the Treasury Department, the U.S. Department of Housing and Urban Development (HUD) located at http://www.financialstability.gov/makinghomeaffordable/.

Now, let’s take a look at this week in real estate:

• Dixon-Davis—Agents are busy with buyers and short sale listings. “Regular listings” increased over the last few weeks. One of our REO Agents continues to stay busy while others’ inventory is still low. Short sales and REOs continue to get multiple offers. All of our short sales continue to get back up offers while they are waiting on acceptance from the banks.
• Elk Grove—We had 12 multiple offers out of our Elk Grove office this week. Much of this is in large part due to REO properties, considering the fact that 85% of our business is short sales or foreclosures. REO and short sale business has dominated for the month. Floor call volume and open house traffic has increased.
• Fair Oaks—Our Fair Oaks office shares that listing inventory has increased because of the number of relocation regarding USSA. Sales inventory has decreased and multiple offers have increased. Our local market in Fair Oaks and surrounding areas are fairly active with buyers. It seems like the real sellers are coming out of the woodwork.
• Folsom—Our Folsom office reports increased sales activity and steady inventory. Our office doesn’t have any REO listings right now, though we are participating on the sale side with other brokers. We are still slow on the new listings. The average sale price of $350,000 for this week was good. We had one sale over $700,000, one sale over $600,000 and one over $500,000.
• Rocklin-Lincoln—Our Rocklin/Lincoln office reports open house activity was slower than usual due to the rain. The largest number of attendees was one open house with 18 visitors. There were five good leads from our open houses this weekend, however, which tells me that the serious buyers are out there, weathering the storms. We had two REO listings and one short sale listing. We also received approval from Wells Fargo for a short sale submitted about 30 days ago that included the first, second and a line of credit. REOs were slow this week but we expect this to change, especially in Lincoln Crossing. We are also getting calls daily with regards to listing short sales.
• Roseville-Granite Bay—We saw decreases in inventory this week and overall, activity was slow.
• Sacramento—Our Sacramento Metro office reports that we had 10 multiple offers this week—all of which were on REOs. We are seeing good open house activity in the core areas. We are seeing signs that REO activity is slowing and with this new, lack of inventory in our core areas, things are slowing in the Sacrament Metro area. Our Sacramento Sierra Oaks office concurs noting that inventory is very low. Though the wet weekend might’ve kept some buyers away, we are still seeing a lot of action—often multiple offers—on REO properties.
• Tahoe-Truckee—We are seeing steady listing inventory and sales activity in our Tahoe-Truckee region. It appears that buyers are in a wait and see mode. There are many buyers who are looking at properties, particularly the short sales and bank owned. However, they are not necessarily writing offers. We’re hoping that the spring will bring closed transactions for those currently looking. We are receiving phone inquiries on short sales of late.

The news of the week is a breath of fresh air for millions of homeowners and for the real estate sector, it is just what the doctor ordered. It is imperative that we continue to move with speed to make housing more affordable and to help stop the spiral in our housing markets. I believe that this plan will encourage additional loan modifications and will ultimately reduce the foreclosure rate. In the end, this is one—and possibly the most important—way to stabilize prices and once again get us moving in the right direction. Helping families keep their homes is critical, both for the health of our economy and in neighborhoods across the country.

What I am most inspired by is the fact that I really do believe that we are headed in the right direction. On a local level, we’re already starting to feel the initial flow of these benefits. Though I can’t say it is across the board, in general, we are seeing increased floor activity, increased open house activity and buyers are finally getting off the fence and inquiring about the first time home buyer credit, increases in conforming loan limits and seeking counsel on whether or not now is the best time to buy.

While I don’t want to sound too much like a Pollyana, I truly believe that we are well-positioned and poised for a recovery. No, it won’t happen overnight but Obama and his team have made it very clear that they can’t fix this economic crisis without fixing the housing woes and with the recent release of the second half of the TARP funds coupled with the Emergency Economic Stabilization Act and now the Homeowner Affordability and Stability Plan, the housing sector truly is in one of the best positions for a recovery.

Until next week,
Make it a great one,


Bob Bronswick