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Glenn Hanon

HAMP

March 30, 2010 at 06:31 PM · Posted under Glenn Hanon

Just the other day I was talking with a friend and he asked, “If there are so many mortgages in real trouble why aren’t the banks working faster to fix the problem?” His question is one that I think many are asking. On the surface the simple fix seems obvious. But as you peel the layers back one can see why this just isn’t working. According to the Wall Street Journal only 170,000 borrowers have found relief with the government’s new HAMP program or Home Affordable Modification Program. This new program is supposed to assist borrowers who find themselves underwater. Some of the problem rests with the banks moving too slowly. To qualify for this program the homeowners must be current on their loan, occupy the home as a primary residence, document their income and assets fully, and their credit score must be above 500. Most of the requirements are okay, but let’s look at the first one. The homeowner must be current on their mortgage. This is precisely the problem. So the program is stating that if you are making your payments you qualify, but if you are having trouble making your payments there is no help with this program. Out here in the real world we are seeing just the opposite. The folks that have missed some payments are in the category that need the most help. Part of the slowness is that the government continues to modify the rules. Case in point as reported in the WSJ on Saturday March 27, 2010 (click the thumbnail for a larger view). Now the government is trying to figure out how they can assist the second lien holders since they are usually left holding the bag on a short sale. The steady stream of revising rules, new programs and proposed bailouts only fuels the fire of bureaucracy. If banks think that there may be a bailout or government assistance down the road do you really think they will move quickly now to resolve the growing problem. I am not putting the blame on the banks, but the government needs to realize that the mixed messages are slowing down the recovery in housing. So what is the answer? I don’t think it is easy or palatable, but the market needs to fix itself with less intervention. Housing can heal itself, but the continued intervention has the possibility of making things worse.

Posted by:Glenn Hanon

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Interest Rates set to Rise

March 29, 2010 at 06:41 PM · Posted under Glenn Hanon

For those of you sitting on the sidelines wondering if now is the time to buy that first house or trade up I would suggest that NOW is the time to get moving. (Sorry for the pun) The Fed has targeted this Wednesday as the deadline for their overwhelming involvement in purchasing mortgages. Currently the Fed is buying over 99% of every mortgage written, compared to a normal level of about 60%. The Fed desperately wants the private sector to reemerge as the principal purchaser of these mortgages. But at a 5% return it seems unlikely that the private investor will be lining up to buy these instruments. Perhaps at a return of 6%-7% they might find mortgages appealing. Well if you are a buyer and are waiting for the “bottom” of the market stop trying to time the market and get in. Here is why; let’s say you are looking at a $250,000 home. You think it is a good deal now but feel as though the price could drop another 5%-8%. Your friends even suggest that you might shave another 10% off the price. For the sake of the argument let us assume that your friends are correct. The payment for the $250,000 home with 5% down is $1,247.00 per month for principal & interest. Now if the house lost an additional 10% the value is $225,000.00 and if rates go up to just 6.5% the payment with the same 5% down is now $1,351! So while some are waiting for the so called bottom of the market they lose all that benefit from the bottom by the higher interest rates. I always encourage my clients to look at the entire picture. If you are buying strictly for one reason, that is your choice but it make not make the best fiscal sense.

Posted by:Glenn Hanon

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