Underwater Mortgages and Possible Changes to HARP


I have been helping a company develop a couple underwater mortgage calculators and in discussion with them they mentioned that nearly 1/4 of all homeowners currently hold an underwater mortgage. I found that difficult to believe but he assured me it was true, and today in the news I read an article that confirmed it. However, that statistic is misleading since most of the underwater loans are in just a few states, like California, Florida, Nevada, Arizona and Michigan. In those states the percentage of people with negative equity is staggering, about 60% in Nevada, nearly 50% in Arizona and over a third in Michigan and Florida. I found this cool graph to figure out where Missouri stood and it is much more typical, where about 15% of homeowners are underwater (about 1 in 6.) That is still not great news, but nothing like the numbers from the hardest hit states.

The federal refinancing plan set up to help people with their problematic loans has been far from a success, with less than 900,000 homeowners using the Home Affordable Refinancing Program (HARP) where they were hoping to help millions. So now they want to change the program, removing the maximum 125% LTV limit on qualifying loans and lowering the cost to refinance. (Once anything is approved I am modifying my online calculator!) That is a great thing to try to help those with underwater loans, but what about the 85% of us in most of the other states who have loans well under the value of our homes? It is great they are making refinancing cheaper for those people most in trouble, but why not lower refinancing fees for everybody? I had someone e-mail me a question about a loan modification and he mentioned his total closing costs to modify and refinance his loan would be about $800, where I know it would cost me nearly $2,000 to refinance my tiny loan which does not qualify to be "modified" since it is well under the value of our home and our monthly payment is well within our means. In any case I hope they make some changes to the program so that more people can use it, or what was the point of it at all?

Interest rates have taken a slight uptick in the past couple of weeks so anyone thinking about refinancing will have to decide whether to wait to see if any of these modifications to the plan get approved or try to do something now before rates get any higher. For many folks the rates do not make a difference since they are so far underwater they do not qualify for anything, so they desperately need the 125% LTV criteria to be lifted. Let's see what Washington can do to try to help out the underwater mortgage situation.

Comments

Post a Comment

Popular posts from this blog

Trying out the L'Ecole Culinaire Presentation Room restaurant

Image
We had been seeing the ads for the restaurant at L'Ecole Culinaire and since we live so close by we thought we would try it out. We had always enjoyed dining out at cooking or hotel schools like the CHIC in Chicago and the Statler at Cornell where we went to college. Since we still love to go out and eat here in St. Louis , we ventured over to their restaurant on the first day they were open for lunch. The first thing we noticed is that they do not have much parking! They really need to let patrons know where they are supposed to park. The restaurant itself is small but very well attended. There was one fellow who kept straightening all the centerpieces and place settings on the tables, and we always saw one or two student workers milling about. The lunch menu was small and the choices did not appear overly "gourmet". The special of the day was a bison burger stuffed with cheese, and other choices picked by my group included a club sandwich, a "margherita" pi...
Read more

BMI & BMR Calculator (Body Mass Index and Basal Metabolic Rate)

Image
My wife has been researching type 2 diabetes and recently checked a book out of the library which included a body mass index (BMI) chart much like the one pictured here. Whereas it is fairly easy to follow, I, of course, think it must be converted to an online calculator! However, when I checked the Internet, there were already a billion of them so I had to make one that was different. So my lovely BMI BMR calculator accepts either inches or centimeters for your height and pounds or kilograms for your weight and calculates not only your BMI, but also your BMR (basal metabolic rate) which determines how many calories you should consume! So I made a spiffy "all in one" healthy body indicator calculator which not only determines how underweight or overweight you are, but also tells you how many calories you should consume to maintain or improve your ideal weight. 
Read more

Not all Frosted Window Films are the same!

Image
We live in an older home with a lot of issues and one of them concerns our back door to our patio from our sunroom. The door has double paned glass on it, but unfortunately the seal has broken so you can see moisture collect inside of it. We decided the easiest way to "remedy" the problem was to cover the window with some "frosted" film so we did not have to see the moisture condensing between the panes. But the question was, what film? There are a bunch of them available so we had to select something to try on the door. The first place we tried was our nearby Lowe's store which had a bunch of Gila brand film. We selected what seemed like the typical adhesive based door sized  film that cost about $25 after tax. We thought it could not be that hard to put up and look nice on our door. So one day my wife ran out and purchased it at Lowe's and we commenced to install it on our door window. We made our own soapy water solution and followed the directions...
Read more