Where is the Help for the Homeowners?

Earlier this month, during a panel discussion with OTS Director John Reich, Federal Reserve Board Vice Chairman Donald Kohn, FDIC Chairman Sheila Bair, and Federal Housing Finance Agency Director James Lockhart, the Comptroller of the Currency John C. Dugan said "that new data shows that more than half of loans modified in the first quarter of 2008 fell delinquent within six months."

He went on to say that “After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,”

A key question, Mr. Dugan said, is why is the number of re-defaults so high? “Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”

Let's discuss this, shall we?

Question 1 - Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers?

Answer: YES! When providing modifications for the homeowners the banks do not make their decisions based on what the homeowner can afford, but instead their decisions seem to be based on the amount owed on the loan. Most banks are unwilling to budge for the homeowner and will even close the file after making a modification offer, if the homeowner takes to long (as little as 72 hours) to make a decision.

Question 2: Is it because consumers replaced lower mortgage payments with increased credit card debt?

Answer: Very possible - especially in the cases of "teaser" rate loans. We find that the providers of these loans qualified the borrower only at the beginning interest rate and failed to qualify the borrower at the "real" rate.

This failure often make the unsophisticated borrower feel that they have more latitude in terms of disposable income and who subsequently made purchases based on today's monthly payment totals instead of making purchases based on the adjusting loan balance.

Question 3: Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments?

Answer: The failure of the mortgage providers to properly look at the applicant's paperwork is a big part of this problem. The stated income program was at first one of the greatest lending programs I have ever seen in my 20 year real estate career. This program allowed self employed people finally get a chance to purchase a home without having to explain why there 1040's only showed little or no income (line 36).

The problem with programs like these is that everybody decided to use it to get their client a loan (and rightfully so). However, when it was credit driven, meaning your score had to be above a certain level, everything was running smoother. Then one day, the mortgage provider relaxed their guidelines and reduced the requirements.

All of a sudden EVERYBODY was getting a home loan or refinancing their existing home. It was like the Wild, Wild West out in Real Estate land! The folks who wouldn't normally qualify for a loan are now homeowners! This in itself is not bad, but unfortunately the mortgage providers should have underwritten these loans better.

Question 4 - Or is it a combination of these and other factors?”

Answer: There is another factor I want to bring forward. Loan's with one hundred percent (100%) financing. It was okay for this program to have been released. But shouldn't the mortgage providers insist that anyone who accepted this loan must first go to some sort of financial responsibility class?

I know, hindsight is One Hundred percent (100%)! However, they should at least have made sure first time buyers or people with credit scores under 650 attended this type of class.

Now that we've answered these questions I want to make an observation.

Why are we talking about loan modifications in terms of failure?

Shouldn't we instead be questioning the banks about why they are not doing more to help the homeowners in distress?

Didn't the banks get a bailout package?

Why isn't anyone we asking them to share the bailout package with the homeowners in distress?

In my next submission, I'm going to talk about the Bank Bail-Out Plan & the possible affects it may have on homeowners!

Did the Recession Affect Your Christmas Like it Did Mine?

No matter where you live in this country, whatever your economic status or the type of work you do, you are either being affected by this current recession or you know someone who is. Americans (we, the people), all over this great nation are losing their homes, losing their jobs, losing their hope and are feeling powerless because of this crisis.

With all the foreclosures, all the failed banks, huge investment firms closing and with credit tightening, our economy is in crisis! There is plenty of blame going around. The Democrats blame the Republicans and vice versa, the Feds blame the mortgage companies, the lenders blame the homeowners.

Our leaders don’t seem to have the answers necessary to stem the tide. Big bucks are being passed around Washington that help the large corporations that, frankly, helped cause these problems in the first place.

Next to nothing is being done to help the little guy, you and me.

So, what CAN be done? First, to take back our economy, we need to leave the blame game to the talking heads. We can continue to listen to them and place our hopes in Washington politicians, wringing our hands and continue to feel powerless – OR we can choose not to participate, take matters into our own hands and . . . . .

BOYCOTT THE RECESSION!

Recession is money not moving. Lowered sales create slowed production, which causes jobs to be lost, so families have less to spend, which then keeps dollars dormant and not circulating. It’s a vicious cycle that can only be stopped by intelligent intervention.

Our Government may not have gotten it right when they sent out stimulus checks to the entire population, but stopping spending isn’t the answer either.

It seems counter-intuitive, but the very last thing we should be doing when money flow starts to slow is to stop spending our money. The only remedy for a recession is to get cash flowing in our economy again. It’s up to the American consumer to control this recession – and don’t think for a moment that we cannot!

Alice Walker (author of “The Color Purple”) once said, “The most common way people give up their power is by thinking they don’t have any.”

The day has come when we, the people, have to take a stand. We didn’t start this. But we can help ourselves and help each other end it by moving our money more wisely.

It has become clear that our leaders don’t really know exactly what to do to handle this recession.

We, the people, must take matters into our own hands.

Are YOU ready to put an end to the recession? Are you ready to do your part to become financially secure? I AM! That's why I've decided NOT to participate in this recession!

And I want YOU to join me!

Together we can BOYCOTT THE RECESSION and PROSPER

It doesn’t take much on your part to participate and lend your support. And it costs you nothing to join. You can learn more about the BOYCOTT THE RECESSION at

http://BoycottTheRecession.org.

Listen to us on the internet every Wednesday at www.blogtalkradio.com/mr-boycott

Do your part. Go there now and join us. Then tell everyone you know about how they can participate by sharing this blog & radio show with all your friends, family, and fellow workers.