Who Will Benefit from New Obama Housing Plan

President Barack Obama’s administration activated a new housing assistance plan aimed at helping Americans avoid foreclosure. The plan is called the Homeowner Affordability and Stability Plan and earmarks $75 billion towards helping homeowners in two ways. The first involves refinancing to lower rate loans and the second involves awarding incentives to lenders to encourage them to modify existing loans.

The refinancing portion of the plan is aimed at homeowners who have stayed current on their mortgage payments yet have been unable to refinance because of a severe drop in their homes’ value. Under current standards homeowners with less than 20% equity in their homes have almost no chance to refinance. The new standards should be a great help. Homeowners will be eligible as long as their debt does not exceed 105% of the home’s value and the loan is owned or guaranteed by Fannie Mae or Freddie Mac(officials are still seeking participation from other loan servicers). Borrowers will have to provide proof of sufficient income to afford their loan payments.

The loan modification portion of the plan is intended for homeowners who are at risk of foreclosure or already in foreclosure. To qualify, a mortgage has to have originated before January 1st, and the amount owed must be no more than $729,750. For eligible loans, loan servicers or lenders will reduce the borrower’s monthly payments to 31% of gross income. The reduction will be accomplished through lowering of interest rates(2% minimum) or extending the term of the loans. The reduced payments would then remain the same for 5 years before gradually reverting back to conforming rates at a maximum of 1 percent per year. Homeowners would also be eligible for a reduction in their loan’s principal(max. $1,000 per year over 5 years) for making payments on time. The program will be available until Dec. 31 of 2012 and homeowners can qualify only once. Investors and speculators will not qualify for the program as the property in question must be owner-occupied.
Likewise, irresponsible borrowers who mis-represented income will be screened out.
Search La Jolla Condos now.

Foreclosures On the Rise in Some Areas of California

Though some major lenders have called for a halt to foreclosures, the number of at-risk homeowners in February rose 30% from last year. Across the country, over 290,000 homeowners were sent default notices last month. This represents a 6% jump from the previous month. Particularly hard-hit are the Western states and Florida, though the dilemma is beginning to be felt in states like Illinois, Idaho, and Oregon. To make matters worse, many experts do not see the problem easing up any time soon.

Many lenders have taken action to help stem the tide of foreclosures. Temporary halt on foreclosures were instituted by mortgage giants Fannie Mae and Freddie Mac as well as major banks Citigroup, Morgan Stanley, Bank of America and JPMorgan Chase. These companies all took action prior to the Obama Administration’s plan to stem the real estate crisis being released last week. In Florida and New York, temporary bans on foreclosures have been lifted, contributing to the rise in foreclosures. Other states are currently pursuing legislation to stem the tide. In Michigan this week the House passed a bill that would grant a 90 day reprieve to homeowners facing foreclosure. The bill now goes to the state’s Senate. As foreclosure numbers keep growing, banks have not listed the properties for sale. There were around 695,000 such home at 2008’s end. Should all these properties be listed, it could cause the housing crisis to persist even longer.

All of this represents a huge challenge for the Obama Administration. The Administration’s plan aims to help more than 8 millon Americans avoid losing their homes. More than 11% of all those paying on a mortgage (almost 5.5 million homeowners) were behind or already facing foreclosure at the end of last year.
That is the biggest number of at-risk homeowners ever. The number is up from 10% in the 3rd quarter and 8% at 2007’s end. A report from RealtyTrac says that almost 75,000 homes were repossessed in February. Foreclosure rates were the highest in the states of California, Arizona, Florida, and Nevada. In Nevada one out of every 70 homes faces a possible foreclosure battle. In Arizona, it’s one out of 147. The other states with top 10 foreclosure rates are Georgia, Michigan, Illinois, Idaho, Ohio and Oregon.

As for metropolitan areas, Las Vegas, with one out of 60 homes facing foreclosure, ranks highest. Second was the Fort Myers-Cape Coral area of Florida. The next six areas with the highest foreclosure rates are all California areas: Stockton, Modesto, Merced, San Bernardino, and Bakersfield. The San Diego real estate market, as well as, the La Jolla real estate market are not seeing as many foreclosures. This has many experts saying that San Diego has already hit bottom.

San Diego’s Home Affordability on the Rise

A recent report from the National Association of Home Builders revealed that almost 45% of homes sold in the last quarter of 2008 in San Diego County were affordable to families earning the county’s median income of just over $72 thousand. The highest such number San Diego has ever reached was in the 1st quarter of ‘94 at just over 48% during the last recession. The new number is up from the 3rd quarter number, slightly below 39%, and a vast improvement over the fourth quarter of 2007, when only 14% of homes sold were affordable. The affordability index is also up across the nation to almost 63%, compared to 56% in the 3rd quarter and almost 47% at the end of last year. An expert commented that the rise in affordability can be attributed to dropping home prices as well as mortgage rates falling. The index makes the assumption that buyers put ten percent down and set aside 28% of net income for insurance, interest, principal, and taxes.

In addition, home prices have continued to drop in the Southern California area. The median price for homes sold in the area currently stands at 250k, an almost 40% drop from January’s median of 415k. San Diego County’s median home price stood at 280k in January, the 1st time in 7 years it has been under 300k, and an almost 35% drop from the same time last year. Experts attribute the trend to increased numbers of foreclosed homes in the area. 55% of all homes sold in the county in January were foreclosed homes.

Home sales are up in the area almost 53% from a year ago, totaling 15,227 homes sold. The 2,459 homes sold in San Diego county represent an almost 35% increase from this time in 2007. As noted by many builders, buyers are benefiting greatly from interest rates dropping. Freddie Mac’s weekly survey reported that the average 30 year fixed rate loan had an interest rate of 5.04%, down from last week’s 5.16% and last year’s 6.04.

Despite falling prices and an encouraging trend in affordability, San Diego still ranks as the 26th least affordable of 222 metro areas ranked by the NAHB. The least affordable market is New York where under 14% of homes sold are affordable to one earning the area’s median income of 63k.

The La Jolla real estate market has remained fairly stable. The median price for a home in La Jolla is about on par with last years numbers. La Jolla condos have also remained fairly consistent in terms of median price and number of units sold.