« Homes101.net: Somebody’s Buying Homes! | Home | Sun-Sentinel.com: Realtors Group Lifts Outlook »
Sun-Sentinel.com: Bush Mortgage Plan Won’t Help S. Fla. Housing Market
By The 800lb Gorilla | December 7, 2007
Bush mortgage plan won’t help S. Fla. housing market
By Paul Owers; South Florida Sun-Sentinel; December 7, 2007
South Florida won’t get a big boost from President Bush’s plan to freeze interest rates for homeowners nationwide who are bracing for sharp increases in their adjustable-rate mortgages, analysts say.
Many distressed borrowers across the region can’t benefit because they’re investors or homeowners at least 90 days late on their house payments. To qualify for help under the program announced Thursday, residents must be living in their homes and current on their mortgage payments.
What’s more, Bush’s proposal is focused on preventing a national foreclosure crisis and not meant to aid individual states, such as Florida and California, that are leading the housing bust after the boom of 2000-2005.
Some economists say there’s nothing in the president’s proposal that will trigger a rebound in a South Florida housing market that has been mired in a slump for almost two years.
“It’s not going to help areas that need help the most, and Florida certainly is one of those,” said Per Gunnar Bergland, chief economist for Moody’s Economy.com, a Pennsylvania research firm.
Bush said relief is designed for homeowners holding adjustable-rate subprime mortgages they took out between Jan. 1, 2005, and July 31, 2007, and are facing a steep increase in their interest rates before July 31, 2010.
About 1.2 million people could be eligible for help, but only a fraction will get the five-year rate freeze. Others would get assistance in refinancing with their lenders and moving into loans secured by the Federal Housing Administration, Bush said.
Also, the aid will come only to those who ask for it, he said. Thousands of borrowers who are falling behind on their payments have been sent letters about the options, and the president also urged people to call a new hotline: 1-888-995-HOPE.
“There is no perfect solution,” Bush said, as he announced the agreement hammered out with the mortgage industry. “The homeowners deserve our help. The steps I’ve outlined today are a sensible response to a serious challenge.”
About 2 million subprime mortgages — loans to borrowers with poor credit histories — will reset over the next two years from their introductory rates of around 7 percent to 8 percent to levels as high as 11 percent, adding hundreds of dollars to the typical monthly payment.
A recent surge in mortgage defaults in South Florida and nationally has contributed to the worst housing slump in more than two decades and piled up billions of dollars in losses for big banks, hedge funds and other investors while hammering financial markets worldwide. Some economists fear the housing problems may push the country into a recession.
“We should not bail out lenders, real estate speculators or those who made the reckless decision to buy a home they knew they could never afford,” Bush said after meeting with industry leaders at the White House. “But there are some responsible homeowners who could avoid foreclosure with some assistance.”
As of June, 6.6 million homeowners nationwide had subprime mortgages, Economy.com’s Berglund said. Of those, 1.7 million face resets to higher interest rates between January 2008 and July 2010.
Last year, 42 percent of mortgages originated in Broward County were subprime, according to the U.S. Department of Housing and Urban Development. In Palm Beach County, 32 percent were subprime mortgages.
The number of Americans who fell behind on their mortgage payments in the third quarter rose to a 20-year high, the Washington-based Mortgage Bankers Association said.
In Broward County, 2,110 residents were behind on their mortgages in November, almost triple the 770 of a year ago, according to Realestat.com of Plantation.
Palm Beach County had 1,387 residents behind on their home loans last month, up from 515 a year ago.
People facing foreclosure typically are behind on their mortgage payments at least three months and have been notified by lenders that they intend to take back the properties.
Louis Spagnuolo, vice president of mortgage banking for WCS Lending in Boca Raton, thinks that Bush’s plan will help.
He said people still can qualify if they are no more than 60 days behind on their house payments. They also must have at least 3 percent equity in their properties and a credit score of 660 or lower.
Berglund, wonders, though, whether lenders and loan servicers will be sued by investors for altering the terms of the loans. He also points out that many subprime borrowers obtained loans with little or no documentation and may be unable or unwilling to prove their income now to qualify for the rate freeze.
“We don’t think this will be enough to turn the market around or even stabilize it,” he said.
Lauderhill Mayor Richard Kaplan, who will deliver a report Monday to the City Commission about the effect of subprime mortgages on local governments, said more has to be done to help those people who need it.
“This is a good first step, but it’s not the last step,” Kaplan said.
Meanwhile, as the foreclosure pressure intensifies, people are seeking relief from consumer-based groups across South Florida.
Through Sept. 30, the Consumer Credit Counseling Service in West Palm Beach has worked with 2,411 clients who sought relief from mounting housing costs. For all of last year, the nonprofit agency worked with 900 such clients.
The vast majority of clients took out adjustable-rate loans that are due to reset in the coming months, said Jessica Cecere, president of the counseling service.
“We’re definitely hearing the same old sad song over and over again,” Cecere said. “There are a lot of variables to this plan, but the premise on which it stands — to stop the bleeding, if you will — sounds good to me.”
This story includes information from wire reports.
Copyright © 2007, South Florida Sun-Sentinel
Topics: Marketing, Misc, Mortgages, Real Estate |
Fatal error: Call to undefined function: sexycomments_print() in /home/content/r/q/t/rqteck/html/jungleblog/wp-content/themes/The Jungle Blog/comments.php on line 42