An interesting solution.
Loan Modifications... A Solution For Negative Equity?
In July, Congress passed the Hope for Homeowners initiative. It is a FHA insurance package which will insure $300B of new mortgages for home owners in a "negative equity" position.
Negative equity, of course, meaning that most of these loans are worth more than the home.
To qualify for the loan modification, the borrowers must have made at least 6 loan payments on time, and they would need a DTI of 31% or less.
What happens if the borrowers meet all the guidelines? (And keep in my mind, that most of these are non-performing mortgages. And if I had to guess what the debt to income ratio on average in 2007 was, it would most likely be around 40-45%).
Who's Going To Qualify For Loan Modifications?
The answer is: Very few people.
When the program became available, out of 49 people applying, zero applications were approved.
NonPerforming Mortgages Included In FHA Secure Program
Just as difficult to qualify for, out of 203 applications only 49 borrowers were approved for the FHA Secure program.
During this same period, California had about 1,300 properties that had a Notice of Default filing.
So what's the big deal here? Can't we just give the H4H program some time?
Of course.
Remember that H4H, along with the lenders participating in these loan modifications will be looking for federal backing on these 90% principal reduction plans.
Instead of waiting on H4H, why don't you invest in those 49 notes that were rejected and make an offer to buy them.
And most likely, there will be more non-performing mortgages (to buy) where they came from.
Author: DeanEngle
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