Help for the homefront
MORTGAGE BOOST | Obama says plan helps 9 million avoid foreclosure
For homeowners stuck with expensive mortgages on houses they can't sell, President Obama served up a $75 billion program -- in addition to another $200 billion to Fannie Mae and Freddie Mac -- Wednesday to ease their burden.
The plan doubles the federal guarantee, to $400 billion, for mortgage giants Fannie and Freddie -- which hold about 40 percent of the nation's $12 trillion in mortgage debt -- to encourage mortgage availability and make refinancing easier.
(AP)
CURRENT MEDIAN AREA HOME PRICE
Barrington $481,498
Crystal Lake 224,681
Evanston 322,287
Mount Prospect 287,151
Naperville 311,205
Tinley Park 206,603
CHICAGO COMMUNITIES
Lincoln Park $415,000
Near South Side 358,000
Washington Heights 72,000
West Elsdon 188,250
Wicker Park 438,500
SOURCES: HomeInsight.com, Trulia.com
The rest of it relies on voluntary agreements by lenders to lower mortgage payments for families pushed to the financial brink.
Critics, including mortgage brokers and would-be borrowers, questioned whether the plan goes far enough to bring new buyers into the market, which they see as essential for a housing recovery. They also said it doesn't solve an underlying problem of lending standards that have gotten straitjacket-strict.
"The problem is the underwriting" of loans, said Chris Chambers, vice president of mortgage lending at Guaranteed Rate Inc. "It is the highest and tightest, even with low interest rates."
He said lenders are continually demanding higher minimum credit scores for borrowers or higher down payments for new loans or refinancing.
Marve Stockert, executive director of the Illinois Association of Mortgage Professionals, said private mortgage insurers have recently complicated the market by not supporting certain loans.
Also, Stockert said some companies have severely curtailed participation in condominium loans.
Lenders argue that they are reverting to historically normal standards of creditworthiness.
Delivering a speech in Mesa, Ariz., a community hit hard by the housing crisis, Obama said his plan would help up to 9 million Americans stay out of foreclosure.
"The plan I'm announcing focuses on rescuing families who have played by the rules and acted responsibly," Obama said. "It will not rescue the unscrupulous or irresponsible."
The scope of the problem is vast. Moody's Economy.com estimated that 27 percent of the nation's 52 million homeowners owe more than their property is worth.
In the Chicago area, the real estate Web site Zillow Inc. has estimated that 19 percent of homeowners are similarly "upside down."
A novel approach in the Obama plan is a "bounty" it would pay as incentives for lenders, borrowers and mortgage servicers. The bounty would reward the servicers and lenders who modify mortgages according to the rules. Borrowers would get $1,000 a year for five years for staying current in their renegotiated loans.
For families whose payments on subprime loans have risen beyond their ability to pay, the program calls for lenders and the federal government to share the cost of lowering the monthly payment to 31 percent of income.
But the program generally applies only to loans eligible for Fannie or Freddie backing. In the Chicago area, the maximum loan amount is $417,000.