Can the Government save the Housing Market?

Senate

The federal government is beginning to cut back on its support for the private sector. Is it too soon?

Over the past year, the government has intervened heavily at essentially every stage of the home-buying process and the housing market has become very dependent upon the government. In fact, more than 80% of the new residential mortgage loans made this year benefited from some form of government support, according to the trade publication Inside Mortgage Finance.

To keep funds flowing to the housing market, the government bailed out Fannie Mae and Freddie Mac last year and now basically owns the mortgage finance giants and their $5.4 trillion in loan portfolios.

And to boost sales, the government also is offering $8,000 tax credits to first-time home buyers.

Read more…

Loan Modifications Increasing

FannieMae

photo by futureatlas.com

Fannie Mae and Freddie Mac modified nearly 24,000 loans during the 4th quarter of 2008, an increase of 76% over the third quarter. The modifications, along with suspension of foreclosures that began November 26, reduced the number of foreclosures by nearly 27% during the quarter.

Foreclosure prevention options include *forbearance plans, payment plans, delinquency advances and loan modifications.

*Forbearance – postponement of loan payments for a temporary period of time (usually up to one year)
*Payment plans – schedule of payments may be modified (from monthly to weekly or bi-weekly, increased to add on and catch up arrearages, etc.)
*Delinquency advance -promise to pay at a later date (moving delinquencies, possibly to the back end of the loan)
*Loan Modifications – modifying the existing loan by reducing the interest rate, extending the term of the loan, changing to a different type of loan or any combination of the three

Read more…