Vinnys House of Real Estate

Quick article about the mortgage bill, I don’t know very many people who are only a little underwater, they are very underwater..

Realtors, mortgage brokers and others working in the trenches of the Phoenix housing market say President Barack Obama’s mortgage rescue plan offers glimmers of hope to the distressed marketplace, but leaves out many troubled homeowners.

Stan Van Dyk, Tempe branch manager for America One Finance, said Obama’s plan to allow homeowners who have lost equity to modify their mortgages will help some borrowers as well as loan and title companies but not the most distressed cases.

“Most of the folks who will take advantage of this are not the folks who are in foreclosure,” Van Dyk said.

He said the Obama plan focuses on conventional loans and does not include investment properties — which are substantial in the Phoenix market. It also might not help many property owners who have more than one mortgage or are severely upside down in terms of home value versus what they owe.

“Unfortunately, with 80 percent of distressed properties having a first and second mortgage, modifications for those who were overleveraged is going to be next to impossible unless they’ve been paying extra payments to bring down their balance,” Van Dyk said.

Skeptics also note that defaults resulted despite voluntary mortgage modifications undertaken by banks in 2008. Still, some real estate agents and mortgage bankers say the Obama plan offers some certainty amid the tumbling housing market. A decrease in mortgage balances and payments could boost consumer spending, they say.

“If we reduce mortgage rates, that will allow more Americans to have more money in their pockets, which translates to more consumer spending,” Van Dyk said.

“I feel this plan will help the crisis because the public has hope at least,” said Julie Sullivan, a real estate agent with Keller Williams Realty in Goodyear. “Two months ago we had nothing. Even people who are not in trouble are hoarding their money and staying home for the most part,” she said. “Obama’s plan will help the Phoenix housing market. Not because it’s a great plan, but because it is something. The public is scared, and when the government was doing nothing the public got more scared.”

Sullivan’s said she still worries whether banks really will be compelled to modify mortgages and reduce foreclosures. “I have seen many homeowners lose their homes because the banks refuse to let them work out a loan. This whole crisis could have been avoided if the bank would have worked out new loans for the homeowners.”

Van Dyk said lenders have imposed tougher financing rules in hard-hit states such as Arizona and that cuts into refinancing and new lending.

Banks receiving Troubled Asset Relief Program, or TARP, funds are required to participate in the $75 billion federal mortgage modification and assistance program. Bankruptcy judges will be able to rework consumer mortgages mortgage giants Fannie Mae and Freddie Mac will receive another $200 billion in equity funds.

Tony Pomykala, a Realtor with Sunrise Investments in Chandler, said the Obama plan offers some certainty for the uncertain Phoenix housing market and that the tax break for first-time home buyers could increase demand. He said investors and Canadian buyers also have started looking for bargains in the area.