In an effort to help the home owners who have continued to make their payments even though the home is currently worth less than what is owed, the federal government has launched its plan to allow FHA loan refinances for this group.
Many have felt that this segment of the market is being unfairly asked to burden the load while others get bailed out or just jump ship by walking away from their home. While this does not solve the value imbalance (time will do that), it does allow the home owner to take advantage of the very low interest rates currently available.
These folks have been forced to pay the higher interest rates because they were denied the opportunity to refinance. We have seen some as high as 12% on the adjustable roll-over loans. Today’s rates are in the 4% range. On a $350,000 loan (remember, these folks are still paying on the high purchase price) that makes a monthly payment drop from $3600 (P&I only) to $1670, a difference of nearly $2,000 per month!
In principal, we think this is a great idea. If the banks can get this rolling many of the real estate related ills of our current economy will be lessened.
- Conscientious homeowners will not be removed from the fruits of their labors.
- Investors will continue to receive their money.
- Banks will be saved the expense of foreclosure.
- Less foreclosures will be hitting the market.
- Real estate prices can stabilize as confidence begins to raise.
- The rest of the economy will follow as that confidence raises.
Of course, the questions remain as to whether:
- The government can manage this program successfully.
- The banks will administer and work with the program.
- Will those affected get the news and apply for the program?
To get another take on this issue you can click HERE to read an article in The San Francisco Chronicle. And for more local news don’t forget the Discussions and News tab at Yuba Sutter Home Buys, or the Hot News icon at Yuba Sutter Homes and Loans.