Housing Woes Bring New Cry: Let Market Fall

Please note our new address - see the end of this posting for new information.

Bad news in the forecast for homeowners on Labor Day?  The New York Times prints, "Housing Woes Bring New Cry: Let Market Fall."

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

The Obama administration has been trying to pull a rabbit out of the hat when it comes to the falling value of American homes and poor market demand.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As mentioned elsewhere in Vested Title News, with the exception of the tax credits gimmick, these programs have not been successful.  Maybe drastic action is in order.

Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.


When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

 There is a lot at play here; financially and emotionally.  We've complained before about "strategic defaults" where a homeowner walks away from his home because its market value has fallen below the value of the mortgage.  And we've mentioned that every seller thinks her home is worth a million dollars when it's listed for sale.

Maybe the "shock therapy" is what is needed.

Read the full column, and let us know what you think.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 201-656-9220 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Mortgage program a bust with 50% dropout rate?

We have previously written about the Obama Administration’s program to encourage mortgage modifications.  Well, the news is in and it’s not good.

According to the Associated Press,

“Nearly half of the 1.3 million homeowners who enrolled in the Obama administration's flagship mortgage-relief program have fallen out.

“The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday's report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say.”

 “Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That's about 48 percent of  those who had enrolled since March 2009. And it is up from more than 40 percent through June.”

 Who is to blame?

“Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork.

“The banking industry said borrowers weren't sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.”

 One thing is clear—we are facing more foreclosures.

Read the full report.

 

For your next title order or 

if you have questions about what you see here, contact 

Stephen M. Flatow 

Vested Title Inc. 

648 Newark Avenue, P.O. Box 6453, 

Jersey City, NJ 07306 

Tel 201-656-9220 - Fax 201-656-4506 

E-mail vti@vested.com - www.vested.com

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Obama administration to send $112M to N.J. for mortgage assistance

Some New Jersey residents stand to benefit from mortgage assistance coming out of Washington, D.C.

Staying out of foreclosure in this economy can be tough enough. Try keeping up with the mortgage after losing a paycheck.

To try to help prevent more defaults, the Obama administration today said it will send $112 million to New   Jersey to design a program to help unemployed homeowners stay in their homes while looking for work.


New Jersey is one of 17 states with persistently high unemployment rates to share $2 billion in funding through the program, dubbed the "Hardest Hit Fund."

The state still has to come up with a plan on how the money will be dished and no one is predicting, yet, how many people will actually benefit from the program.  Of course, there’s a risk of abuse—money going to the wrong people—but this is New   Jersey, after all.

In any event, hats off to the folks in Washington for sending this money our way.

Read the full report from the Star-Ledger.


For your next title order
or if you have questions about what you see here, contact
Stephen M. Flatow
Vested Title Inc.
648 Newark Avenue, P.O. Box 6453,
Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com Sphere: Related Content

FDIC's Bair weighs in on financial regulation

Sheila C. Bair, chairman of the FDIC, has an Op-ed in the New York Times supporting President Obama's call for a new regulatory network for banks and other financial providers.

"THE Obama administration has proposed sweeping changes to our financial regulatory system. I am an active supporter of the key pillars of reform, including the creation of a consumer financial protection agency and the administration’s plan to consolidate the supervision of federally chartered financial institutions in a new national bank supervisor. This consolidation would improve the efficiency of federally chartered institutions while not undercutting our dual system of state and federally chartered banks."

Bair then outlines the advantages of the Obama plan over other plans that have called for a single regulatory agency.

What concerns me is that Bair has been wrong before, most notably about the mortgage modification debacle. And when she says, "this is not about protecting turf. This is about protecting consumers and the safety of our financial system," my first urge is to run for the hills.

Read the full article, The Case Against a Super-Regulator.

For your next title order,
or if you have questions about what you see here,

contact Stephen M. Flatow
Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Mortgage Modification Program a Bust - Ask this homeowner

The New York Times reports on what we have been reporting all along--the Obama administration's mortgage modification programs are not working. In Promised Help Is Elusive for Some Homeowners the Times relates the story of Arizona homeowner, Eileen Ulery, and her efforts to modify her mortgage. Her problem? She's current on her payments.

Yes, she was teetering toward delinquency. She was among millions of homeowners rapidly sliding toward danger for whom the Obama administration had devised an aid program — some already in foreclosure proceedings, others headed that way as they ran out of means to make their payments. But unlike those in imminent peril of losing their homes, Ms. Ulery had never missed a payment.

“I don’t know who this bailout is helping,” she said. “We’ve given these banks all this money and they’re not doing what they say they’redoing. Something’s not working right. They keep saying they’re doing all this, but we don’t see it down here at this level.”

More than three months after the Obama administration outlined a new program aimed at rescuing millions of distressed homeowners by compensating banks that modify mortgages, Ms. Ulery’s experience illustrates the mixture of confusion, frustration and limited assistance that now reigns.

Good luck to Ms. Ulery and the thousands of other homeowners just like her as they attempt to weather the financial storm. In fact, good luck to us all.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Piggy Back Seconds Blocking Modifications?

At our catbird seat in Northern New Jersey we have heard of many homeowners who have been frustrated in their refinance attempts by low appraisal values and other wrinkles, such as lender's instructing borrowers to go into default before applying for a modification.

The Obama Administration's attempts at freeing up refinance money just do not seem to be working. For instance, a New Jersey homeowner buys near the top of the market, has been making on-time payments, and is looking for a lower rate. Along comes the government's HARP program and a loan limit of 105% of appraisal value. If you bought a house for $300,000, put down $30,000, and your property is now worth $225,000, the arithmetic is simple--under HARP you qualify for a loan of $236,250.00. That's a far cry from the $270,000 =/- you are trying to refi.

What if you have a piggy back second mortgage from your closing? Kenneth R. Harney's Washington Report: Second Liens and Piggyback Loans discusses the issue.

Second liens and “piggyback” loans have been big impediments to successful
mortgage modifications for thousands of financially-stressed home owners. Now
the Obama administration has a new program to deal with the problem.

Under a plan outlined last week, the Treasury department will soon begin offering cash incentives and subsidies to lenders who lower troubled home owners' monthly payments on second mortgages and credit lines, or simply write them off their books.

How will this work?

• Treasury will enter into agreements with second lien holders to reduce interest rates to just one percent on fully-amortizing seconds and to two percent for interest-only seconds, for the next five years.
• Treasury will pay cooperating lenders $500 for each second lien they modify, plus $250 a year for each year the home owners stay current on payments. Alternatively, lenders may be offered a lump-sum cash payment from the government to cancel the second-lien debt altogether.
• Whenever first mortgage holders cut a borrower's principal balances by a percentage of the loan amount, second lien holders will be required to reduce balances owed by a similar percentage.

Will it work in markets such as New Jersey? Only time will tell. Read the full article here.

For your next title order, think:

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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HARP on it to make your home more affordable

HARP is the acronym for a government program (they love acronyms) for the Obama Administration's Home Affordable Refinance Program. The program is addressed to the "homeowner who is current on [her] mortgage payments but unable to refinance to a lower interest rate because [her]home value has decreased..."

Eligibility for HARP is determined by answering yes to four questions-
1. Are you the owner of a one- to four-unit home?
2. Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?
3. Are you current on your mortgage payments?
4. Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

If you can answer yes to all four questions, then you may be eligible for the program. The next hurdle is the appraisal because loans are limited to a maximum amount of 105% of the appraisal value. Eligibility and qualification are different things.

The HARP website says:

The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to re-finance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.

We hope that HARP lives up to its promise.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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The 2% Solution-- A cure for what ails America?

Arthur Conan Doyle's Sherlock Holmes would create a solution of 7% cocaine and 93% water for his drug habit. When America's economy ails, the drug of choice for American politicians appears to be taxes.
As reported yesterday in The New York Times,

President Obama will propose further tax increases on the affluent to help pay for his promise to make health care more accessible and affordable, calling for stricter limits on the benefits of itemized deductions taken by the wealthiest households.

Today, February 26, 2009, the Wall Street Journal weighs in on the matter discussing The 2% Illusion,

President Obama has laid out the most ambitious and expensive domestic agenda since LBJ, and now all he has to do is figure out how to pay for it. On Tuesday, he left the impression that we need merely end "tax breaks for the wealthiest 2% of Americans," and he promised that households earning less than $250,000 won't see their taxes increased by "one single dime."

This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.

The Journal then proceeds to show the weakness of the assumption that the tax increase will be a cure-all remedy. For instance,

The proposal is to raise the highest rate "only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need."

But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can't possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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Revenge of the Tax Code

Chris Edwards of the Cato Institute says,

If it were a movie, it would be called "Revenge of the Tax Code." The complex income tax, which has bedeviled average Americans for years, is biting back at the elite who helped create it. Tom Daschle, former chief lawmaker in the Senate, withdrew his Cabinet nomination because of an "unintentional" $128,000 tax mistake. Rep. Charles Rangel, chief tax-writer in the House, is also entangled in a tax scandal, as is Tim Geithner, the Treasury secretary, and Nancy Killefer, another high-ranking nominee who has withdrawn.

"What is going on here?", Edwards asks. Mainly, it's the complexity of the tax code that causes good people to blunder into a tax morass and calculating folk to walk away from tax obligations.

The solution? "The solution to all these problems -- from the Enron debacle to Obama's tax-troubled nominees -- is to reform the tax code. With a simple and consistent base, taxpayers would know what they owe, and the IRS could easily enforce it. That is the promise of the "flat tax," which would tax all income once and create a level playing field with no tax-free loopholes," Edwards writes.

Has the time for a serious discussion of the flat tax come? We'll see. Read the full report here.

Vested Title Inc., 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220. Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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