Copy for Real Estate Guide Column for 8-20-10

REAL ESTATE PATTERNS
By Ken DuVall

RELIEF IS ON ITS WAY

Main Street may be getting its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion.

The move would be a stunning political and economic bombshell. The key date is August 17 (which falls after my press deadline) when the Treasury Department holds their much-hyped meeting on the future of Fannie and Freddie.

Also, Congress just came up with an extra $1 billion to help people who can't pay their mortgage because of unemployment or a medical problem. Under this new “Emergency Mortgage Relief” program, eligible homeowners who are at least three months delinquent can get up to $50,000 in no-interest federal loans to pay their mortgages for as long as 24 months. They would need a good record of mortgage payments before their employment or medical condition changed. They would also have to demonstrate a "reasonable likelihood" of resuming mortgage payments within two years.

The money for this program came in the financial regulation bill signed last week and will be made available October 1 to the U.S. Department of Housing and Urban Development. This follows two other federal programs providing assistance to unemployed homeowners. The Treasury Department is providing $2.1 billion to struggling homeowners in what it calls the "hardest hit" states. The Treasury awarded $1.5 billion to five states in June and will award $600 million to five other states later.

Here at home, the California Housing Finance Agency got $700 million from the “Hardest Hit Fund” beginning Nov. 1 for its program, “Keep Your Home”. Low and moderate income people who are unemployed or owe more than their homes are worth could be eligible for payment subsidies, principal reduction, or relocation expenses. Homeowners can have their payments reduced or suspended under the Treasury's “Home Affordable Unemployment Program”. Homeowners can't be more than three months delinquent plus other requirements.

Sales of homes for less than the mortgage amount have tripled since 2008, particularly in California. Known as short sales, this increasingly common transaction for financially troubled homeowners is projected to balloon to 400,000 in 2010, according to Core Logic. Where a quarter of homeowners owe more on their property than it's worth, short sales are appealing to investors, banks, and owners as a cheaper way out than foreclosure.

The White House on Wednesday said it would spend an additional $3 billion to help distressed homeowners in the states with the highest jobless rates to pay their mortgages. This latest round of funding pushes the total federal commitment up to $4.1 billion to help homeowners modify existing mortgages or make their monthly payments. The White House is authorized to spend up to $50 billion under the “Troubled Asset Relief Program”.

So hope and help is out there. Talk to your lender for further details.

Ken owns Ken DuVall & Associates, REALTORS at 3rd Ave. & Mangrove in Chico. Ken was the 2001 President of the Chico Assn. of Realtors and the 1995 Chico Realtor of the Year. See Chico MLS listings at www.KenDuVall.com and call Ken at 345-3700 for all your real estate needs. Free consulting.