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Wednesday, Mar. 04, 2009

Stimulus package training offered real estate professionals

The monthly Breakfast for Champions business development meeting for real estate professionals will be at 9 a.m. March 11. Training will cover the stimulus package and lead generation strategies.  AmeriChoice Home Loans of Richland is presenting the event at the Tri-City Association of Realtors office, 7151 W. Clearwater Ave., Kennewick, from 9 to 10:30 a.m.

For more information call AmeriChoice at 735-6603.

— Ingrid Stegemoeller: 582-1537; istegemoeller@tricityherald.com; Business Beat blog at www.tricityherald.com

Homeowners get $75 billion lifeline
ASSOCIATED PRESS AND HERALD STAFF
President Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure Wednesday, declaring an urgent need for drastic action -- not only to save their homes but also to keep the housing crisis "from wreaking even greater havoc" on the national economy.

The lending plan, $25 billion bigger than the administration had been suggesting, aims to prevent as many as 9 million homeowners from being evicted and to stabilize housing markets that are at the center of the worsening recession.

Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" -- those in which homes' market values have sunk below the amount the owners still owe.

"All of us are paying a price for this home mortgage crisis, and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said.

The president, focusing closely on the economy in his first month in office, rolled out the housing program one day after he was in Denver to sign his $787 billion emergency stimulus plan to revive the rest of the economy. And his administration is just now going over fresh requests for multiple billions in bailout cash from ailing automakers.

Wall Street has shown little confidence in the new steps, declining sharply Tuesday before leveling off after Wednesday's announcement. The Dow Jones industrials rose 3 points for the day.

Tri-City lenders expressed questions and cautious optimism about the plan.

"Anything that stabilizes Fannie Mae and Freddie Mac is a good thing," said Randy Wacker, manager of real estate lending for Gesa Credit Union. But he said more questions came to mind as he learned more about the plan Wednesday.

"What's really our role, on a local level? What steps do we have to take? The plan hasn't outlined those steps for us yet," Wacker said, adding that he anticipates learning more when the rules are published.

"It's a compromise," said Steve Anderson, executive vice president and chief operating officer for HAPO Community Credit Union. "It's a compromise for homeowners, it's a compromise for lenders. Ultimately, something had to be done.

"It's the best thing that could be done considering the magnitude of the problem and the number of different entities that are involved."

And Dana Mundy of AmeriChoice Home Loans in Richland also had many questions about the new plan. "When the government steps (in) and tells lending institutions to write down loans, they are violating the contract that was signed when the loan closed. Is that the job of government?" she wrote in an e-mail to the Herald.

"I don't think the homeowners that take advantage of this program should be able to pocket the equity on down the line. I understand the need to stimulate the economy. I also believe that homeowners should take some level of responsibility," Mundy wrote.

Success of the foreclosure rescue is far from certain.

The administration is loosening refinancing restrictions for many borrowers and providing incentives for lenders in hopes that the two sides will work together to modify loans. But no one is required to participate. The biggest players in the mortgage industry temporarily had halted foreclosures in advance of Obama's plan.

Complicating matters, investors in complex mortgage-linked securities, who make money based on interest payments, could still balk, especially those who hold second mortgages or home equity loans. Their approval would be needed to prevent many foreclosures.

"The obstacles have not gone away," said Bert Ely, a banking industry consultant in Alexandria, Va.

Another cautionary note came from John Courson, chief executive of the Mortgage Bankers Association.

"It seems to offer little help to borrowers whose loan exceeds their property value by more than 5 percent," he said, noting that that requirement would limit the plan's success in some of the hardest-hit areas in California, Florida, Nevada and Arizona and parts of the East Coast.

Indeed, Obama himself said, "This plan will not save every home."

The goal is to reduce many endangered homeowners' payments to no more than 31 percent of their income. But that depends on a high degree of cooperation by lenders who have been increasingly wary of new lending.

Still, the Obama administration, after talking with mortgage investors, appears confident that it is providing the right mix of incentives and penalties to make sure mortgage companies take part. Obama said he backs legislation in Congress to allow bankruptcy judges to modify the terms of primary home loans -- an idea ardently opposed by the lending industry.

"Taken together, the provisions of this plan will help us end this crisis and preserve, for millions of families, their stake in the American Dream," Obama said. Yet, he also added: "We must also acknowledge the limits of this plan."

He called on lenders, borrowers and the government "to step back and take responsibility" and said: "All of us must learn to live within our means again."

Nationally, Moody's Economy.com says that of the nearly 52 million U.S. homeowners with mortgages, about 13.8 million, or nearly 27 percent, owe more than their homes are worth after many months of declining prices.

How soon will the new plan show results?

"You'll start to see the effects quite quickly," Treasury Secretary Timothy Geithner told reporters in Phoenix, noting that rules governing the changes will be published March 4.

In theory, homeowners facing foreclosure or borrowers owing more on their homes than their mortgages are worth would have more opportunities to refinance their loans so that they have lower monthly payments. Lenders would voluntarily participate in the government programs.

The $75 billion Homeowner Stability Initiative would provide incentives to mortgage lenders to cut monthly payments in an effort to persuade them to help up to 4 million borrowers on the verge of foreclosure. The goal: cut monthly mortgage payments to sustainable levels, using money from the $700 billion financial industry bailout passed by Congress last fall.

Another part would specifically help people with dwellings whose market value has sunk below the principal still owed on the mortgages. Such mortgages have traditionally been almost impossible to refinance. But the White House said its program will help 4 million to 5 million families do just that -- if their mortgages are owned or guaranteed by Fannie Mae or Freddie Mac.

To boost confidence, the Treasury Department said it would double its support to the two mortgage giants that the government essentially took over last fall.

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