Obama Housing Plan Will NOT Help You Refinance
Posted on | March 24, 2009 | 8 Comments
I recently wrote an article on how the Obama Housing Plan would help you refinance; I truly had hope. Sadly, the same restrictions that were in place in January, before the housing plan, are still in place today. Obama and his administration attempted to give lenders incentives to ensure that borrowers would be able to access the lowest mortgage rates in modern history. Unfortunately, most home owners STILL cannot get through the appraisal process. In January, I wrote the article “Why Can’t I Get that Low Mortgage Rate Advertised” that expressed the problems home owners are having with the appraisal step of the refinance process. Ultimately, NOTHING has changed with the Obama Housing Plan.
I have a good friend who recently went through the refinance process on Amerisave.com. He had hopes of getting a rate of under 5% as the Federal Reserve continues to inject trillions of dollars into the economy to force rates lower. Let me preface his experience by saying he is considered a PRIME borrower with a credit score over 800, zero credit card debt and an abundance of cash in savings, checking, and 401(k). He also has a stable job that produces six figures a year. If anyone could get a lower rate by refinancing, it would be him.
After going through the process, he was sadly disappointed to know that the appraisal for his home was over 10% LESS than his purchase price and over 20% less than he expected. He lives in a housing market that has yet to see a steep decline; well, that is what we thought. The lender made the statement that the appraiser did everything he could to increase the home value, but it was still well below the purchase price. He thought he was going to have well over 20% equity in his home, but this is not the case with the new appraised value.
In essence, the steep decline in the value of his home has caused the refinance process to come to a screeching halt. This is all too common with home owners today. I honestly thought this would change as Obama attempted to create a housing plan that would put a bottom in the housing market. Well President Obama, looks like you and your administration need to go back to the drawing board. If a PRIME borrower cannot get a desired refinance rate then who can? I realize you want to redistribute the wealth, but those who have been financially responsible should be rewarded at some point!
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8 Responses to “Obama Housing Plan Will NOT Help You Refinance”
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March 24th, 2009 @ 9:32 am
I became disabled in 2006. Prior to that I had a successful law practice for over 20 years. I have owned my home since 1980. I refinanced once in 1998 and Wachovia now holds my mortgage. I have never missed a payment on my mortgage, but since becoming disabled I have blown almost through my savings supplementing my meager disability payment. Well in advance of reaching the financial tipping point, I asked Wachovia to work with me to modify my loan so that my monthly mortgage payment consumes less of my monthly income but they basically told me to fuck off. When I asked them how allowing me to sink and end up in foreclosure would benefit either one of us, the genius I spoke with told me that “we (the bank) don’t recommend allowing forclosure.” I asked her what she did recommend for people who can no longer pay their mortgage. She suggested I sell the house. I asked her if she had heard about the ongoing financial crisis in this country, in particular, in California, where despite the bullshit stories you hear on teevee, unemployment is at a staggering 26% (according to an official in the California HRD). I explained that people aren’t buying homes just now, which makes selling one really difficult.
Nevertheless, my concerns fell on completely deaf ears. After hearing Mr. Geithener’s plans to ressurect the toxic asset purchases, I realised that banks don’t want to help homeowners. The more toxic assets they have the more TARP money they get.
Game over, little people. Thomas Jefferson’s worst case scenario is about to come to fruition. Having turned power completely over to private banks, (congress and the administration obviously work for them, not us) most Americans will find themselves homeless in the land their forefathers conquered.
Perhaps it’s a fitting end to the United Staes of America.
March 24th, 2009 @ 6:39 pm
Our house was not upside down, although not worth as much as it had been. Your friend, and it is likely he bought in the last 3 years?, has discovered that yes… house prices have come down. They are now using normal, traditional, rational methods of measuring house value… lots of folks I know can refinance, if they bought 5 years ago, etc. and the house value appraises high enough.
However, if your friend plans to sell in the next 2 – 3 years, just pay a bit more against principle, unless it was a Countrywide loan, in that case, prayer is the only solution… because a refinance will not pay itself off in less than 2 years for most folks.
However… if they are in an adjustable… have they considered, perhaps being able to re-negotiate with the lender?
From adj to fixed? etc. Our credit union was very reasonable… $750 to just change the rate!
March 25th, 2009 @ 4:25 pm
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April 21st, 2009 @ 7:47 pm
I did just what President Obama suggested and attempted to refinance my home. We bought our home in Hawaii in 2005 for $300,000 and put $100,000 down at 6.8%. After paying $550 for an appraisal, I was told my home is now worth $230,000 and in order or qualify for the refinance will have to pay for mortgage insurance. The cost of the refinance is almost $5000 and with the additional cost of the mortgage insurance my monthly payments will be approximately $45 less a month on a 4.8% refinance.
This does not compute that at approx. $600 a year saving, it will take almost 8 years to pay off the cost of the refinance.
My loan is owned by Thornburg, who by the way filed bankruptcy this month, and is not backed by Fannie or Freddies, to there is no help for me under his housing plan.
The only thing Thornbury offered is to have me pay on a 4% loan and add the remaining 2.8% to my principal balance. In a few years this would definitely put me underwater.
Obama needs to give more incentive to lenders to reduce the interest on existing loans without a refinance.
I am close to losing my home, and the fact that I had to pay $550 for an appraisal that does not help me save any money monthly, is making this month and the months to come even more stressful.
May 22nd, 2009 @ 6:04 am
My son and his wife are trying to apply for the obama housing plan and are getting nowhere! Excuse after excuse. Lost paperwork, understaffed, untrained etc…. Every week they call about their application (they do qualify) they are told it could take two or three more weeks. They have a new baby along with two other children, have had a pay cut and make half what they used to. Their home isn’t worth what it was when they bought it. They are about to be behind on their payments. It has been about 8 weeks of excuses from Bank of America! We are exhausted from the fight with Bank of America. This plan does not work for them!
Gayle
May 27th, 2009 @ 11:58 am
We have been trying to apply for this program since March and it’s not getting anywhere either!!! We were so happy to learn that we can save some money and finally get some relief from regret of the home purchase we made last year right before the housing crash. Sadly, the broker of Suntrust has kept breaking his promises to call us and work on the paper work, it’s been already three month. we’re exhausted with this process. The broker has frustrated us by not returning our hundreds of calls and emails and the interest rate is going up. Now 5% instead of 4.5% we hoped for and the broker promised. The bank doesn’t give us the priority and don’t care about this housing plan. At this point, I seriously doubt this plan actually helps people in need. The idea is great but in reality, it’s too good to be true. People can’t even complete the applications because the banks don’t want to hire people to process the applications!!!!
July 20th, 2009 @ 4:19 am
I called wells fargo regarding the Obama modification plan. I gave them all the information they required and was told I qualified for Obama’s plan, At the time Wells offered me 4.85% and no points to adjust my interest only 7 yr arrm loan. But said go for the Obama plan. I was just informed I did-not qualify for the Obama loan, and now they are trying to give me a 5.35% loan with 2 points to close. Obama plan is BS I found out no one is qualifying for it, another dirty play between the banks and government. I voted for Obama, you know what this is jive.
February 23rd, 2010 @ 6:04 pm
I started the process for the OBAMA plan in January with Wells Fargo. I was told on Jan 23rd that I was prequalified for this program. Since then, I still havent gotten the certified paperwork I was supposedly to get including the financial worksheet. I have however, gotten about 15 letters to date saying to call them with my financial info so they can help me with my financial hardship. Mind you, I’ve already taken it upon myself to mail, call, and fax 10 times my own financial worksheet, paystubs, and a wonderful cover letter. Every time I call Wells Fargo they tell me they havent recvd my info to keep sending it to them.. I think this OBAMA plan is a scam and a waste of time.. So glad I didnt vote for him!!! Is anyone else going through this? Pls email me kacr30@hotmail.com.