Loan Aid Leaves Some Worse Off – WSJ May 18, 2010
The government’s mortgage-modification program has left some struggling homeowners worse off than they were before.
The Treasury reported Monday that nearly one in four homeowners who were offered lower payments under the Obama administration’s 15-month-old effort have been weeded out of the program. Many people were removed from the trials because they failed to make payments, didn’t provide all the financial documents needed to qualify or were found to be ineligible.
Homeowners are first offered trial modifications under the program, which provides incentive payments to loan servicers, investors and the homeowners. If borrowers make the payments and satisfy other criteria, those trials are made permanent, ensuring a cut in payments for five years.
While awaiting answers, some borrowers keep making payments, exhausting their savings in what may be a futile effort to save their homes. They also incur fees from the banks and delay taking action that might give them a fresh start in a more affordable home.
Some borrowers had unrealistic expectations about loan-relief programs, which were never designed to prevent all foreclosures. Another big problem is that banks often take six to 12 months to determine whether applicants are eligible.
“I had to learn the hard way and deplete my savings doing it,” said Mia Parry, a manager at a mortgage brokerage in Scottsdale, Ariz., who has spent nearly two years seeking a loan modification. She now wishes she had put her home on the market.
Most struggling borrowers do benefit from seeking help, said Aaron Horvath, a senior vice president at Springboard Inc., a nonprofit counseling service based in Riverside, Calif.
Some win modifications, cutting monthly payments by hundreds of dollars. Others who ultimately can’t get modifications at least are allowed to stay in their homes for months, making either no payments or reduced payments.
But “if you’re draining your savings” in a vain effort to hang onto a home, he said, you may end up worse off.
Eager for quick results, the Obama administration last year prodded banks to start people on trials without first obtaining documents proving they were eligible. That has led to many crushed hopes. The Treasury earlier this year changed its rules and told banks to start trials only after getting documents that proved borrowers qualified.
The Treasury said in a monthly report on the government’s $50 billion Home Affordable Modification Program, or HAMP, that about 1.2 million trial modifications had been started under the plan, and about 281,000 borrowers had washed out by the end of April. Read more….
Banks Resist Plans to Reduce Mortgages
Strategic Mortgage Default – A Viable Option?
This article summarizes the very recent discussions on what is now a viable alternative for many homeowners
Commercial real estate’s problems: Beyond any rescue?
The U.S. government has pulled off a lot of bailouts recently, but in the deepening problems of commercial real estate, it might have met its match. It increasingly looks as if the government might have to just stand by and let bondholders and banks take huge losses on the nation’s $3.4 trillion of deteriorating debt secured by commercial properties. The problem starts with voters. When it comes to wooing votes, giving a helping hand to bondholders doesn’t work nearly as well as trying to keep families from losing their homes to foreclosure. The Wall Street Journal (11/19)(Subscription may be required)
Commercial property optimism said to be boosting banks
The word among the panelists on CNBC’s “Word on the Street” program was regional banks are gaining because the picture is brightening in the commercial real estate sector. Commercial property has a disproportionate impact on regional banks because they have significant exposure to commercial mortgages. The successful CMBS offering by Developers Diversified Realty was offered as evidence that “REITs are able to refinance.” 
CNBC
Shopping center REITs report third-quarter increase in leasing demand
Shopping center REITs reported an increase in leasing activity in the third quarter. “I think we saw signs of stabilization. Sequential occupancy increases were somewhat encouraging,” said Robert McMillan, an analyst with Standard & Poor’s Equity Research Services. “Some of the big-box space that has been vacated is being leased, so once demand picks up, that should help pricing.” RetailTrafficMag.com
Arizona trailing almost all other states in economic health….
Last week, the nonpartisan Rockefeller Institute issued their latest report on the economic health of the fifty states and the news wasn’t good. Over the past year, Arizona has seen its personal income tax collections drop by 45% — a record that indicates how much poorer Arizonans have become. Only one state has fared worse. And no state in America has lost a higher percentage of its jobs than Arizona. Read more…
Economy and Market Going to Blast Off from Here, Altucher Says
The economy is recovering nicely, says James Altucher, managing director at Formula Capital, and 2010 is going to be a huge year. Read More….
Commercial real estate is weakest sector in Fed’s Beige Book
Weak or deteriorating commercial real estate markets were reported by all of the Federal Reserve’s 12 district banks, according to the central bank’s latest Beige Book. The Fed’s regular anecdotal report found that the overall economy is still plagued by weakness in banking and increasing unemployment. Among the few bright spots in the report were observations of “stabilization or modest improvements” in manufacturing and housing.Bloomberg (10/21) , Google/The Associated Press
Commercial property faces hard times, not Armageddon
Robert Bach, chief economist at Grubb & Ellis, is one of many industry experts who reject the contention commercial real estate’s problems could bring down the entire financial system of the U.S. “These problems are focused in regional banks and the Federal Deposit Insurance Corp. has a tested method of shutting those down on Friday and opening them on a Monday under the auspices of a bigger bank,” he said. “These are not too big to fail banks. I don’t see [commercial real estate] as an unmitigated disaster. I see it as a repeat of what happened in the 1990s. …” The Business Insider