Southern California Mortgage Crisis

The “Making Home Affordable” (sic) program found at www.makinghomeaffordable.gov is a federal program that is intended to help refinance homes that have teaser rates or low adjustable rates and thereby avoid the inevitable rate reset that will raise payments to an unaffordable level. It may also reduce the principal for qualifying loans. There is an eligibility questionnaire on the site that helps many visitors determine if they qualify. Most people will qualify at this basic level, e.g. a first mortgage less than $750k and a payment that exceeds 31% of your monthly gross income. What is not clear are whether two requirements that were highlighted at the time of the program’s roll-out but do not appear to be prominently displayed at this time are still, in fact, requirements; namely, a) the total owed on a home does not exceed 105% of it’s current market value, and b) the loan must have been backed by a Federal institution or program, either FHA or FannieMae or FreddieMac. In many instances, it’s been difficult for owners to determine if their loans have federal backing. Additionally, with steep declines in home values, most people who bought a home in the last four years did not have enough equity to absorb the price deflation and are now upside-down on their loan by more than 5%, making it impossible to meet the original requirement of no more than 105% of the home’s value in outstanding principal owed.
KVCR and its partners will post more information on this site to clarify these murky issues as our discussions take us to those people who have verifiable first-hand knowledge of the truth of these programs.