The Housing Market: Assessing '07 and Hope for '08

Posted January 7th, 2008 by NFAN
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It’s no secret the housing market is in trouble. Mortgage foreclosure rates are soaring. One in every 134 homes was foreclosed in the first half of 2007, twice the figure the previous year. Last year saw the largest decline in home prices in 37 years. There were over 1 million foreclosures in 2007 and experts predict that figure could double in 2008. Right now, over 5% of homeowners are at least 30 days behind on their mortgage payments; almost 1% are over 90 days behind and likely to enter foreclosure procedures.

What Happened?

An Aug. 16 Forbes article offers a good summary of what happened to the housing marketing over the last few years:

[R]ising home prices prompted lenders to offer liberal mortgages for eager borrowers. Loans were issued with two-year teaser rates allowing borrowers with limited assets and income to buy homes that might have been beyond their means. The idea was that rising prices would permit borrowers to sell or refinance before their monthly payments rose. That strategy came undone when prices leveled off and interest rates increased, and subprime borrowers began defaulting on their loans.

Many homeowners who were no longer able to afford their mortgages were forced to foreclose on their homes after their fixed rates reset to higher adjustable rates. Falling housing prices meant that selling or refinancing as a way to free up cash became difficult or impossible. But for some homeowners, there may be hope in 2008.

Hope Now

Hope Now is voluntary plan intended to help subprime borrowers (borrowers with low credit scores) who are unable to meet their payments after their loans’ adjustable rates increase. It is designed to help homeowners in one of three ways:

  1. By locking in fixed rates for five years thereby delaying the shift to adjustable rates, which could give homeowners time to save or plan.
  2. By helping homeowners refinance their existing mortgage or helping them into a new private mortgage.
  3. By moving homeowners into a Federal Housing Authority “FHASecure” loan.

    Unlike other private loans, an FHASecure loan does not consider a borrower’s credit score, though it does analyze borrowers’ credit histories and review their payment- and debt-to-income ratios. The FHA does not actually make the loans, (FHA-approved lenders do that). Instead, the FHA insures the loans, which makes the loans are more attractive for lenders.

    This CNNMoney.com article outlines other requirements and information about FHASecure loans.

President George Bush announced the Hope Now initiative on Dec.6, 2007, although it is technically not a government program. It is made up of lenders including Citigroup and Bank of America and organizations such as NeighborWorks America and the Homeownership Preservation Foundation.

Unfortunately, Hope Now cannot help homeowners already forced into foreclosure and its benefits are only extended to people who qualify, and that means homeowners must be current on their mortgage payments.

The White House said Hope Now could help an estimated 1.2 million homeowners. While experts agree this initiative will not solve the mortgage crisis, it can offer much-needed relief to qualifying homeowners.

The Hope Now website (www.HopeNow.com) offers limited information about the program, but homeowners can call 1-888-995-HOPE (4673) for more information.

Additional Resources on Hope Now: