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5/7/2011 4:20:17 PM EST
|What Happened to Mortgage Help?
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Housing bubble’s legacy
A substantial proportion — perhaps one-third — of older householders ages 55 to 64 will be less secure in retirement because of the housing bubble and its aftermath, according to a September analysis by the Center for Retirement Research at Boston College.
Vanished equity may be most threatening to seniors who own homes in markets that have seen the steepest price drops, such as Arizona, Southern California and South Florida.
“Their home is their largest asset, and that’s taken a substantial hit. It’s really impacting retirees right now,” says Pete Flint, CEO of Trulia.com, a real estate search service.
“It’s sad to see them go into foreclosure in their twilight years. It’s very tragic,” says Flint.
Macon McDavid and her husband, Jim, aren’t facing foreclosure, but the vision they once had of their golden years is no more.
Instead of retiring, McDavid, 72, is sending out résumés in hopes of getting a job to help make ends meet. She and Jim own a home in Raleigh, N.C., and a vacation cottage in Sunset Beach, N.C.
When their son became ill, they spent about $70,000 on his medical care before he died. They were forced to take out a second mortgage. Meanwhile, the retirement savings they’d invested in the stock market lost about half its value.
Macon McDavid says they now have no choice but to sell one of the properties. The problem: There are no buyers, and the couple can’t afford to take the loss they’d incur at current market prices.
“Our concern is about making payments. We have to decide which house to sell, but just because you put it on the market doesn’t mean it will sell,” McDavid says.
“All our life we worked to be where we are, and we’re not there anymore.”
Many are turning to the government for assistance. However, more than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That's more than the 27 percent who have managed to have their loan payments reduced to help them keep their homes.
Last month alone, 150,000 borrowers left the program -- bringing the total to 436,000 who have exited since it began in March 2009. A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.
"The majority of these modifications aren't going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you're still looking at a very high debt burden."
Not all 60-day delinquent loans are eligible for HAMP. Other characteristics may preclude borrower eligibility. Based on the estimates, of the 5.7 million borrowers who were 60 days delinquent in the 1st quarter of 2010, 1.7 million borrowers are eligible for HAMP. As this represents a point-in-time snapshot of the delinquency population and estimated HAMP eligibility, we expect that more borrowers will become eligible for HAMP from now through 2012.
Only 30% of the 5.7 million borrowers who are 60 days delinquent are eligible for the program. 4 million delinquent borrowers are stuck. Of those eligible for the program, only 346,000 have completed the trial and received a permanent modification.
Many of those receiving a permanent modification will slip back into default and head for foreclosure. Many of those who successfully keep their house would be better off if they lost it.
Looking at HAMP from every angle, it's safe to say the program was a failure and another huge wave of foreclosures is coming down the road.
1st Choice Family Solutions can help. See our Mortgage Rescue section at bit.ly/govplan to learn more.
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