August 6, 2010 at 10:58 am 2 comments

By: Maria Hass

“Mortgage Amnesty” is key to finding an end to America’s national housing crisis.
The source of this mess goes back to homeowners owing more than their house is worth. Lenders continue to value homes based on prior levels of the real estate hype, not at current values. Lenders should consider reducing the mortgate principal of homeowners based on current, realistic values to stop foreclosures and short sales. By doing so, their investments on these properties will appreciate sooner and consumer spending will increase if borrowers have equity on their homes.
Instead, banks’ loan modification efforts will just prolong the pain and agony faced by the lending industry and the economy. Many loan modifications approved by the banks DO NOT reduce the principal mortgage — ironically it increases the loan. Homeowners will have to stay in their homes 20 to 25 years to repay such loans. Most people will sell their homes before that and because they are still upside down, their only options are short sale or foreclosure.If short sales and foreclosures continue, home value appreciation will be hard to achieve. Demand for houses will decline as buyers are waiting to hit bottom and inventory will increase, thereby forcing prices to decline further. This will result in “deflation” in the housing market and the economy as a whole.
To solve the housing crisis the question must be asked: “What does it take for true appreciation to take place?”
Let’s begin by clearing out the short sales and foreclosures. Once people are convinced that true appreciation of home values has been achieved, real estate activity will increase dramatically as more buyers feel the sense of urgency to buy NOW rather than wait.
Fannie Mae and Freddie Mac own 80 percent of the mortgage loans. The federal government gave them 13 Million courtesy of our tax dollars to help homeowners avoid foreclosure. Our future now rests in the hands of Freddie and Fannie.

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Real Estate Deals. Tags: , , , , .


2 Comments Add your own

  • 1. Chris Lopez  |  August 10, 2010 at 12:01 am

    Hi Maria,

    I agree, the systems implemented by the banks to attempt to slow or solve the “foreclosure crisis” seem to be backfiring.

    Although principal reduction would be a suitable way to help this market recover faster, I highly doubt that we will see any real principal reduction put in place by any bank.

    I hope you have time to visit my site smithavenue.com and post your comments to my many blogs on issues much like this one!

    I am about to post a blog on Fannie Mae’s new short sale guidelines. Have you seen a serious change as of yet? Feel free to email me as I would love to quote you in one of our blogs regarding Fannie Mae as we have seen them not stopping foreclosure sale date. This is an unfortunate side effect to their new guidelines. Yikes!

    Chris Lopez

    • 2. arizonabargainhomes  |  August 10, 2010 at 10:58 pm


      Thank you for your reply and your plan to quote me in your site. I will be delighted.
      Fannie Mae and Freddie Mac is under receivership by the federal government. Under this change, the government, I would imagine will be controlling Fannie and Freddie. This set up would make it easier to require the lenders/investors to initiate a “Mortgage Amnesty” if our government has the guts to do so. Our financial leaders did suggest the $$$bailout for the banks in the past, why not suggest “Mortgage Amnesty” to benefit the people? It just doesn’t make sense that the investor would agree to value a home at current market for a buyer on a short sale but not for the original homeowner.

      Regarding Fannie Mae Short Sale Guidelines, no I have not seen any serious changes. It seems like their effort is likely to fail than succeed. They have not done anything good by far. But, who knows, they may have a change of heart. Thank you again for your reply. I will visit your site soon.

      Maria Hass


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