The Obama administration’s flagship effort to help people in danger of losing their homes is falling flat. More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. Last month alone, 150,000 borrowers left the program – bringing the total to 436,000 who have left since it began in March 2009.
A major reason so many have fallen out of the program is that 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 homeowners were disqualified or dropped out.
The growing number of people leaving the program could lead to a new wave of foreclosures, which could weaken the housing market and hold back the broader economic recovery. Experts say more borrowers are likely to drop out in the coming months.
Some homeowners who owe more on their loans than their properties are worth are likely to conclude that paying an oversized mortgage isn’t worth the cost. Even after their loans are modified, many borrowers are simply stuck with too much debt..
Obama administration officials contend that borrowers are still getting help – even if they fail to qualify for the program. The administration published statistics showing that nearly half of borrowers who fell out of the program received an alternative loan modification from their lender. About 7 percent fell into foreclosure.
Another option is a short sale – one in which banks agree to let borrowers sell their homes for less than they owe on their mortgage. A short sale results in a less severe hit to a borrower’s credit score and is better for communities because homes are less likely to be vandalized or fall into disrepair. To encourage more of those sales, the Obama administration is giving $3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender. Administration officials said their work on several fronts has helped stabilize the housing market. They cited government efforts to provide money for home loans, push down mortgage rates and provide a federal tax credit for buyers.
But it was just a short-term fix. The expiration of the tax credits, which required eligible buyers to put a home under contract by April 30 and close by June 30, caused many people to stop looking. The number of showings in May plummeted 30 percent from the same month a year earlier, and pending sales were off 5 percent. It appears that the tax credits simply took the buyers that would have bought in the second and third quarter of this year and you stuffed them into the first quarter.
The end of the tax credits has also caused new housing starts to fall across the country. They were down 10 percent in May, the biggest decline since March 2009, the U.S. Commerce Department reported. Triangle home showings declined about 5 percent in November when the government tax credits were originally set to expire. This time, real estate agents have reported a noticeable drop in activity since the deadline to put a house under contract passed. Showings in the Triangle are down 30 percent from last year and it appears that this will not be a HOT SUMMER for Raleigh Real Estate. Sellers will not be in the driver’s seat for the next several months at least.
If you’re looking to buy and take advantage of the buyer’s market, contact the Freeman/Davis Team at www.FreemanDavisHomeTeam.com and www.HomeSearchRALEIGH.com. We are area experts, having lived here most of our lives. Call us at 919-649-6638 and let’s talk about your next real estate move. In fact, regardless of where you are moving to or from, we can help with our network of great real estate agents across the country. Visit www.CertifiedRelocators.com for more information and registration.
Today, we’re updating Triangle real estate sales figures and answering the “how hot will summer sales be in Raleigh-Durham” question. In an earlier blog post, I reported that there were 2,083 home closings in May for Durham, Johnston, Orange and Wake counties, up 26 percent over the same period last year, according to the Triangle Multiple Listing Service. Well the numbers are in for July and sales, unlike the outdoor temperatures, have cooled with only 1,354 closings for the month, which is a 35% dive over a two-month period. That’s also down 35% from the same period last year as closings in July 2009 in the same four counties numbered 2,052.
Check out my blog post at 
being said there are some things to keep in mind when setting out to buy a home, the least of which is getting to know the neighborhood you wish to buy in. If you do your research and your homework selecting your home properly can insure more of a return for you when you decide to sell at some point in the future.
