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Christopher Greco

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Are the new cuts harmful and/or helpful....If helpful, who is really being helped?

11-26-08
Christopher Greco

Its seems that everyone is praising the new plan that led to a cut in mortgage interest rates! But is the cut really good news for the millions of homeowners already in trouble....If homeowners are already behind on their mortgages or have deliquent credit card payments then the answer is probably NO! IMHO

I'm not an economics professional nor am criticizing the plan but is it possible that the rate cut will only help those with good credit and will do little or nothing for the millions of Americans already suffering with blemished credit scores because of the mess that the original loan programs and low rates in 2001-04 started? Is the government starting another cycle which was originally fueled by low rates in the first place?

So in the end, the plan will most likely stimulate home sales and will probably help stabilize the housing market but it will do little or nothing to help those already in trouble and may result in more trouble in a year or two after these new loans close. Are the future unemployment rates not a consideration in this plan? Are those qualifying for the new loans at low rates the future bailout victims of 2010?

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Attention Mortgage Professionals: Rate Buydowns? Are they worth it?

11-16-08
Christopher Greco

As an appraiser I have expertise in residential value "opinions." Lately, I have not been asked about home values as often I used to. It seems to me that many people are struggling to make their monthly mortgage payments or can't sell the house that they over payed for. These people are now looking for solutions to lower their monthly expenses. Many of these same people have money in the bank and are considering to refinance to a lower principle balance AND are considering a rate buy down so that they don't have to move or sell their home. I know of one couple with a jumbo mortgage that is considering to sell a real estate holding in order to refinance their primary residence. Their strategy is to bring a portion of the proceeds of about $100,000 to the closing table and to buy down the rate from 6.5% to 5.5%. They believe that by buying down the rate they will save about $300.00 per month and by bring the $100,000 to buy down the principle they are saving $800 per month....for a total monthly savings of $1100+/-. They have asked me if this a good idea? Since I am not a mortgage or financial professional I declined to give advice. I told them that I would do some"blogging" around. Any thoughts from the AR community?

And on a side note, why is there no talk of helping out Americans who purchased second homes or retirement homes in any of the stimulus proposals. I know too many people that purchased property in Fl for retirement in the next five years. They still live in New York, they can't rent or sell the home in FL and can no longer make the monthly payments. Not to mention the 401K are down 40%. Why is there no talk of helping them? I would make an uneducated guess that a large percentage of the foreclosures throughout the Country are second homes or investment homes. Is there no help for those Americans that too risks and lost? The US Govt is bailing out major corporations for irresponsible behavior but not even thinking about Americans that planned responsibly for their future with ret. homes and investment properties.

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