1. Fannie Mae and Freddie Mac loans: Homeowners who have loans with Fannie Mae or Freddie Mac are allowed to modify their loans provided the remaining balance on the mortgage does not exceed more than 5% of the current “Market Value”. I think many homeowners will not be able to modify their loans under this program because home values are declining at a faster rate than the cap rate of 5%.
2. Voluntary Lender Program : The plan wants to give ” $1,000.00 cash” incentives to lenders who modify loans. A lender must be willing to reduce the current mortgage to 31% of the homeowners gross income. For example, a person who makes $50,000 per year has a monthly gross income of $4,1,66.67 . According to this plan, 31 % of the monthly gross should be a persons mortgage. In this example the mortgage payment should not exceed $1,291.67 per month. The maximum mortgage a person would qualify for based on this scenario is $241,616.31 (based on 5% Interest, 30 year Amortization) .It is unclear if this monthly amount includes Principal, Interest, Taxes, Insurance. If taxes and Insurance are not factored in then the maximum mortgage would be less. Now let’s assume this same person has an existing mortgage balance of $300,000 and has a subprime rate of 7% . The monthly payment on this loan is $1,984.33 . The difference in payment between $1,984.33-$1,291.67= $692.66 per month or $8, 311.92 loss in 1 year to the lender. The new plan will only reimburse the lender $1,000.00 so the net loss to the lender in 1 year is now $7,311.92 . Does this sound like a good plan for the lender? I do not think so, and therefore I do not see this volunteer program working very well.
3. Plan calls to change the Bankruptcy Code: The third part of the plan will allow a judge in bankruptcy court to help modify the loans with lenders. The bankrutcy judge would be allowed to force the lender to lower the principal balance owed on the debt in order to make the monthly mortgage payments more affordable for the homeowner. I think the courts will overburdened with people attempting to modify their loans and this plan will not be successful.
While Obama tries to help homeowners from loosing their homes to foreclosures he admits many will not be helped with his plan. Those not being helped are people who are unemployed, those who have second homes, or those people who took advantage of the system to begin with and according to Obama will not be bailed out.
The North Shore communities of Evanston, Skokie and Lincolnwood are the first suburbs north of Chicago. Each one of these communities have homes in different stages of foreclosure.
| Active Listings | Evanston | Skokie | Lincolnwood |
| Single Family Total | 289 | 312 | 113 |
| Short Sales | 33 | 48 | 10 |
| Bank Owned | 15 | 23 | 02 |
| % of Total | 17 | 23 | 09 |
| Condo Total | 520 | 276 | 34 |
| Short Sales | 31 | 37 | 02 |
| Bank Owned | 11 | 16 | 01 |
| % of Total | 08 | 19 | 11 |
"Bam!" "Will be Right Back"
Super Bowl Sunday in the minds of realtors marks the beginning of the " Spring Real Estate Market". Many realtors look forward to this day because " They Put It Up a Notch" when the Spring Market hits. In anticipation of the Super Bowl being this weekend, I have to think how many Realtors are up to the challenge to "Put It UP A Notch" . Are we prepared to put aside all of the bad economic news and go back to business as usual? It will be interesting to see if a New President and New Governor in my home state will help "Put It Up a Notch". As Emiril says on each show" "Will be Right back" to "Put it UP a Notch"
I attended my first Real Estate Auction in Lincolnwood, IL by Williams and Williams. I arrived early to preview the home before the Auction. The home is new construction and consists of 8 room, 4 bedroom, 2.5 bath. The original asking price for the home was $999,000 and on the auction date the opening bid price was $100,000. Needless to say there was a large crowd in the home on the day of the (25-50 people) auction. There were some people represented by agents and some were not. Those individuals who were planning to bid on the home had to pre-register by giving id, filling out a form, and were given a auction number to raise during the auction.
I started to talk to several people who attended the Auction and we quessed amongst ourselves what the final bid price would be on this home. I guessed the price would be between $500,000-600,000. When the Auction began it started with a frenzy. It did not take long for the bidding to go over $400,000. When the price started to creep up to the high $400,000 there were fewer buyers interested. Finally, the last bid came in and it was $515,000. Not bad for a guess..right.. well not really and here is why... the auction was not considered and abslolute auction. In other words the final bid was still subject to the sellers approval. I called Williams and Williams the day after the sale and found out the final bid was not accepted by the seller.
Final notes about this auction: This home was on the market for 445 days. It had an upaid mortgage balance of $826,000 according to the tax records from the MLS. The average price of a home in Lincolnwood, Il is $537,148
It appears that bidders were anxious to buy this home and bid on emotions and if successful would not have gotton a great deal. I am curious what the seller is going to do now that it did not accept the bid.
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