MBA’s Bold New Plan - Short Sale Fundamentals
 
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25
Feb

MBA’s Bold New Plan

“History will be kind to me, for I intend to write it.”
Winston Churchill

I recently told you about Citibank’s new plan to allow delinquent borrowers to remain in their homes for up to 6 months. Well, the MBA (Mortgage Bankers Association) has a new forbearance plan in the works that would up that limit to 9 months. This would only be in effect for those who have lost their jobs and are looking for new ones.

During those 9 months the mortgage payments would be significantly lowered. With the 9 month grace period, MBA hopes the homeowner would have time to find a new job and/or qualify for a loan modification.

Of course, reality doesn’t always work out according to plan. But MBA seems to have good intentions. They expect that even if the borrower finds a new job, it’ll be around 75% of what they were making previously.

MBA is trying to walk a fine line between giving up to soon, and holding a losing asset. Since the average unemployment time is about 7 months, their plan should help most home-owners. This still may not allow him to start making regular payments, but he may end up qualifying for a loan modification.

This program enjoys support from the White House, the Treasury, and HUD. But the program is voluntary for all lenders and not everyone will necessarily be eligible.

I think even the most naive person these days understands that in a recession, banks are the first ones to look out for their own interests. No matter how bleak a person’s situation, if a bank stands to lose too much from him, they will probably turn a deaf ear. But most people have woken up to that reality and are actively trying to improve the situation for the common man.

Do you think these efforts will be enough? Do you think we’re even headed in the right direction?

  • Denise

    This will be great for the homeowner, but where does it put those of us who are trying to work the short sales.

  • Carlos H Lackey

    This could be enough, if all the banks follow the process. The question is when people are making their payments in time, even thou they don’t have a job, in order to maintain their excellent credit rating, would this action affect negatively in their credit rating?

  • http://ConnectedInvestors.com_saratogaproperties Richard

    Cory, you are so right about banks and covering their “assets” before giving their customers a second thought. I’d be booted out as fast as the sheriff can evict me.
    The new program will help a little bit as your analysis accurately portrays and probably nothing more.
    It looks like they are trying to stop the influx of new Foreclosures from happening as bad as it sounds it could be.

    I have several realtors whom are trying to ignore the short sale assistance we can provide, playing the slowly-reducing price game. What would be your (or anyone’s suggestion) to overcome this objection?

  • http://bargainhomesforyou.net Kevin Kravcak

    Best Idea I’ve heard to date but the caveat is lenders have to agree to it and I don’t see that happening. Plus, their always seems to be some kind of “eligibility requirement” that very few people seem to meet when it comes to all these “special programs”.

    I truly hope this becomes wide spread and helps a lot of homeowners but I have lost all confidence in our politicians and bankers (can’t trust them to begin with).

    IMHO, we have been left to fend for ourselves!!

  • Steven Lundin

    As a CA> DRE Licensed Agent ( for 15 years) I have to say that not enough is being done to help the homeowner who was duped into signing on for a home that they obviously could not afford, by self serving agents and brokers. Boo-Hoo to the banks, who knowingly and willingly committed fraud for profit and Boo-Hoo to the entire Retail Real Estate industry who also committed fraud by not doing what was best for their clients, but rather what was best for themselves. I am disgusted with the lot of them. I am telling all my friends and colleagues to move all their funds from banks to redit Unions immediately. It is time to force the banks out of business. Also, I feel it is time to push the “For Sale By owner” sales method and put the DRE agents out of business as well. And I once actually enjoyed my career, but now the people in it make me SICK!!!!

  • john martins

    This sounds like another artificial fix so the White House the Treasury and Hud look like they are doing some thing for the home owners, but accomplishing nothing.
    Yes, the banks managed to stop all the foreclosure filings, but that’s so Obama can get on his high horse and say, “look what I did, foreclosures are way down, look at me”.
    Ya, foreclosure are down, but the home owners are still in limbo and will most likely be foreclosed on some time in the future.

  • Kevin Moore

    Cory, The forebearance plan that would make the most sense would be to copy the old Rural Housing program. 5 year Forebearance with interest adjustments every year based on income and all delinquent interest and principle put to end of loan and paid off when home sells or refinanced

  • diana henderson

    This plan could well work if the bank will re fi at a lower rate and at the current value of the property in question.I would choose to stay in my home if this could be the case.I feek confident that the job market will begin to recover as everyone in trouble will find a way to re-invent themselves.



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