New rules designed to make it easier for homeowners with little or no equity to refinance may be a huge relief for the estimated 30 percent of San Diego homeowners owing more on their homes than the homes are worth.
October 24, 2011 1:16 p.m.
Vino Pajanor, president and executive director of Housing Opportunities Collaborative.
Related Story: Obama To Promote New Steps To Help Housing Woes
CAVANAUGH: New federal refinance rules could lower mortgage payments for under water San Diegans.
SANDAG is about to finalize an expensive and controversial regional transportation plan. This is KPBS Midday Edition.
I'm Maureen Cavanaugh, it's Monday October 24th. Our top story on Midday Edition, President Obama's new rules for refinancing federally backed mortgage loans. As you heard on were in, the new rules are designed to make it easier for homeowners with little or no equity to refinance. With almost 30% of San Diego homeowners owing more on their homes than the homes are worth, this is announcement should generate a lot of enter. I'd like to welcome Vino Pajanoor, president and executive director of housing opportunities collaborative. Welcome to the show.
PAJANOOR: Good afternoon, Maureen. Thank you for having me, once again. Thank you.
CAVANAUGH: You're very welcome. Thank you for doing this. We invite our listeners to join the conversation. Have you been trying for a refinance or a loan modification? How do you think these new refinancing rules could affect us? Give us a call with your questions and comments. Our number is 1-888-895-5727. That's 1-888-895-KPBS.
Vino, I know your group has been doing seminars with homeowners across San Diego County for a couple of year it is now. How widespread is the problem of being under water?
PAJANOOR: It's pretty prevalent, Maureen, right now. When we have a subprime loan crisis because more people are having leaderships making their payments, but over the past year, and couple of years now, we have been seeing homeowners coming to our home clinic, and they have been responsible homeowners, meaning that they have been paying their mortgages on time. But the assistant question is, I am 30 plus, and some of them even 60 plus under water, meaning they owe more than the value of their home, and that's becoming a recurring question Eand some of them have been asking us, is it really making business sense for me to stay in this home? Can I just walk away? What can I do? Unfortunately, in the past until today, there's a new program that has been announced by the president, but before that, your home -- the home value, if you owe more than your -- the value of your home right now by more than 25%, you don't qualify for any of the other programs. The only option is to figure out other foreclosure prevention methodologies, like short sales or bankruptcy or other means. It's been prominent right now in San Diego, especially in some of the newer neighborhoods, we have sudden a drop off maybe 50 to 60% of the homes.
CAVANAUGH: And yet if people can still make the payments on their onlies, even if they are so under water, what real problem does that cause?
PAJANOOR: They're cutting corners. They are not making their payments for the insurance or they are not taking care of the other needs. Maybe in the long run, even if they have the affordable ratio of making the payment and still being comfortable, they're not going to see honestly speaking a rebound in their equity of their homes in the near future. Maybe not even for the term of the mortgage period. Maybe it is 35-year or 30-year fixed mortgage too. They might not see it. Upon that's the current situation. So when it comes back, maybe they don't have enough equity to refinance. So like, for example, if they want to refinance it to a better mortgage interest rate, right? For example, about I would say about 60% of those who are under water make a mortgage payment based on an interest rate of 6%. Right now, the mortgage rates are at 4.11. That's the lowest it has gotten to in many years, maybe even from the '50s and '60s. They're not able to refinance. They're losing out. They're responsible, they don't want to walk away from their homes, but the fact of where they are on the interest rate, and the different programs that are available, they are not able to qualify for anything, and they are not -- they are making more than what the actual home is valued currently
TINSKY: So Vino, how does this new plan, as you understand it, change the rules to help homeowners who are under water? Earlier to today, the program had a limitation on the -- if your mortgage was 25% more than what your current value of your home is, you don't qualify under the harp, home affordable refinance program. That is the program that is being -- you know, revamped. Now, they're taking the ceiling off. Meaning that even if you owe 40%, 50% more than your home value, this program will help you. But not all homeowners are going to be benefited by this program
CAVANAUGH: Right. I wanted to ask you that. This is actually for people whose mortgages are owned by Fannie Mae and Freddy mack; is that right?
PAJANOOR: That's correct. So you have to be a fanny or Freddy mack owned mortgage. So basically you have to go to their website, you can go to the making home affordable.govwebsite, and they're listed over there, you can enter your address, and check whether your particular mortgage is owned by fanny or Freddy. But just to give you a scenario of what's there, 11 million home horns are under water, nationally. This particular program, the new revised program, could help anywhere between a million to 2 million homeowners who are under water. So you're looking at about 10% of those who are under water may qualify under this program, and then there is the other catch. There are feed involved in this program. So because it's a refinancing, you might have to pay up some upfront fees to get into the refinance program. And you might also want to check whether your lender or servicer had signed up for this program. If you're owned by one of the large lenders, and they're signed up for this program, you're going to see whether your particular mortgage or lender has signed up and therefore you can also be benefited of the harp, the home affordable refinance program
CAVANAUGH: I want to take a call. We are taking your calls at 1-888-895-5727. Barbara is calling us from Golden Hill. And good afternoon, Barbara. Welcome to the show.
NEW SPEAKER: Hi. That's good timing. I was just going to ask if I have been trying to get a couple programs, but my lender, U.S. bank, doesn't participate in save your home California, and I don't think they're going to participate in this one. Is there anything I can do to encourage their participation?
PAJANOOR: Yes, of course. I mean, do you want me to take the call?
CAVANAUGH: Please do, Vino.
PAJANOOR: Okay. Write to U.S. bank and say that I'm an under water homeowner, I'm taking difficulty, I would be greatly benefited by this. But more than that, you need to write to your local elected officials, starting from your congressional official, who has been elected from your district to the assembly member, and the Senate offices, and to even to those who are in DC saying that you want your servicer to join the program. All of these lender services were not part of the agreement or any other pool are not forced to turn. It's optional. It's their choice to join it. But more and more people are outreaching to L lenders and everybodieses, their elected officials to ask them to persuade these lenders and services to join the program. Tell increase the lenders and services to do it. They have been fighting for this for years now, but we need more and more homeowners who are under water, who are current, who want to be in their home, and this is their asset, please do write to the officials and your lender or service and tell them to join this program
CAVANAUGH: These new guidelines that the Fannie Mae, the federally guaranteed mortgages have to follow now because the president is changing the rules. Will that put any pressure on bank mortgages to follow that lead to make it easier for people to refinance?
PAJANOOR: Be I hope it does. It's not happened in the past four years. Let's just look at the numbers for HARP, which is the program that has been, you know amended or changed right now. It was, when it came out in 2009, it was predicted to help about 5 million homeowners initially. It's helped about 800,000 plus homeowners. That's about 14 to 15% of those who should have gone through the program. So we have not seen in the past lenders and services jumping onto the band wagon, where in fact the program here in California, which is the keep your home California, got $2 billion, and 1 of the programs is to do a prince practical reduction. And you have not seen many of the lenders does and services jumping onto the program and saying they're going to help the homeowners here. Hopefully that is some kind of an encourage. . It is -- encourage. Factor. The when a lender or servicer does, you know a refinance, they pay about $1,500 for each of those loan modifications or refinance that happens to the program. That is an incentive, but then, you know, lenders and services are in the business of making new loans, and they are probably securing the loans for the investors. They're going to look at the bottom line is, does it make business sense or profit sense for us at the bank?
CAVANAUGH: Todd is calling from San Diego. And good afternoon, Todd, welcome to the show.
NEW SPEAKER: Thank you. My question is my wife and I moved to San Diego because of the job market in the mid-west. And we've never missed a payment on our home that we've owned for five years, but we do have an interest rate on an 80/20, that is 7% on 1 and 10% on the other. And the only advice I've gotten from any government institution was to default on my payment for 5 to 6 months and then I would be eligible for government help. But I refuse to destroy my credit in order to get help. And I'm wondering if there's any solution for people like us who have done everything right and haven't missed a payment.
PAJANOOR: Yes, and that's exactly what the program is trying to address right now. First and foremost, you have to check whether your mortgage is owned by fanny or Freddy, go to making homes affordable.gov, and there is a page on the site, where you check why where are particular mortgage is own bide fanny or Freddy. That's the first eligibility requirement. And earlier than today, there was a limit on the 25% of what you owe to what the actual home value is. Right now, that particular limit has been removed. So even if your home value is, let's say, $100,000, and you have 100 and $60,000 mortgage, to give you an example, you would qualify -- you can qualify under this particular program that's been launched today.
CAVANAUGH: Under the change, right what are the biggest homeowners make, Vino, when they start to struggle to make their mortgage payments? Because you deal with people a lot, you center these seven Rs, you hear a lot of stories. What do people traditionally do wrong if they see that they're having trouble with their mortgage?
PAJANOOR: First and foremost, what they do is try to ignore the fact that they have trouble paying their mortgages. Then they -- you know, they don't outreach to services that are out there that are free. Because already you are having trouble making a payment. You don't have enough money to go get some kind of advice legal advice or other professional advice. So their agencies in San Diego County and initially that could help you for free to understand the different programs that are out there and to figure out whether you qualify for any of those programs. And all of that help is for free. And then what you do is you have to start prioritizing. People always try to do it, they pay off their credit card and other payment before they even come to their mortgage payment. And sometimes homeowners, what we're seeing is even when the truth is that they cannot afford their particular home, they do everything under their means, that the saves did, to their 401K to make the mortgage payment. Which sometimes is not a business approach. You really can't make a payment, and you cannot afford that home that you live in, you have to think of other options. You have seen in the last four-year, homeowners who have come to our program and start the into the foreclosure, and homes that have been foreclosed, they are now in the game of once again buying homes that they can afford. So losing a home to foreclosure or other, like a short sale or bankruptcy is not the end of the dream. It's the end of one dream, the beginning of another.
CAVANAUGH: Really quickly, Vino, do you have any estimate about how many people might foreseeably be Homeposted by these changes in the refinancing program for Fannie Mae and Freddy mack here in San Diego?
PAJANOOR: We don't have the numbers, but if the numbers are right, nationally San Diego reneglects the national numbers. You're expecting about -- at least 10% of the under water homeowners in San Diego could be helped.
CAVANAUGH: Well, I've been speaking with Vino pana hoar, president and executive director of housing opportunities collaborative. And thank you so much E.
PAJANOOR: Thank you Maureen. Thanks always.