Bailout Bill – How It Effects Real Estate
The Emergency Economic Stabilization Act of 2008 was signed by President Bush into law on October 3rd, 2008.
The Bill Will Help Homeowners and Borrowers
The Senate legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages. Here are some provisions of the new bill:
- When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures.
- All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage.
- Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties and owners of commercial properties. Policy goal is to assure that tenants don’t lose their residence or their place of business when an owner has problems with the mortgage.
- Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.
These provisions of the new bill are encouraging and hopefully will help owners who get into trouble in 2009, when we see the effect of the legislation. However, it will not put the brakes on sliding home values, and I don’t see how this helps today’s homeowner who is already in foreclosure or has defaulted on their loans.
With September’s recent loss of 160,000 jobs, the United States has seen job losses every month this year. Homeowners who wish to sell this year and next year must price their home according to the market, not at what they want to receive. Buyers must run their numbers with their mortgage brokers before going out looking. Vigilance on the part of buyers and sellers will keep this crisis from becoming a disaster.