Staff and wire report
The Tucson area had 7,000 homes enter foreclosure last year, and the median home price continues to tumble.
Resale home prices declined from a $200,000 median in March 2008 to $160,000 in January due to foreclosure sales, said John Strobeck, author of the Southern Arizona Housing Market Letter.
There’s more to come.
According to an analysis by the Center for Responsible Lending, lenders this year are supposed to foreclose on more than 118,000 homes in Arizona.
Can anything be done to help stop the plunge?
Between the $75 billion foreclosure plan President Obama outlined Wednesday in Phoenix and the $787 billion economic stimulus he signed a day earlier, the government promises a range of programs aimed at getting new help to homeowners.
Still, not everyone who needs help will get it. Some homeowners who owe more than their house is worth will get help, but many of those who are most severely “under water” with their mortgages won’t see a bailout.
Who qualifies for the assistance? What exactly will they receive and when will the help arrive?
Here are questions and answers about the latest round of aid for homeowners:
Q: What if I’m a homeowner on the brink of foreclosure?
A: Homeowners who are behind on their mortgage payments or are struggling to keep current may qualify for a mortgage modification under the Homeowner Affordability and Stability Plan that Obama unveiled Wednesday.
To qualify, the house must be your primary residence, your mortgage payment must be greater than 31 percent of your monthly gross income and your loan mustn’t exceed current Fannie Mae and Freddie Mac loan limits, which vary by region and max out at nearly $729,750.
Owners of two-, three- and four-unit properties are eligible as long as they use one unit as a primary residence. Just first mortgages are eligible for a modification.
More detailed requirements will be available March 4.
Q: What if I’m not near foreclosure? Do I get assistance?
A: Borrowers who are current on their mortgages but can’t refinance into lower interest rate loans because their homes have fallen in value are eligible to refinance into a 30- or 15-year, fixed-rate loan under the plan, but only if their loan is held by mortgage finance companies Fannie Mae or Freddie Mac.
To qualify, homeowners can’t owe more than 105 percent of their home’s current value on their first mortgage. For example, if your home is worth $100,000, your first mortgage can’t exceed $105,000.
Borrowers with a second mortgage are eligible as long as their first mortgage isn’t more than 105 percent of their home’s value. The value of your property will be determined after you apply to refinance.
Skeptics say it’s going to be difficult for borrowers to figure out whether their loan is held by Fannie or Freddie. “I’m not sure people are always going to get a straight answer,” said Bert Ely, a banking industry consultant in Alexandria, Va.
Q: Any breaks for first-time homebuyers?
A: Under the economic stimulus plan that Obama signed Tuesday, first-time homebuyers who purchase a home between Jan. 1 and Dec. 1 will be eligible for a tax credit of 10 percent of the value of the home, up to $8,000.
Homeowners don’t have to pay back this credit over the next 15 years, the way they had to with the $7,500 tax credit enacted last summer. However, homebuyers would have to repay the credit if they sold their homes within three years.
First-time buyers are defined as those who haven’t owned a house for at least three years.
Q: Any other breaks for current homeowners?
A: Homeowners can qualify for a tax credit of up to $1,500 by making their homes more energy efficient this year or next. Many projects qualify, such as installing energy-efficient windows, doors, furnaces and air conditioners, and adding insulation. Homeowners can get back 30 percent of their expenses up to $1,500.
Q: Will there be more assistance down the road?
A: The Obama administration is working with lawmakers to pass a bill that would allow bankruptcy judges to modify the terms of primary home loans in court.
The lending industry is fighting this plan, arguing that it would make lending a risky proposition. But with support mounting, the industry’s efforts are primarily focused on limiting the scope of the bankruptcy proposal rather than blocking it completely.
Q: How soon can I expect to take advantage of these benefits?
A: The refinancing and loan modification programs start March 4. The first-time homebuyer tax credit is in effect from the first of the year through the end of November. The “green” home tax credit applies to energy-efficient improvements made through 2010.
Q: What should I do until March 4?
A: If you’re interested in refinancing or applying for a loan modification, collect all necessary documents to give to your lender.
These include your most recent pay stubs and other documents detailing the income you receive, your most recent tax return, information about your second mortgage if you have one, payment information on your credit cards if you carry a monthly balance and payment information on all other loans, like student loans and car loans.
Q: What if I’m facing foreclosure and can’t wait until March 4?
A: Contact your mortgage servicer or mortgage lender. Many lenders said they will postpone foreclosure sales on home loans that could qualify for the modification.
FORECLOSURE PROTECTION
The Obama plan would:
• Help up to 9 million families restructure or refinance their mortgages to avoid losing their homes.
• Get rid of a restriction that stops mortgage giants Fannie Mae and Freddie Mac from refinancing mortgages they already own or guarantee.
• Create incentives for lenders to modify at-risk subprime loans.
• Keep loan rates low for millions of middle-class families seeking new mortgages.
• Pursue reforms to help families avoid foreclosure.