Thursday, October 9, 2008

Hope for Homeowners - H4H - Good? - Bad? - Ugly!

Hope for homeowners! I can't believe they picked that title because it is so deceiving! In fact, I would say it is just the opposite.

The homeowner who goes for this is totally screwed because he gives up all future appreciation. (he may as well rent) I guess what he gets out of it is, ... is, ... well, I guess he doesn't have to move. I would like to say that there is no foreclosure on his credit report but my gut says that this product will show on his report and he will be dinged for it. (Any bets here?)

Let me clarify future appreciation. This program creates artificial equity for the new mortgage lender at the expense of the old mortgage lender which must take a 10% bigger loss and accept the new loan payoff as paid in full.

This new loan essentially "mortgages" the new/created 10% equity and any (?) future equity to the government and to any subordinate lien holder that agreed to release their lien. If he stays in the home for the rest of his life, or at least 7 yrs he will get the benefit of appreciation after that point. Most people move every 4 to 7 years. Do the math.

OK, but look at the math this way. If the homeowner had a 2nd mortgage for $30,000 and gave up their lien for a promise of future equity from the new loan, how long would it take for the home to appreciate $30,000?

Oh, and this lender really only gets a "portion of the equity". What does that mean?? I haven't found the fine details yet. Understandably hidden if they even exist at this stage!

So, ... the original lender takes the major hit here because he not only takes the loss from the equity in the declining market, he also takes an additional 10% loss because he has to give it to the new lender. Remember, the new loan is only 90% LTV. And, he is suppose to smile about this.

The home owner is screwed but doesn't have to move. The old lender gets the royal work over but maybe that is justice although I think the blame is placed in the wrong place here as this lender was only following government direction!

The BIG looser is the American people because all our brilliant elected officials have done is spread the loss into the future to cover their ass and given the government "owner rights" to our equity into the future. The government is now in our nickers!!!

WE LET THIS HAPPEN!! Wow, I am really up set about this stuff.

I have added to our site the underwriting guidelines to the Hope for homeowners program. Please go and review this information and then please comment here and change my mind about the smoke and mirrors the politician are using to destroy our Independence and freedom. Please, tell me that I am wrong.

We have also put up the guidelines for the FHA Secure program. I wasn't a big fan but when I compare it to the H4H it is a great program. Few will qualify for it but at least it doesn't sell our children down the road! Review it here: FHA Secure - Rescue Program

Please come back and comment.



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