Obama-Math Doesn't Add Up for Most Homeowners

First, President Obama said he was offering help to homeowners who were in financial straits but hadn't yet walked away from their homes or stopped making monthly payments. Then he said, today, that the time is now for refinancing.

So, I tried, and here's what happened.

I called my lender, Countrywide, and we went through the numbers. Even though my credit rating is stellar, I didn't qualify for one type of refinance with really good terms because my loan-to-value ratio, along with my income-to-loan ratio weren't satisfactory. That's because I'm self-employed, and the penalties for being self-employed are a whole other story.

The only loan option left for me, therefore, had the benefit of lowering my monthly payments about $300. But - and here's the kicker - it would require $6,000 in closing costs.

Let's be clear. Anyone who needs to save a few hundred bucks a month just to get by isn't going to have six grand sitting around to pay Countrywide (now Bank of America). Unless and until this offer changes, it's a bust for just about everyone who it's meant to benefit.

Why? I'm not quite sure, but there's are a few bread crumbs to follow. Most home loans are guaranteed by either Fanny Mae or Freddy Mac. These friendly sounding, government created behemoths, you'll recall, were at the heart of the mortgage meltdown from the beginning. Now, they're the ones dictating the terms of our Obama-created refinance opportunity.

If your "investor" is Fanny, as it turns out, good loan terms are available without huge sums due at closing. But if your investor is Freddy, you're currently out of luck.

This is huge news - the kind of ridiculous red tape that will sink hard-working families who are desperate for a leg up. Still, no one's talking it.

My Countrywide Customer Advisor agreed with me that refinancing under these terms would make no sense. She was in the same bind with her own home. The best she could offer me was a suggestion to call back in a couple weeks to see if public outrage caused Freddy to change its terms.

Here's hoping. Want to outrage with me?

Comments

[californiadreamer]

Even the legal settlements with predatory lenders have all kinds of loopholes that make it impossible to restructure the loan. The Attorney-Generals who worked out the settlement with Countrywide/BofA have the power to impose restructuring but have backed away. They can point to the settlement to show they are with the homeowner, but the truth is, it has no teeth. Hopefully the voters will be more educated this time around and not fall for these kinds of political ploys. Soon we shall no doubt see the demise of the bankruptcy judge option to reduce principals on loans. This is going to go to the Senate floor soon where it will be amended to death. But Obama, Dodd, et. al can say: Well, we tried. But that's not good enough. New research shows that the banks can do pretty well with foreclosures, so why should they modify. Score: Banks Billions, Homeowners Nothing. Thanks Obama for all your hope and empty promises.

[PhilipTaylor]

PEOPLE ----------­----------­-Trickle DOWN DOES NOT WORK !!!!!!!!!-­----------­----------­------PEOP­LE

TRICKLE UP should have been done 6 to 7 months ago!

Now people are Not just HURT by a "SURE FAIL TRICK" Mortgage but also have lost their JOB!

They keep trying "TRICKLE DOWN" when if we had used "TRICKLE UP" months ago we could have stopped this Hemorrhaging!

PEOPLE ----------­----------­-Trickle DOWN DOES NOT WORK !!!!!!!!!-­----------­----------­-------PEO­PLE

[Dan Forth]

I have been following the same game at Chase, there is an option to save about $200 a month that will cost about $5000 and extend the loan another 10 years. This has been available since before Obama so is not a part of the bailout. I called about Bailout money and was told that all things would be worse than that deal. I have good credit and an FHA loan but disability has severely reduced income.

I was really hoping that there would be a better result

[kmac23va]

I talked to a company that would do a loan restructure, and after finding out that I was underwater on my house but current in payments, they told me they really couldn't do anything to help. But that if I was a month behind, they could probably get my lender (Citi) to talk to me and restructure. Is this what it's going to come to, voluntarily stopping payments on mortgages in order to qualify? The solution's almost as bad as the problem if that's the case.

[cynara]

I had the exact same experience a few weeks ago. Yes, I could refinance, but the closing charges would equal the savings...

[TRYKER]

It feels like corporations are still in control of our govt. Everything thus far has gone their way.
Even Wagner, fired from GM, may end up with over $20 Million golden parachute...sorta to make up for the $1 a yr he was working for.
When the govt says it is offering loans at 3% for 30 yrs, including student loans...THEN we will know that they have arrived.
When Obama says that credit card companies can't charge more than 10% a yr, pay day loans at 20% max, then we'll know they get it. How can he stand by and watch his people be robbed perpetually?
The grass roots pressure has to increase, lobby our govt. Its a crying shame that the citizen HAS to even tell its elected ones what they need and want and don't want. Our reps have sub-contracted themselves to too many $pecial interest$, how can we compete?
The regulations, that should have been put in place before they gave out the $$, are languishing where?

[cylindar]

I have been outraging for a lot longer than you have. I am tired. It is your turn.

[matthewdfleming]

why didn't you just roll the closing costs into the refinance? It seems you really wanted to talk about the Fannie/Freddie difference rather than the inability to do the refinance.

[Raphael Cushnir - Huffpost Blogger]

Perhaps I didn't do a good job clarifying this. The costs were due at closing and couldn't be rolled into the refinance. That was the problem, more than the amount of the cost.

[iridium53]

In some places the $417k limit on loans is a big problem.

In San Diego, the median home price is $390k, the 75th percentile is $775k.
The low-rate loan limit is simply too small for some 40% of the people.