16 CFR Parts 317 and 318: Mortgage Acts and Practices Rulemaking
The economy needs people to spend money to recover. Mortgage help should go to those people who, through modifying their mortgage will have extra money each month to spend. Those people with stable jobs and good credit. Financially responsible people. The focus of assistance so far has done nothing to impact the bigger issue. Until the situation I describe here is addressed, housing values will continue to decline and the economy will not recover.
I use my current situation as an example:
I purchased my home in March of 2006 after hesitating because of the price I would have to pay for something average in the Las Vegas market. My income is better than average for the area and I was seriously confused as to how many, many people were affording things that my income could barely afford. After watching house prices continue to rise, I decided to purchase before prices reached a point where I truly should not have purchase a house. I was able to quell my earlier suspicions with a simple - I guess others know something I don't. Turns out, it was I that knew how to do basic math and others that failed.
I would consider myself to be financially responsible throughout life and would only accept a 30-year fixed mortgage, as I knew my income would not adjust at the rate to exceed the rate of increasing ARM APR.
Currently I face this situation: Approximately 310k principle balances on two original 80/20 loans (for 332k purchase in Mar 2006). Approx 2500 (6.5% and 8.5% fixed rates) in monthly mortgage payments, which account for approx 45% of my income. Approx current market value of 170k for the home. This is my only and primary residence. The neighborhood quality has taken a severe turn downward with many residents, if the house is occupied, failing to keep up the appearance of their properties, even with HOA involvement. I have little faith that I will ever, in my lifetime, see market price of this house exceed the purchase price as there is nothing locally to truly create the personal income levels nor the housing demand required.
I have been making efforts since Feb 2009 to discuss this situation with my current lender - Countrywide/Bank of America with absolutely no progress. Customer service representatives are more concerned with their call time metrics than actually helping. I have been attempting to start short refinance negotiations with CW/BofA and see little point in waiting further.
The ideal resolution for the economy, the bank, and myself would be the short refinance. 170k at 5.5% for 30 years would free up approximately $1500.00 of my monthly budget to SPEND. I would eat at restaurants more frequently, perhaps purchase a new vehicle, improve the house, spend more on my education, donate to charities, ... ; SPEND. Let's say that now have $1000 to spend monthly.
Now take others in my situation and offer them the same short refinance. If only 1000 people received this help, that would free 1 million dollars of personal income that people could spend PER MONTH, 12 million PER YEAR. That is only helping 1000 people; help 10,000 or 100,000 and you can add a zeros to those figures possibly reaching 1.2 BILLION dollars per year in freed up spending cash that DIRECTLY goes into the local, national, and global economy. I'm sure there are at least 5 homeowners on my street alone that would qualify and take this offer if available.
I do not need to lecture you on the benefits EVERYONE will experience from this increased spending.
The alternative I see, should CW/BofA not respond favorably to my request is voluntary foreclosure. It makes absolutely no sense for me to continue to pay for something I will never come close to selling at the purchase price. What will I do with the extra $2500/month no longer going to a mortgage payment? I will save it to offset the negative effects on my credit of the foreclosure and to pay lawyers if necessary. It will not be directly added to the economy. No one is helped this way.