The Details of Hope

Here are some details that we have to consider as the federal government continues to try to bail out the real estate market.

Some of the programs may apply to us.  Making Homes Affordable is a program that our lender is participating in.  We could lower our monthly payment to 31% of our income.  We were not crazy when we bought this house, and spend 32% (still in my opinion, high, but it was what a house cost).  Citi offered to lower our payment through refinancing by 1% of our monthly income, saving us close to nothing over the lifetime of our loan, as they were also willing to charge the going rate for a refi.  In several years we could have recouped the cost of modifying our loan using Make Homes Affordable, which in the end, doesn't really make our house any more affordable.

So far, the Make Homes Affordable project has helped 170,000 home owners.  This is wonderful news for those home owners.  The project was anticipated to be viable for 3-4 MILLION home owners initially.  People with more expertise than me, are estimating that 5% of the 3 millions folks will actually get a loan modification using this program.  I actually could be one of those 170,000 homeowners, but it wasn't a savings for us.

This is why last week I was a bit excited about new programs being formed to help even more underwater and unemployed home owners.  There are many details.  The main deal is that we would need to get current to salvage our credit score.  In the case that we did get current, our principle could be reduced 15% per year we have been paying.  This is equal to the dive the market took.  It would make our house affordable.

After the excitement of the new announcement wore off, I started thinking.  Which federal assistance program adopted in the last 2 years has been really effective?  Which one has offered real assistance to me, my neighbors, small businesses, corporations, the stock market, etc.  If we were able to participate, or our lender is participating, the only difference between a federally funded principle reduction and a short-sale, would be my credit score, the taxes owed to the state of California, and my proximity.  Are those things that I want to leave in the hands of the government and the lender?  Do I really want to wait and hope on these institutions to resolve the situation?

For now, my answer is no.  I'll jump through their hoops if they put them out for me, but the track record is pretty bad.