Cori Bradley and Cecil Baird are among many Valley homeowners who are finding it tough to qualify for mortgage modifications as they face declining home values, diminished income and the looming shadow of foreclosure.
Homeowners, real estate agents and mortgage experts say President Barack Obama’s mortgage modification plan is not working in housing markets such as Phoenix, because in many instances home values have dropped too much for the owners to qualify.
To qualify for a principal modification under the plan, a borrower’s mortgage balance cannot be more than 105 percent of the current value of the home. For example, a suburban
“The real killer here is the 105 percent stipulation,” said Joseph Maggiore, a Realtor with
Adjustable-rate mortgage holders in trouble may qualify for temporary rate reductions for five years, but then will see their rates go back up. That could reintroduce the same problem of suddenly rising payments now faced by subprime borrowers, said Dean Wegner, a mortgage banker and principal with
Wegner said conventional mortgage holders who are current on their loans, but have seen values dive often do not qualify for either aspect of the rescue plan.
Baird is in that nonqualifying group. He has seen his income drop and his Queen Creek home’s value plummet, and he’s behind in his mortgage payments — but he’s not qualifying for mortgage adjustments from his lender,
Baird’s wife decided to stay home after the birth of their daughter because she didn’t make enough money to offset child care costs. They have not been able to keep up with their $1,850 mortgage payments. He’s in the last month of a forbearance period and faces higher payments next month.
“I have tried several times to remodify the loan. However, since I am in the red … Chase (representatives) say they are unable to assist me until I at least break even,” said Baird, who received a conventional mortgage in 2006. “I paid $211,000, owe $206,000 and have seen comparable houses posted for $76,000.”
In the
“We are terribly underwater. We owe $291,000-ish and the property is now worth $190,000, maybe,” she said.
The Bradleys also are suffering in the economic downturn. Both were laid off from their jobs in the mortgage and commercial real estate industries and had to deal with unexpected medical and tax bills. They have found new jobs and are current on their mortgage, but it is an adjustable-rate loan, which puts the couple in peril.
“I know that everyone is going through tough times and that my story is just another story, but I am hopeful my lenders will reach out and help us in this time of crisis,” Bradley said.
NO REAL OPTIONS
Stacy Pingree, president of
Mortgage and real estate professionals also said the federal modification plans are not working well in other hard-hit housing markets, such as
“It seems like there is no real option that addresses the most common scenarios out there: people who are significantly upside down on their value and either have adjusting loans or fixed rates that are just too high to be manageable,” said Maggiore, who would like to see the underwater rule lifted from modifications.
MORE HELP NEEDED
Chase spokeswoman Mary Jane Rogers said it has been difficult for the bank to qualify borrowers under the refinance plan because loans often total more than 105 percent of a home’s current appraised value.
Late last month, Chase opened a loan service center in north
“We’re seeing an increase in people talking to our bankers about their options,”
There also are mortgage brokers, modification firms, attorneys and rescue companies offering their services to struggling homeowners.
Dan Mercer, senior partner with
Mortgage and real estate experts expect the Obama administration to revisit the modification rules because they aren’t helping markets such as
“They’re probably just going to have to wait it out,” said Brandon Hinson, an agent with
Staff reporter Chris Casacchia contributed to this story.
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Federal Deposit Insurance Corp.: www.fdic.gov/consumers/loans