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Ten real estate predictions for 2009

NEW YORK – Dec. 18, 2008 – 2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Prepare yourself and your business with these predictions from HGTV’s FrontDoor.com Web site.

• Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.

• The Obama administration will act on its plan to crack down on abusive lending practices.

• Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate’s Joint Economic Committee has predicted two million foreclosures in 2009.

• Banks’ restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.

• Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.

• The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages and credit, enabling better decision-making going forward.

• Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.

• Buyers and sellers will be more and more tech savvy, relying on tools like video, webcasts, and mobile search. Consumers and practitioners will benefit from being ahead of the curve.

• Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.

• The recession will end and buyers will regain confidence in the market.

Source: Frontdoor.com (12/03/2008)

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(Paulsen Changes Plans with Bailout Money.. Mortgage/Foreclosure Assistance May not Be on the Top of the List..)

Anger, doubt aired in financial bailout hearing

WASHINGTON (AP) – Dec. 12, 2008 – Lawmakers and a watchdog charged with overseeing the government’s $700 billion financial sector rescue plan peppered the Treasury Department with pointed queries Wednesday in a bipartisan display of skepticism over the management and direction of the program.

Members of the House Financial Services Committee challenged the administration in the final weeks of the Bush presidency, complaining that the Troubled Asset Relief Program has not held banks accountable, has failed to devote money to reducing foreclosures and has used an erratic strategy.

Some lawmakers maintained that they had been misled by Treasury Secretary Henry Paulson into believing the money would be used to buy up bad assets from financial institutions, which in turn would free up lending. Instead, the Treasury is now injecting capital directly into banks.

“We’ve been lied to,” said Rep. Davis Scott, D-Ga. “We’ve been bamboozled.”

At the same time, the Congressional Oversight Panel for Economic Stabilization, an entity created specifically to monitor the program, issued a report Wednesday that echoed many of the same questions posed during the House committee’s hours-long hearing.

The tough reviews illustrated the difficulty Paulson might have if he seeks access to the second half of the $700 billion fund. All but $15 billion of the first $350 billion has been allocated in the two months the program has been in place.

Neel Kashkari, director of the Treasury office that oversees the bailout program, told lawmakers that Paulson has made no determination about whether to request the remaining money. He said the Treasury Department is keeping President-elect Barack Obama’s economic team informed of developments.

Under persistent questioning, Kashkari defended the work of the program even as he conceded that its degree of success was difficult to measure.

“The (financial) system is fundamentally more stable than it was when Congress passed the legislation,” he said. Pressed by Rep. Maxine Waters, D-Calif, to put more resources into reducing foreclosures, he said, “Imagine how many foreclosures we would have if we had allowed the financial system to collapse.”

At least two lawmakers quizzed Kashkari about retention payments made to top executives by troubled insurer AIG. The company has received billions of dollars in government help, including $40 billion from the Troubled Asset Relief Program. In a recent letter to Rep. Elijah E. Cummings, D-Md., AIG CEO Edward M. Liddy said 168 employees were scheduled to receive retention payments ranging from $92,500 to $4 million.

“Is $3 million a year bonus, a $3 million bonus, is that excessive to a company owned 80 percent by the United States government and as to which over $125 billion of taxpayers’ money has been invested?” Rep. Donald Manzullo, R-Ill., said.

“It is excessive for a failing institution, yes,” Kashkari replied. But he said he was not familiar enough with the AIG payments to determine whether they met Treasury compensation standards.

With Federal Reserve Chairman Ben Bernanke predicting foreclosures this year will reach about 2.25 million, Democrats also have been insisting that the Treasury devote more effort to halting the rise in mortgage failures.

“In the macroeconomic sense, foreclosure reduction is an essential part of getting us out of the problem we’re in,” said Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman. “The refusal so far to use the money to that purpose has been, I think, a violation of the intent and undermines the ability to get the votes in this Congress to do things in the future.”

The 37-page oversight report offers no specific conclusions, but the questions suggest sharp disagreements with Paulson’s stewardship of the program and echo some of the criticism raised in a Government Accountability Office audit of the program last week.

Gene Dodaro, acting comptroller general of the U.S., told lawmakers Wednesday that the GAO concluded that the government must toughen its monitoring of the bailout fund to ensure that banking institutions limit their top executives’ pay and comply with other restrictions. The auditors said the Treasury Department had no mechanism in place to track how institutions are using taxpayer money that the government injected into the banking system.

“What is Treasury’s strategy?” asked the oversight panel, which is chaired by Harvard Law School professor Elizabeth Warren. “Is the strategy working to stabilize the markets?” and “Is the strategy helping to reduce foreclosures?” The draft presses the Treasury to answer those questions and more.

Rep. Jeb Hensarling of Texas, the panel’s only Republican, declined to sign the report. He said he had raised several concerns with the panel over access to resources and other issues that “have not yet been addressed.”

Warren, a Democratic appointee to the five -member panel, later said that the oversight group has only been constituted for two weeks. She said Hensarling had been invited to every meeting the group held, but that he sent aides instead.

“I don’t want to turn this panel into a partisan divide,” she said. “I’m not clear what the difficulty is. There has been not a single request that he has made that has not been granted.”

Copyright © 2008 The Associated Press, Jim Kuhnhenn (Associated Press Writer.) All rights reserved

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(Ben Bernanke is Expected to Announce Another Rate Cut This Week! How Low Will the Fed’s Go? This Will be the Second Time This Month that The Feds Drop Rates.. This Could Result in 4-5% Interest Rates, but May Only Represent “New Loan” Purchases & Not Refinances.. Thinking About Purchasing?? Could Be Time to Dive In..)

U.S. weighs slashing rates to cushion fallout

WASHINGTON (AP) – Dec. 15, 2008 – The Federal Reserve is widely expected to ratchet down a key interest rate – perhaps to an all-time low– to prevent the sinking economy from falling deeper into the doldrums.

Federal Reserve Chairman Ben Bernanke and his colleagues open a two-day meeting Monday to take a fresh pulse on the ailing economy, which has been mired in a recession since last December, and to decide their next move on interest rates.

Fighting the worst financial crisis since the 1930s, the Fed already has pushed down its main lever for influencing the economy – the federal funds rate – to 1 percent, a level seen only once before in the last half-century.

Many economists predict the Fed will cut its rate in half – to just 0.50 percent when the session wraps up on Tuesday. A few think the Fed could opt for an even more forceful action – lowering rates by a whopping three-quarters percentage point or more. If that larger cut occurs, it would be the lowest on records that track the monthly average of the targeted funds rate going back to 1954. The funds rate is the interest banks charge each other on overnight loans.

However deeply the Fed decides to cut rates, the prime rate – now at 4 percent – for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate is used to peg rates on home equity loans, certain credit cards and other consumer loans. Cheaper rates could give pinched borrowers a dose of relief.

The goal of lower borrowing costs is to entice people and businesses to spend more, which would revive the economy. So far, though, the Fed’s aggressive rate reductions have failed to turn the economy around.

Walloped by the financial crisis, worried banks have hoarded their cash and been extremely reluctant to lend money to customers. Fearful consumers, watching jobs vanish and their investments tank, have sharply cut back their spending, including big-ticket purchases like homes and cars that typically involve financing.

The negative forces have fed off each other, creating a vicious cycle that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to break.

The Fed can lower the fund rate only so far – to zero, and is getting closer to exhausting its rate-reduction ammunition. However, Bernanke has made clear the Fed has other tools available to stimulate the economy.

For example, the Fed could buy longer-term Treasury or agency securities on the open market in substantial quantities. This might lower rates on these securities and help spur buying appetites.

Copyright © 2008 The Associated Press.

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(Citizens Property Insurance Chairman, Bruce Douglas, Will be Answering Questions..)

Citizens hit with additional asset losses

TALLAHASSEE, Fla. – Dec. 15, 2008 – The credit market’s turmoil continues to haunt the state-run property insurer.

Citizens Property Insurance has written down an additional $119.5 million of the value of troubled mortgage-backed securities that had been included in a state-run investment pool.

The company’s general counsel disclosed at Friday’s Board of Governors meeting in Jacksonville that the state insurer has fielded questions from the Securities and Exchange Commission on the sale of auction-rate securities earlier this year. The notes were repurchased in June when there were no buyers for auction-rate notes.

A subpoena from the SEC’s Washington office was received by Citizens in June. It replied to the SEC’s inquiry in early July.

The state’s Office of Financial Regulation confirmed that it has an open investigation of Citizens. But a spokeswoman wouldn’t say why the insurer was being investigated or when the investigation started.

In 2007, Citizens had invested more than $2 billion in the Local Government Investment Pool run by the State Board of Administration. Like many cities, counties and local agencies, Citizens’ money in this fund was frozen after the news that several of its mortgage-related securities were downgraded caused a run.

As a result, the fund divided its money into two pools and restricted access to investors to prevent them from withdrawing their entire balance at one time.

Citizens has had more than $651 million sitting in the fund since last December, but will gain full access to the money Dec. 23. The insurer has $73.3 million in Fund B, which contains the most troubled securities, that it still can’t touch.

The $119.5 million write-down reflects the difference in current market price for these securities and what Citizens paid for them, Kerry McGovern, Citizens’ investment manager, told a Citizens governors board committee meeting Thursday. That’s in addition to an $88 million write-down last December.

McGovern said about 79 percent of the September write-down came from the securities in the local investment pool’s Fund B. The rest came from losses on Lehman Brothers Holdings, the Wall Street broker and investment firm that filed for bankruptcy in September.

Given continued market declines, McGovern said further markdowns might be needed at the end of the year.

Citizens did manage to skirt losses on about $8 million it had invested in the Reserve Primary money market fund, which “broke the buck” in mid-September when losses pushed its per-share price below a dollar.

McGovern said Citizens will be able to recoup its investment after Jan. 5.

At the board meeting, the financial statement presented by Sharon Binnun, Citizens’ chief financial officer, showed the insurer had a surplus of $3.3 billion at the end of the third quarter. Surplus is cash the insurer has stocked away to pay future claims.

Christine Turner, Citizens’ director of government relations, said the insurer has provided the documents and information requested by the SEC regarding its repurchase of auction-rate notes. She called it a “fact-finding inquiry.”

Citizens repurchased the notes when rates on these securities rose sharply as the credit markets deteriorated.

Both current board chairman James Malone and former chairman Bruce Douglas had been informed of the SEC inquiry. But the board hadn’t been told about it until Friday’s board meeting when the SEC request was mentioned during the general counsel’s report.

Allan Katz, a Tallahassee attorney and one of the governors, was dismayed that the board hadn’t been told earlier. Routine or not, “you don’t wait five months to tell board members.”

Copyright © 2008 The Miami Herald, Beatrice E. Garcia. Distributed by McClatchy-Tribune Information Services.

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(“Yes, Mr. Loan Officer! I’m literally upside down in my home!” I like the article below because this is a question I get quite a bit.. “What about me? The guy who didn’t make a stupid investment or take uncalculated risk & buy more home than I could afford? And the Feds are letting my neighbor escape his mortgage??” Understand Mr. Disciplined Mortgage Payer.. That penalty is not as light as it seems.. A blotched credit report with recorded foreclosure will haunt speculators for many years to come..)

Mortgage help unfair but needed

SAN DIEGO – Dec 5, 2008 – Some homeowners who make their mortgage payments on time say they are irritated that the U.S. government is helping others who don’t.

Helping some homeowners but not others may not be fair but is necessary to keep the U.S. economy from sinking further, CNNMoney.com reported Friday. As the number of delinquencies soars, home values decline, adversely affecting the economy.

“There’s always the issue (of) ‘I’m paying my mortgage even though I’m upside down and my neighbor is not,’“ said Mark Goldman, a real estate professor at San Diego State University.

Letting delinquent mortgage borrowers slip into foreclosure harms the entire U.S. financial system, Goldman said.

“The appropriate public rationale (for the bailouts) is to support housing prices,” he said. “The reason they’re doing this is to stop plummeting prices and everyone benefits from that.”

But just because it’s appropriate doesn’t mean taxpayers like it, CNN Money found.

“All these idiots who bought homes they couldn’t really afford are going to be rewarded with loan modifications, but what about those of us who didn’t make stupid decisions?” asked Jay Black, a CNNMoney.com reader who rents in New York.

Others wonder why help is available only to borrowers who are at least two or three payments behind.

“Why does a homeowner have to be behind in their mortgage to qualify?” asked Tamila Fiola of Fall River, Mass. “Why can’t help be brought to those that are struggling to keep the note current? My sister-in-law pays over $5,000 a month for her mortgage; she struggles to make it but she does.”

Copyright © 2008 by United Press International.

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(Mortgage Rates just plunged to 4.5% (Compare that to the Historic Real Estate Mortgage Graph Above), which will be enticing for many “Sidelining” consumers to jump into the Real Estate Market. This still won’t be enough to stabalize our Markets depreciating condition. This rate only applies to “Purchasing New Homes” & not refinancing. Only a week after the Federal Reserve unveiled a $600 billion plan to reduce mortgage rates, the Treasury Department is considering adding to the effort to lower rates even more.)

 Mortgage rates drop to lowest level since January

WASHINGTON – Dec. 5, 2008 – Rates on 30-year mortgages plunged this week to the lowest level since January after the government launched a sweeping new effort to aid the U.S. housing market.

Mortgage finance giant Freddie Mac reported Thursday that average rates on 30-year fixed-rate mortgages dropped to 5.53 percent in the largest one-week drop in 27 years. That was down from 5.97 percent last week, and the lowest since the week of Jan. 24, when it was at 5.48 percent.

Further drops could be on the way if the government launches an industry-backed plan to lower the rate on a 30-year mortgage to 4.5 percent by spending hundreds of billions to buy mortgage-backed securities issued by Fannie Mae and Freddie Mac.

That would follow an effort announced last week by the Federal Reserve, which is planning to purchase up to $600 billion of mortgage-backed securities and other debt issued by Fannie and Freddie and the Federal Home Loan Banks. Those institutions don’t make loans directly to consumers, but provide money to the mortgage market by packaging loans into investments.

The Fed’s move caused rates to immediately drop by about a half-point, and many in the real estate industry hope rates will keep dropping as the government increases efforts to battle the credit crisis.

Rates “are now almost a full percentage point lower since the last week in October,” Freddie Mac Chief Economist Frank Nothaft said in a statement.

Bringing mortgage rates down is positive, but it “doesn’t help people that currently have unaffordable mortgages because it doesn’t help them refinance,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said Thursday. “Low interest rates help some consumers, but the ones that really need help and can’t refinance are not helped.”

Meanwhile, Federal Reserve Chairman Ben Bernanke said the government can take steps to improve the functioning of the mortgage market, which would allow more people to secure home loans and help stabilize the housing market. Currently, he said, “the mortgage market is dysfunctional.”

Mortgage rates are sinking as Treasury yields, some of the most sensitive barometers of investor sentiment, have dropped to record lows this week as a torrent of bad economic news continues. But as investors send yields down, they’re also influencing the economy – driving interest rates so low that savers get punished and borrowers get a break.

Treasury buying has picked up and sent yields down because the economy is in a recession that investors believe will be long and deep.

Consumers already are taking advantage of the situation. New mortgage applications more than doubled last week, according to the Mortgage Bankers Association’s weekly survey released Wednesday. Refinance volume more than tripled, and made up nearly 70 percent of all applications.

Rates on other types of mortgages also fell, according to Freddie Mac’s survey. For 15-year, fixed-rate mortgages, rates averaged 5.33 percent, down from 5.74 percent last week.

Rates on five-year, adjustable-rate mortgages dipped to 5.77 percent, compared with 5.86 percent last week. Rates on one-year, adjustable-rate mortgages dropped to 5.02 percent, from 5.18 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point last week. The fee on five-year, adjustable-rate mortgages averaged 0.6 point, while the fee on one-year adjustable-rate mortgages averaged 0.5 point.

A year ago, the nationwide average rate on 30-year mortgages stood at 5.96 percent, 15-year mortgage rates averaged 5.65 percent, five-year adjustable-rate mortgages were at 5.75 percent, and one-year adjustable-rate mortgages stood at 5.46 percent.

The rate on Fannie Mae 30-year mortgage-backed securities fell to about 4.25 percent Thursday, said Kevin Giddis, managing director of fixed income at Morgan Keegan. That is down from about 5.5 percent in mid-November.

Fears of a protracted recession are slamming Treasury yield, which is good for borrowers with mortgage rates tied to Treasurys, but bad for people invested in money market funds that have been buying up Treasurys for safety.

Treasury prices fell again on Thursday, sending rates to new record lows, as the Dow Jones industrial average fell more than 200 points. The 10-year Treasury note yielded 2.56 percent, down from 2.67 percent late Wednesday, while the 30-year Treasury bond yielded 3.07 percent, down from 3.17 percent.

Copyright © 2008 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved

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(I’m representing more Real Estate Investors than ever due to the depreciating prices in our market.. Sarasota, & much of Florida, traditionally has made for rough rental investments due to expensive prices & contrasting low rent rates.. With correcting values, investors are re-entering the market & buying homes that earn them 10% a year on their capital investment.. Purchasing a home below market value, & finding a tenant to pay market value for rent is a common package in our current market & something Shirley International Realty Inc. offers to anyone looking to make money off of Real Estate. Read on about the experiences from other Real Estate Professionals & Investors uncovering opportunities Post-”The Bust”..

Bright side of housing bust

OCALA, Fla. – Nov. 26, 2008 – Ron Boatright had more business than he could handle during the housing boom.

His Ocala drywall business employed as many as 60 people in the home construction heyday. Back then, it looked like there would be good times for a long time.

“It was wide open. I was in The Villages for 12 years working and the most we did was 16 (homes) a week. That’s a lot,” Boatright said.

Fast forward three years and Boatright’s thriving drywall business is anything but. That’s because with almost no new homes being built, there’s little need for drywallers and Boatright’s telephone, which once rang off the hook, went silent.

“Now we’re lucky if we do one home a week,” Boatright said. “And I think it’s going to get worse.”

But the 50-year-old Boatright also saw a new housing niche and a way he and his family could cash in on it. He saw hundreds of homes for sale with sticker prices significantly less than what their owners had paid for them just a few years ago.

So Boatright took his savings and looked for homes costing about $50,000 or less. He found one this year, bought it for $50,000 and put his family and in-laws to work restoring it. Three years ago the home cost $110,000.

Boatright put in about $8,000 worth of repairs, tacked on another $2,000 for a Realtor to list the house for $70,000 and sell it. Within two weeks he had a potential buyer. The only problem was the buyers didn’t qualify for a bank loan.

So Boatright decided to hold the mortgage for five years. By doing that, he made some extra money and ensured the sale went through. At 8 percent interest, Boatright is planning to make an extra $10,000 in interest in addition to proceeds from the sale of the house.

Now Boatright said he’s accepting buyers that many banks would probably reject, and he accepts a smaller down payment than most financial institutions. He is in the process of buying his fourth investment house this year.

“If I can find somebody with halfway decent credit and a steady job, I can get them in the (house),” Boatright said.

Even though he’s charging higher interest, Boatright said he’s offering homes that buyers can afford, something most banks didn’t do before with sub-prime mortgages.

Dawn Rickabough, a broker and mortgage consultant in California, said that in today’s tough housing market, offering homes at lower cost and owner financing gives sellers an edge.

“Depending on the area, it can be critical and the difference between making a sale and not,” said Rickabough, who lectures on holding mortgages.

Although there are no statistics readily available about how many homes are sold through owner financing, Rickabough said an informal study she commissioned showed that in 2006, about one in every 400 properties sold had some form of owner financing.

That jumped to one in every 50 this year, and Rickabough predicts the number will only grow during the next few years.

Rickabough said that while the market has been a tough road for sellers these past couple of years, there is a niche and people like Boatright are filling it.

“I think he’s got a good system going there,” she said. “(He’s) getting a decent return on his money and doing better than the stock market. I think it’s a fabulous strategy.”

But buying a home cheap, fixing it and selling it by holding the mortgage isn’t for everybody.

Rickabough said sellers need to understand the risks and whether they can afford to keep the property if the buyers stop making payments.

Sellers need a reliable source of equity to buy properties, and set the buyers’ payments according to the risk. Sellers should also make sure they have all the financial documents in order, such as proof of buyers’ income, tax returns and credit history, in case the seller wants to sell the mortgage one day to another investor.

Michael Malkasian, president of the Web site FSBO.com (For Sale by Owner) said that during the past couple of years he is seeing about double the number of people buying inexpensive homes, repairing them and then selling them through owner financing or renting them in hopes the market will improve later.

“In a market like today, sellers are forced to come up with more creative ways to get their properties sold and owner financing is one of the oldest ways,” he said.

The market in Ocala is tough, but one in which Boatright can flourish, with more than 6,000 properties listed for sale.

And with sales stagnant, Boatright is working in an environment in which investors can buy homes at a fraction of what they sold for just a few years ago.

Single-family home sales in the third quarter of this year were down 10 percent in the Ocala area compared to the same period in 2007, according to a study released Tuesday by the Florida Association of Realtors. The median sales price dropped 16 percent. During the same period from 2006 to 2007, Ocala single-home sales dropped 53 percent and sales prices dropped 6 percent.

Sales in Gainesville weren’t much better. The number of home sales in the Gainesville area dropped 33 percent during the third quarter of 2008, compared to the same period in 2007. Median sales prices dropped 11 percent. During the same period last year, home sales dropped 10 percent from 2006 and 2007 and prices fell 4 percent.

Bert Meadows, president elect of the Marion County Association of Realtors, said there is money to be made in the housing market if investors buy cheap, make modest repairs and offer owner financing. Boatright said he plans to continue buying and selling homes because he doesn’t see the demand for drywall work picking up soon.

Flipping houses and offering mortgages has kept some of his family members and in-laws off the unemployment line.

“And I just see it getting worse,” he said. “So I’m going to keep doing what I’m doing.”

Copyright © 2008 Ocala Star-Banner, Fla., Fred Hiers. All rights reserved. Distributed by McClatchy-Tribune Information Services.

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Foreclosure reprieve gives hope to families

TAMPA, Fla. – Dec. 1, 2008 – Tiffany Edwards thought she was running out of time to persuade her lender to work out a new loan so her growing family could stay in their Tampa home.

She had been out of work for more than a year, and her husband’s income wasn’t enough to cover all the family’s bills. She found a job a few weeks ago, but her lender was already set to foreclose on the house – likely before Christmas.

With a 3-year old daughter and a baby on the way, Edwards panicked. Then came last week’s announcement that Fannie Mae and Freddie Mac – the nation’s two largest providers of mortgages – will postpone foreclosures until early January. In the meantime, they will try to work out loan modifications so more homeowners can keep their homes.

“What a stress relief,” Edwards said. “Now I have hope we’re going to be able to work something out.”

The Edwardses are one of about 16,000 families nationwide who are eligible for the help. The foreclosure suspension is exactly the kind of action some economists and industry leaders say is needed as the foreclosure crisis weighs down the entire economy. Florida Gov. Charlie Crist is contemplating a way to get lenders to agree to a moratorium on foreclosures until after the holidays.

There were cheers when Fannie and Freddie agreed to hold off on some foreclosures. But now that the dust is settling, many wonder how significant the action will really be.

That’s because after Jan. 9, the people helped by the reprieve could still lose their homes. Even if all those people work out new loans, they still represent a small percentage of the more than 2 million homes that are expected to be lost in foreclosure before late 2009.

“This is great, it really is,” said Debbi Colon, a Catholic Charities foreclosure counselor who has worked with the Edwards family. “But it’s just a first step.”

After the announcement last week, her phone rang all day and night from clients wondering if they qualified for the reprieve, Colon said. Most don’t, she said, because their loans are held by private companies.

That’s the downside of the plan, Colon said. Only homeowners with loans owned by Fannie Mae and Freddie Mac are eligible. Together, the two companies own only about 20 percent of the nation’s delinquent loans.

Of the loans that Fannie and Freddie own, not all of them are eligible for the reprieve. Homeowners must be still living in the home and must be at least three months behind on their payments.

For those who are lucky enough to get a second chance at a loan modification, Fannie and Freddie’s new program could be a big help. It calls for mortgage payments – including taxes and insurance – to total no more than 38 percent of homeowners’ pretax monthly income.

Officials for the Center for Responsible Lending said they are encouraged by Fannie and Freddie’s holiday reprieve, but know it’s not a solution.

“This is a solid step in the right direction,” said Ginna Green, spokeswoman for the center. “But we must also aim for solutions – like streamlined modifications – that keep families in their homes for the long term as well as the short term.”

Even so, Edwards and her family say they are thankful for the extra time in their home. No matter how long that ends up being.

Copyright © 2008 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.

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