Gary Haber of the Baltimore Business Journal wrote a great article about a new federal program, which could effect Baltimore real estate owners.
A new federal program to make it easier for “underwater” homeowners to refinance their mortgages will help cash-strapped homeowners in the Baltimore area, local real estate agents said Tuesday.
“I think it would be tremendous,” said Denie Dulin, a broker with Yerman Witman Gaines & Conklin Realty in Baltimore. “There are homeowners who need this refinancing.”
The Federal Housing Agency said Monday it will allow homeowners to refinance Fannie Mae and Freddie Mac mortgages regardless of how much their loans exceed the value of their home. That would mark an expansion of the existing program which limits refinancings to homeowners whose homes are worth at least 75 percent of the amount of the mortgage. A homeowner is underwater when their home is worth less than the amount they owe on the mortgage.
Nearly 20 percent of Greater Baltimore homes were underwater in the second quarter of 2011.
Dulin said that some of her clients have found banks reluctant to refinance existing mortgages or agreeing to short sales. A short sale is when a homeowner sells his home for less than the amount owed on the mortgage. It requires the approval of the bank holding the mortgage because the bank writes off the difference between the sale price and the amount owed on the mortgage.
“I think it would be absolutely beneficial to keep people in their homes,” said Amanda Lopez, a real estate broker with Style House Realty in Greenspring Valley.
But, while the program is a good start, it doesn’t go far enough, said Nick Gioia, an associate broker with ReMax Sails in Canton. Gioia would like to see banks slash the underlying amount of the outstanding mortgage, as well as the interest rate.
Cutting the interest rate would help people who want to stay in their current home, Gioia said. But it does little for people who want to move, whether to relocate for a new job or other reasons. Those people find it very difficult to sell their homes if they can’t pay off their outstanding mortgage, he said.
“They’re still going to have the same debt, but with a lower interest payment,” he said.
Reducing the loan principal to reflect the drop in a home’s value would make it easier for people to sell when they have to because banks have been reluctant to agree to short sales, Gioia said.
If people are able to refinance that could help stabilize the real estate market because it would mean fewer short sales and foreclosures, which drive down real estate prices, Lopez said.
