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Q&A: President's plan unlikely to fix housing crisis

By Gary M. Singer, Sun Sentinel, Source: MCT News Service

QUESTION: I heard in the State of the Union address that President Barack Obama has a new plan to fix the mortgage situation and help struggling Americans. I'm also having some problems with my mortgage, and my property is underwater. Is this plan going to finally save me?

ANSWER: I've been asked a lot in the past few days whether the president's plan to fix the housing crisis will actually work. His proposal is the third bite at this particular apple. Similar plans were adopted by then-President George W. Bush and, later, Obama. Both of those previous plans had little effect.

In this latest initiative, the homeowner must be current on his or her payments and can only refinance the mortgage as long as the loan is no more than 40 percent underwater. Later, if there is a foreclosure on the new loan, the federal government will pay back the lender some, if not all, of its losses. The president's idea is that when the government refinances loans at a lower interest rate, homeowners will take the savings and buy other items, thereby helping the economy. Other tenets of the program include a homeowner's bill of rights and the bulk sale of foreclosed homes to investors.

Pundits are saying that this program is unlikely to be approved due to political infighting. That may not be such a bad thing because I see little different in this program for the average homeowner. I don't think this program would do enough to improve a homeowner's situation. The people who need the most help are those who can no longer keep up with their mortgage payments, but they wouldn't qualify for aid. While everyone paying their mortgages would benefit from lower rates and save $100 to $200 a month, it's not enough of a savings to make a difference for someone who is $60,000 underwater on a $150,000 home.

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ABOUT THE WRITER:

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

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