Woodland Hills, CA (PRWEB) December 13, 2007
The administration initiated a new strategy to freeze introductory prices on subprime mortgages preventing them from resetting to higher rates for 5 years. Nevertheless, there are some who think that this plan focuses energy in the incorrect path.

Eli Tene, the President of I Quick Sale, Inc., a top nationwide loss mitigation service provider, believes that the freeze is just one more sign that the administration does not have the required tools to deal with a crisis. “If the purpose is to support distressed homeowners, the mortgage rate freeze is missing the target,” says Tene.

Tene highlights 4 significant pitfalls in the program that need to be regarded:

1. The plan is restricted to loans made at the start off of 2005 by means of July 30 of 2007, and will cover loans that had been scheduled to reset to larger prices between January 1, 2008 and July 31, 2010.

2. The strategy targets only property owners that are current in their mortgage payments. In other words, it ignores the increasing number of homeowners who have currently missed 1 or much more payments. These homeowners continue to face foreclosure with no way out.

three. Freezing prices does not necessarily mean the prices will be low sufficient to let the homeowner to remain existing. Some mortgages have already adjusted and a lot of of those who need to spend them can not afford to do so.

four. The sheer notion that the housing marketplace rates will improve, hence enabling home owners to refinance their present adjustable price mortgages does not hold water. On the contrary, the mortgage freeze will just help the lackluster overall performance of the true estate market place and will now lock both the property owner and the lender for a longer period of time.

Tene is not alone in his criticism of the plan. Hillary Rodham Clinton and John Edwards, complained that offered the risks to the economy, Bush’s proposal is too limited. The two Democratic presidential contenders place forward plans to freeze mortgage payments as effectively as lessen further foreclosures. Tene agrees with their proposed initiative stating, “there need to be pressure on lenders to negotiate with homeowners.”

Tene also suggested that lenders should be directed to the solution that can maintain the industry in motion. “It is extremely crucial to minimize losses for the lender, giving them the likelihood to maximize their recovery,” says Tene. “At the identical time, we need to remember that the concentrate should stay on the property owners. We must provide serious options to set property owners free of charge from loans they cannot afford.”

“The government was usually proud of profitable applications encouraging homeownership. Now home owners that are in default, or those that cannot qualify, under the new aggressive legislation are left out. The call for full documents will basically leave these borrowers “flushed down with the water”. This plan deceives the folks and provides the impression that the government is in fact performing some thing. Quite swiftly we will all recognize that it is basically just a band-aid.”

Tene suggests a couple of options for win-win solutions for each the property owner and the lender but, “when it comes to the bottom line, the only accurate solution that solves the root cause of the problem is a brief sale.” According to Tene, far more and more lenders understand the benefit of short sales and he believes that this is the most viable selection. In brief sale, the homeowner sells the property at the fair market value, even even though it is much less than their existing debt owed on the home. The lender maximizes its recovery and achieves liquidity. The house owner erases the debt and minimizes damage to their credit score. A lot more importantly, the homeowner gets a second chance to get involved in the genuine estate market place, but in the correct capacity.

For property owners that can qualify to stay in their home, Tene suggests lighter tests to decide their economic qualifications going forward. He states that the modification function out must be created simpler and include change of price, modify of balance, and alter the maturity by adding ten years.

Tene concludes, “It is clear to everybody that something need to be carried out. It is crucial nonetheless to concentrate on realistic solutions that will minimize the damage this crisis will inflict on absolutely everyone.”

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