Making homes affordable fails another young couple
H and L nearly lost their condo this summer, when H lost his job.
They bought in the summer of 2008. They had just returned from living abroad and were living in a sublet. Not a living soul wanted to rent to a young family with a newborn and a pre-schooler. The place they sublet didn’t have a functioning toilet. Life was pretty tense…
They had saved a 20 percent down payment based on H’s professional job. They were able to spend far less than the 31 percent their lender would allow, so they would be able to continue saving while paying the mortgage. It seemed like the right time to get out of the rental market with their children.
Now it seems that another job like H just lost is not going to come around again in the current economy. He needs to get some more education so he could sell his skills in a lower-paid, but saner, part of his field. That will require a year or two of much lower-paid work while going back to school.
How are they going to get through the next two years without selling their condo? I will tell you next week. Today, I want to talk about how they didn’t do it:
1. They didn't get their loan modified or refinanced by the Making Homes Affordable programs.
They applied, but were quite displeased by the whole process. Their application sat on the Chase website with no action. Then they spoke to a counselor, who helped them fine-tune their application and got it submitted. Since H was no longer in a full-time job, they didn’t fit in the narrow range between “not in trouble” and “too risky.” They were rejected.
“It is not in the lender's interests to help us out,” is how H explains it. “We weren’t in foreclosure; we weren’t even late on our payments.” The way H and L see it, it’s all about the math. The government incentives are just not enough money to entice the lenders into restructuring the loan. The program does not help responsible homeowners over the hump in a bad economy.
On August 4, Bloomberg.com published figures that support H and L's opinion.
Bank of America modified 4 percent of their eligible loans for modification; Wells Fargo had a 6 percent rate, trailing JPMorgan and Chase & Co.’s 20 percent and Citigroup, Inc.’s 15 percent. Wachovia Corp., which Wells Fargo acquired, had a rate of 2 percent.
2. They didn’t get a loan or grant from the “Bank of Mom and Dad.”
So, how did H and L avoid selling their condo while H retools for a better job in his field? Do you have any ideas?
Do you agree that H and L have a right to be frustrated with the structure of the Home Loan Modification programs? Have you been frustrated by them, too?
