Sunday, March 15, 2009
BY MARY AMOROSO
NorthJersey.com
SPECIAL TO THE RECORD

Pulling housing out of its slump

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The $75 million-plus federal mortgage modification program aims to bring down payments on struggling homeowners' primary mortgages to no more than 31 percent of their income.

But while there are financial incentives for both lenders and homeowners to develop more affordable payments and keep on making those payments, this program is voluntary (except for those lenders accepting government capital). And for Salowe-Kaye of New Jersey Citizen Action, therein lies the rub.

"The parts that concern me are that the loan modifications are temporary – they expire in five years – and that the program is voluntary," said Salowe-Kaye. "We think that mandatory loan modifications may have to be the way."

One woman who's been fighting foreclosure on her Bergen County home and who asked not to be named said she is confused by the new federal housing programs.

She said she has been working with a HUD-certified housing counselor and has succeeded in getting her mortgage rate dropped from nearly 10 percent to 7 percent, but it's still not affordable.

"If I can get the rate down to 4 or 5 percent, that would cut $700 to $800 from my monthly payment, and I can afford to stay in my house," she said.

Bank of America, the nation's largest mortgage servicer, said it has made a three-year commitment to offer loan modifications to as many as 630,000 customers who represent more than $100 billion in mortgage financing. It's moved staff from other divisions to handle the anticipated call volume and said it has more than 5,900 associates working on home retention efforts for Bank of America and Countrywide. Like many lenders, it is extending its foreclosure sale moratorium for borrowers who may qualify for the program.

The federal loan modification and refinancing programs are expected to help keep a mass of people in their homes and potentially protect neighborhoods from the blight of vacant and vandalized homes. But what about jump-starting the housing market?

A number of people interviewed expressed dismay that the home buyer tax credit — originally crafted as a $15,000 credit for anyone buying a home – was reduced in the stimulus package passed by Congress to a maximum $8,000 credit for first-time home buyers only. (Single home buyers whose income exceeds $95,000 and married taxpayers whose income is over $170,000 don't qualify for any credit.)

"It will help the start-out market, people getting married and starting families," said James Lawrence, a certified public accountant and partner in Traphagen Financial Group in Oradell, which has seen a number of clients apply for the credit. "It's probably not going to help somebody buying a $500,000 house."

Mike Loux and his fiancée, Caitlin McCarthy, closed on a two-family home in Bergenfield on Jan. 23. Their tax preparer has already taken the $7,500 first-time home buyer tax credit that was put into place in 2008. That credit was actually an interest-free loan that had to be repaid to the government over 15 years.

When the new stimulus package was signed into law last month, their tax preparer had them amend their return to take advantage of the new first-time home buyer credit.

"This one is a little more money and it doesn't have to be returned," said Loux. "It will definitely help pay for our wedding. Maybe it will help home buyers on the fence dive into the pool."

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