The MacPlan - Real Mortgage Reform (In Process)

1) We need loan products that are made available to people that are currently making their payments on time but are upside down by more than the 105% that the Obama plan has in store…the people that are upside further than that need access to the lower rates for several reason including giving them some incentive to stay in the property.
2) We need to make the $697,500 loan limit permanent and so that borrower’s, banks, the bond traders and the GSE’s can all plan long term. We suggest making these limits consistent nationwide so that it the higher loan amounts can be easier to administer….rather than having different loan limits in 250 different metropolitan areas.
3) The higher loan limits have to be implemented in a way borrowers can actually utilize them. The program, underwriting guidelines and rates should be the same for $697500 as they are for $417,000 and below
4) I suggest even higher loan limits for Super Jumbo loans that would bring liquidity back to the high end market thus hopefully prevent some preventable foreclosures. This could be a tiered system with the $697500 being the 1st tier, followed by Tier 2 $697,500-1,000,000, followed by Tier 3 which would be 1-2 Million Dollars. Each tier would have tougher guidelines and higher rates…but at least those borrower would have something to better their positions long term. They are, for the most part, stuck with what they have right now.
5) Loan Modifications are a good idea but only if they provide long term solutions. Currently most loan modifications are written from 1-5 years. I believe that the best loan modifications would be for 30, 40 or 50 year terms while taking advantage of today’s low long term treasury prices. Without long term loan modifications we will be re-visiting our current problems….we will be just postponing the inevitable….and the pain will be a lot worse later than it is now.
6) Most stated income or low documentation programs have been banned which is killing the small businessman and self-employed borrowers across the board. We need to bring back low documentation programs for self-employed borrowers that are based on good credit, good assets, and a good Loan to Value of 80%. This will allow more self-employed people to go out and buy new homes, and will also allow self-employed people that currently own a property an opportunity to better their financial position by taking advantage of the low interest rates by refinancing. Currently self-employed people are stuck because the stated and low income documentation loans they used to purchase their properties are no longer available. So there is no way for them to better their position…or buy new a new property….which in turn takes the self-employed out of any buyer pool which makes it harder to sell a property.
7) We should recognize the difference between a real estate investor and speculator and make programs available for the real estate investors to have them also be able to take advantage of the lower rates. Most speculators basically got into the market in the recent past with no real knowledge of the art of real estate investing and they tried to flip properties and got stuck. Many real estate investors are just mom and pop, husband and wife and have 1 or 2 properties…and probably have owned the properties for years….however they are being made into villains in this whole mess. They should be afforded the same access to low rates or loan modifications that are currently only being worked on only for owner-occupied properties.
8) The FHFA, HUD, Treasury, The Fed and Congress all have to work better together. It doesn’t make sense for the Treasury to be using TARP money to buy Mortgage Backed Securities with the goal of lowering interest rates while at the same time FHFA (the GSE’s of FNMA and Freddie Mac) are increasing their loan fees which effectively offset the lower rates that the Treasury is trying to accomplish.

One last point, the mortgage insurance companies either need to be re-capitalized so that FNMA and Freddie Mac loans can be made for over 80% LTV in San Diego….and if they can’t get capitalized I suggest that the FHFA develop its own insurance that could be passed onto the borrowers much like the FHA insurance model or even how VA Loans have been insured in the past. FNMA and Freddie Mac can utilize this insurance for loans higher than 80% LTV in the absence of the other more traditional mortgage insurance companies. This would help to stabilize the market and give more options to the customers other than just the FHA Product which would have different qualifications than the FHFA products.