Will mortgage act relieve local homeowner woes?

By Greg Eichelberger
The Alpine Sun

     SAN DIEGO — While the ink has hardly dried on the Mortgage Relief Act of 2007, proposed by Pres. George W. Bush and ratified by a skittish congress, the controversy has not subsided, and millions of anxious homeowners are on pins and needles about their future, as well.
     The U.S. Senate voted 93-1 on Friday, Dec. 14, to approve the measure, which would make it easier for homeowners facing potentially higher mortgage payments to receive help from the government.
     According to Fidelity National Title Co. The market conditions for East County San Diego are slightly worse statistically than San Diego County as a whole.
     There are currently 1,784 homes and 784 condos on the market in East County San Diego. Sales of existing homes and condos are down 20 percent from last year, which is the same as last month. This is a difference of 262 homes not selling compared to the 2006 numbers at this time last year.
     The bill was in response to this continuing downturn of the housing market and a rising rate of foreclosures, as well as a recent speech by Pres. Bush promising relief.
     The legislation will cut in half the down payment on loans obtained from the Federal Housing Administration (FHA) to 1.5 percent. The bill also raises the minimum loan size to $417,000.
     The Fidelity Web site states, “The real estate market is in constant change and is now making some major corrections throughout East County. We are now most definitely in a buyers market.
     “East County buyers have a large amount of inventory of homes to sort through and there are many bargains to be found. Sellers are asked in this market to price their homes aggressively at market value and expect longer market times and longer escrows.”
     “Let’s face it,” said Alpine’s Jeff Campbell, the 2007 California Assoc. of Realtors director and East County Realtor of the Year. “The market in East County, and all over San Diego, is very soft right now. The president was compelled to do something.
     “What he is doing, though, unfortunately, is not going to affect the right people,” Campbell added. “This bill seems to be more aimed at those people who got into the market a few years ago, or who had bad credit and had to use ‘whack-o’ loans to get approved.”
     Campbell explained that things were going along fine for a few years and then — “boom” — those higher interests rates hit.
     Thanks to what he termed “six years of artificial appreciation,” buyers were lured into a false sense of security, believing they would reap thousands of dollars in equity in a small amount of time.
     “Some of them had made foolish choices, had bad credit and simply overextended themselves,” he said. “Others were victims of job termination or outside situations. This measure will not help in those cases.”
     San Diego State University professor of real estate and finance, Xudong An, however, sees it differently.
     “This is definitely a good thing,” he said. “It’s good personally because millions of people will now get the relief they need. It’s important economically because the rise in foreclosures is a huge drag on the overall economy; the fewer foreclosures, the better America’s financial situation will be.
     “And, it good socially, because it will help low-income borrowers,” he continued. “I believe this is the right move at the right time.”
     An also claims that the legislation distinguishes true homeowners from speculators — or those who purchase a house simply to reap equity and then sell for a profit.
     “All of this is cyclical,” An explained. “Housing prices rise and fall. I expect this downturn to last for about 18 more months.”
     That’s another point the two local men disagree on. Campbell, who has lived in Alpine for two-plus decades, expects the market to remain soft at least twice as long.
     “A few years ago, realtors almost didn’t even have to try,” he said. “It was like putting a net in the water and coming up with a huge fish every time. Now, we’re lucky to get a few sardines — and we have to keep changing lures, as well.
     “I don’t expect things to change for about three years,” he added. “The upsurge lasted so long, this downward trend will go on for awhile, too.”
     It isn’t all bad news from Campbell, however. “A ray of sunshine is that people do have a choice,” he said. “They can enter into an early dialogue with the lender and see if the loan can be recast.”
     He also suggests that some strapped buyers look into the possibility of bringing in a co-equity partner to help with the mortgage payments. There are solutions.”
     Despite the disagreements, both An and Campbell do see eye-to-eye on one thing — the need for borrowers to be fully educated about what they are doing.
     “If I could advise the president of anything, I’d tell him to attach a piggyback to this bill mandating that everyone taking advantage of it would have to take three college courses in consumer economics,” Campbell said.
     “I think that would be a very good idea,” An concurred. “I think that education is the most important component here. People need help today, but they must also take responsibility for their actions.”

 E-mail the Editor