Effort to Making Homes More Affordable Isn't Getting a Lot of Traction
WILLIS: Still with us this half hour, and they're not going anywhere, Ryan Mack, Dani Babb, Lynnette Kahlfani-Cox and Donna Rosato. Just last month, the third consecutive monthly decline in foreclosure filings, is st a possible indication the foreclosure tide is turning? Well, back in February I spoke to the head of the Department of Housing and Urban Development, Sean Donovan. Here's what he had to say.</s>SEAN DONAVAN, DEPT. OF HOUSING & URBAN DEV.: The key effort at limiting foreclosures will be using a significant amount, tens of billions of dollars, of TARP money to be able to accelerate dramatically modifications of mortgages, and what we are working on is a plan to create a set of incentives, assistance to do that, while at the same time making sure that we have the tools that will ensure that lenders do it through a range of options.</s>WILLIS: All right, that was Sean Donovan and Dani Babb, you know, making home affordable, not getting a lot of traction here.</s>BABB: No.</s>WILLIS: What do you she? The marketplace? Because you're at the ground level.</s>BABB: Yeah, what I'm seeing is banks completely unwilling to make a modification for a homeowner unless they're going to get government money to do it. Which means that about 30 percent of the homeowners out there that need it will actually get it. Right now two-thirds of the U.S. population owns a home right now. One-quarter of the U.S. homes actually have negative equity. These people will be in foreclosure at some point. We haven't begun to see the jumbo market fail, which will happen on 2011.</s>WILLIS: It's going to get worse? Is that what you're saying, Dani?</s>BABB: I'm saying the housing market will get worse. But we have to remember, too, that four states make up 50 percent of the foreclosure rate, so it's not widespread. It is very specific to certain areas.</s>WILLIS: Ryan, I want to turn to you, now. I know you think that what's going on with the government and the spending going on there is really kind of propping up the numbers and making it look better than it otherwise would.</s>MACK: Well, stimulus has definitely helped, but especially when it comes to the home tax credit we have to urge individuals don't buy a home just because you get a tax credit. We have to get back to the basics. Do you have your FICO score higher, do you have, not only a regular budget, but a house budget to figure out how much can you really afford. Now, tax credit should be like the cherry on top of the banana split, it shouldn't be the banana split itself. It's like that additional incentive that you have that says, oh, you know what, I can afford to buy a home and guess what, now I get an additional $8,000 to help subsidize payments. So, just don't go out and purchase that...</s>WILLIS: Donna, what do you make of that? I mean, you talk about how the numbers are misleading and the shadow inventories out there. Do we have a long road to go in this market?</s>ROSATO: We still do. And I have to say, we'll probably have more foreclosures -- 2.4 million foreclosures are projengted in 2010 versus two million this year. So, it's going to get worse before it gets better. Home prices are still going to decline, but as Dani said, it is somewhat geographic. I mean, the good news is we're seeing some stabilization in the housing market, and if you are a home buyer, this is the good news, you know, with the tax credit. As Ryan said, you want to have all your ducks in a row before you use that, but if you are a home buyer in the market, that is what's stimulating some of the economies helping stabilize some of these things.</s>WILLIS: But, you know, the interesting point is it's not just the people who want to buy, it's also the people who already own who are in deep trouble.</s>ROSATO: Correct.</s>WILLIS: Lynnette, what would you tell them?</s>KHALFANI-COX: Well obviously, like Ryan said, you don't bite off more than you can schu. The $8,000 tax credit for first time home buyers is one incentive. I think it's moving the needle in terms of stimulating purchases more for the first-time home buyer, as opposed to the trade up or move up buyer, they're eligible through April of 2010 for a $6,500 tax credit. But frankly, nobody I know who's going to buy a second home is just going to do so just for $6,500.</s>WILLIS: But my question is, what are people who are in homes right now and they've seen the value of their home fall? What would be your words of wisdom for them? Because they're tally people who are thinking, what am I going to do here? Should I hold onto this house, should I try to unload it? You know, I'm losing value every day.</s>KHALFANI-COX: I understand. I would say, consider you situation and look at it in two different terms. One is don't be swayed by the masses to say, oh, everybody else is walking away from their mortgage. You know, what's the big deal? Everybody will have a foreclosure, a late payment, a delinquency on their record. Oh, it will be easier in the long run because so many other people did it that way. No, it's not going to be, because the credit scoring system is still going to be severely, you know, punitive and penalizing you for doing that just to sort of haphazardly walk away.</s>WILLIS: So, don't do that.</s>KHALFANI-COX: No, I really don't encourage people to do that. Seek every possible alternative, whether it's budgeting, credit counseling, perhaps a debt management program to see if you can hang on to what could potentially could be the biggest asset of your life. If you truly cannot afford a house, try to do a short sale, try to work out a plan where, you know, the minimal damage is done to your credit rating and your overall financial well-being.</s>MACK: Again, getting back to basics, this is your home. This is the place where you hang your hat. Too many people have started to think of their home as an investment. If your home starts to lose in value and you're going to be there for the next 30 years, hopefully you can take that home and pass it to your children's children and keep it in the family, so what if it loses value? Hopefully you did it the right way and you did it in the responsible way.</s>WILLIS: All right, we got to go. I mean, we need an after-show now, right, just like Oprah. All right, we'll be back in a minute with more conversation. Last but certainly not lease, your health care. Open enrollment season has wrapped up at companies across the country. Big changes are in store for you and your family and we'll break all right down, right after this.