Florida Home Buyers and Investors Blog

The recent news about Bank of America's plan to reduce borrowers principal on mortgages by as much as 30% sound s like a bailout of homeowners, but the vast majority of people will not qualify, and out of Millions of homeowners barely 45,000 will see some benefit.

AP reported this will have a negative impact on Bank of America's earnings, yet the stock price increased .44 2.6% $17.77 share.  How is that good news? I'll never figure out Wall Street.

Only the most delinquent homeowners, who only have 1 mortgage and did not cash out refinance, and are in negative-am, Interest Only, or Pick a Pay loans will qualify, along with some other considerations.

The fear is more homeowners who may not qualify, will allow their loans to slide deeper into the foreclosure process in order to qualify for the new program, as we have seen with other mortgage modification programs, after the homeowners pay 3 or 4 TRIAL payments, and the lender says "by the way, your don't qualify after we reviewed your financials".  This basically tells the homeowner thanks, but we are taking your house anyway.

Many homeowners are just over leveraged, and no matter what lifeline you throw, they just can't afford the house.  For them, there are options on making the transition less stressful and more like a business transaction.

Unfortunately, I see all sides of these matters.  Homeowners who are playing the system, homeowners who have a true financial hardship and will likely recover over a short period of time, and others, who unfortunately, will never recover, and are in financial ruin.  I'm not placing blame on anyone in particular, just presenting the facts.

There are a lot of people not paying their mortgage, credit cards, and other financial responsibilities, yet refuse to change their lifestyle.  At some point, they will have to face reality.

As banks continue to seek ways of mitigating their losses, the moral hazard is going to make more upstanding homeowners, seek handouts.  We have to be very careful, because, if more and more homeowners decide to play the system, the financial repercussions will be disastrous.

Your comments are appreciated.