Homeowner’s Bill of Rights

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Arizona Republic real estate reporter Catherine Reagor discusses President Obama’s plans to stabilize the housing market.

Ted Simons: Good evening and welcome to "Arizona Horizon." I'm Ted Simons. The latest gallup poll shows President Obama's approval rating in Arizona is down from 2009. The poll shows 40% of Arizonans approve of President Obama's performance, that's down from 55% three years ago. Congressman Ben Quayle announced he will run in congressional district six that. Sets up a showdown between Quayle and another incumbent Republican, David Schweikert. Quayle says most of his current constituents live in the proposed new district. And the Maricopa County sheriff's office met today with lawyers from the US justice department. It's The first time the two agencies have met since the department of justice filed racial profiling allegations against the sheriff's office. President Obama recently announced his latest plan to help homeowners who are under water in their mortgages. It's called homeowners bill of rights. Here to give us some insight on what the program's designed to do is Catherine Reagor, who reports on real estate and growth for "The Arizona Republic." Good to see you again. Thanks for joining us. Homeowners bill of rights. What are we talking about?

Catherine Reagor: It's going to be probably multiple pieces of legislation, but what they're trying to do is help homeowners who are under water refinance. It started with the Fannie Mae and Freddie Mac homeowners, that's already going through. Because the government owned and think can do it. This is to help the homeowners with privately owned mortgages. That are owned by investors or the banks, because the government has to have something to push them to do it.

Ted Simons: Interesting. So it's basically what happened with Fannie and Freddie now moved over to the private sector.

Catherine Reagor: Yes. And maybe with more bells and whistles. Maybe with help in cutting principle, getting people into 20-year loans so they're building back their equity faster and some moves to expedite appraisals across the board, not just for Fannie and Freddie, cut refinancing costs.

Ted Simons: This is for folks under water. Can you be as underwater as the Pacific Ocean? What are the limits?

Catherine Reagor: I think as deep as it goes. I asked when HUD secretary Donovan was in town I asked him, he said, yes, you can be 200% underwater, which we have some people in Arizona on the fringes. We probably know them who are 200%. Those homeowners with Fannie and Freddie cannot apply until march. Because they have to get the program up to speed. But I would say call your lender, call your mortgage broker, you can find out if you're Fannie or Freddie on them, and get going on it.

Ted Simons: So you can refinance to a lower rate. Correct?

>> Yes.

Ted Simons: You mentioned principle. I know this was a sticking point, this was a problem with Fannie and Freddie, I'm sure it will be with private lenders as well. What's going on with principle?

Catherine Reagor: There's different talk about different deals to make that work. If you put -- bring the loan down to 20 years you may be making the same payment but you're paying off principle. There's talk about cutting the principle as part of this. HAMP, the Home affordable modification program, which we all know unfortunately. did not do well.

Ted Simons: Dud.

Catherine Reagor: Yes. President Obama said himself, these programs have not done as well. Many will say they failed. HAMP is being expanded, so more people under water can get more help, because in the past Fannie Mae and Freddie Mac would not cut principle on those loan modifications. And they're government owned. We own them.

Ted Simons: Yes. So what's the difference now? What gets them to do it now?

Catherine Reagor: They're telling the regulator, you need to cut principle. You need to do this. And we'll see if this legislation includes something. Fannie Mae and Freddie Mac, because they're quasi governmental and they have bond holders and shareholders, it's kind of a mess. So you have to change some laws and change their structures so they can do more of this, and the federal government can push them to do more.

Ted Simons: So let's do a scenario where you buy a house for $300,000, right now it's worth $150,000. And the mortgage is $200,000. So it doesn't -- there is something afoot to get that principle down closer to 150?

Catherine Reagor: Different cases. Home loan modifications, yes, with Fannie and Freddie. Making it cutting the term of the loan and in some cases possibly cutting the principle as part of a refinancing. If you are not late on your payment. There are several scenariosout there. I think it's going to be -- this is a political hot button. We know this. That's going to be the issue. What we end up with is going to be a compromise hopefully. And at the very least homeowners under water and there are 50% of homeowners in Arizona are, will be able to refinance from 6.5% to 3.5%.

Ted Simons: This has to affect a lot of folks in the Phoenix area. 60%?

Catherine Reagor: 50% in Arizona N. metro Phoenix we could be 60%. This is where the crash was. This is also true to reward the homeowners who didn't walk away. You understand when people got so frustrated,when they wouldn't work with them, when they wouldn't do the short sale, I understand all of those thigns. But there's some people who love their house so much, they just want to be there. And if you say, making your payment and staying there and holding on, we're going to cut your monthly payment by three to $500, you know, that's more incentive.

Ted Simons: And just to be focused on that, you can't miss more than one payment in the last six months.

Catherine Reagor: Yes.

Ted Simons: OK. As far as investors are concerned, correct me if I'm wrong, but doesn't the new plan expand what investors can go ahead and own? And I mean expand by a whole lot?

Catherine Reagor: Well, yeah. In the past, part of this legislation is Fannie and Freddie have sold their homes like on the Maricopa County courthouse steps. One by one. Now they're pushing to do it in bulk. Because this are places not in Phoenix, but in Detroit, where there are 500 foreclosure homes owned by the government in a mile. Two miles. And here now they're going to be able to sell much faster, but they could sell cheaper.

Ted Simons: So home prices could be affected big-time.

Catherine Reagor: Yes. But we don't have a lot of distressed homes on the market and our foreclosures have dropped to one-third of what they were a year ago. Yes, Foreclosures are down, and preforeclosures. So it's a sign. And we have very few homes for sale. We're a different market, and we could be recovering quicker.

Ted Simons: Interesting. In one more aspect of this, standardizing the loan application and borrowing process, how does that work?

Catherine Reagor: The federal government has put out a loan application that everyone is supposed to use. It standardizes fees, it says you can shop for this but you can't shop for this, you have to get an appraisal of this, and it's to cut down on mortgage fraud which was a huge problem in Arizona. And it never has been nationally standardized. Every state has a different system, a different -- go look when you go to get your paper work -- paperwork, it's this thick even to refinance. This would spell it out, and you don't have a four pages later that this is what your payment is, it would make it clearer, easier, and less open for fraud.

Ted Simons: And you mentioned earlier there are politics behind all this. This at least politics afoot in the surrounding area. We should mention Republicans are not too keen on this, because of the cost and the simple -- the nature of it instead of allowing the market to do what it wants to do, you're manipulating the market here.

Catherine Reagor: And also banks would be charged, and they're a huge lobbying group and they would pay a fee, which we don't know, but probably pretty hefty. To pay for the private refinancings. Obama's speech came right after Romney's speech in Las Vegas, where he said he was more concerned with the middle class. Well, homeownership is still very important to the middle class. And for -- to go after voters, that's --

Ted Simons: That will be interesting to see. Before you go, the mortgage debt relief plan, I believe ends at the end of this year. Correct?

Catherine Reagor: Yes.

Ted Simons: What is it and why should people be aware of this?

Catherine Reagor: It's where you could write off your losses due to foreclosures, etc. There is talk on both sides of the fence because it's a political rally, whether it will be extended or not. They extended the loan -- home loan modification for another year, so it would make sense to extend that as well.

Ted Simons: So we shall see.

Catherine Reagor: Yes. We shall see as they fight it out.

Ted Simons: Good stuff. Great information. Good to have you here. Thanks for joining us.

Catherine: Reagor: Thanks.

Catherine Reagor:Arizona Republic real estate reporter;

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