MSU Law Faculty in the News
In Need of Help
February 21, 2009
Cadillac News
By Rick Charmoli
CADILLAC - In the end, it may not be the answer for the mortgage crisis - but at least it is a start.
Those sentiments are from Elliot Spoon, professor of law in residence in Michigan State University's College of Law. In Spoon's opinion, only time will tell if President Barack Obama's plan to aid in the mortgage crisis, announced Wednesday, was the right decision or not.
"I think it is too early to tell. I think it requires actions, but there are so many parts to the whole crisis that it is difficult to know if fixing one part will fix the others," he said. "We need to stop the continuing decline of real estate prices. One way to do that is to stop the foreclosed homes that are flooding the market. (The plan) is expensive, but it will be very expensive if it doesn't work."
Recently, the Democrats who control the Michigan House have said they will again try to pass legislation placing a 90-day moratorium on foreclosures for homeowners trying to work with lenders. A similar idea was proposed last year but failed, and Republicans who control the state Senate are skeptical about the new legislation.
Spoon said while all the details about Obama's plan will not be released until March 4, what is known is that there are essentially two parts.
The first part has to do with the refinancing of mortgage loans, while the second part deals with loan modification.
"With respect to the new refinancing, it will only be refinancing the ones that are guaranteed by Fannie Mae and Freddie Mac," he said. "That is a start, but we know there are lots of loans that are in need of refinancing that are not owned by Fannie and Freddie. Moreover, we don't know the underwriting criteria."
Spoon said the concern with that first part of the plan is not if it is covering enough people but rather if it is covering the right population of people.
As for the loan modifications, which includes giving lenders incentive payments, Spoon said since many details are not known right now, it is hard to know what the total impact will be.
Genisys Mortgage Group President Bruce Meek said he is happy that the Obama administration is taking action but is taking the wait-and-see approach when it comes to whether the mortgage crisis plan is a good or a bad thing.
"I think it is important to know all the details. It (the mortgage crisis plan) is like everything else rolling out of Washington, (D.C.) right now. There are broad stroke plans but very little detail," Meek said. "Some of the stuff makes sense in terms of modifying existing loans and trying to get payments down to 31 percent of person's income. What doesn't make sense is how are the people in need going to be identified."
As a mortgage professional, Meek said the action taken by the federal government during the past week has been a good thing, but he also knows only time will tell if it was enough to aid the ailing housing market.
"I do think it is good to see a sense of urgency about this. Fixing the housing problem is key to fixing the economy," he said. "We have two initiatives that are targeting the housing crisis. Earlier in the week, we had the first-time-buyer tax initiative and now the mortgage crisis bailout plan."
Once the details are released on March 4, Jilane Fenner of Exit Realty Greater Cadillac said the government has to be very clear on what it is going to do to help homeowners. She also said it will be important for the job market to recover, as well, if the plan is going to work.
"Part of the problem is that people have lost jobs and can't make payments. Due to the housing slump, the houses are not worth as much as they are paying for," she said. "Whether it is a stimulus package or whatever, the banks need to work with the homeowners. How they are going to work with them, I don't know."