I'll admit I'm disappointed. I am underwhelmed by this package.

Will it help some additional homeowners? Yes, absolutely. Will this have a serious impact on the overall housing market? I seriously doubt it.

First, the plan is that if you owe more than your home is worth, you'll potentially be able to refinance at a lower interest rate. There are financial incentives to both banks and mortgage servicers to do these loan modifications.

Here's where I see the problems.

First of all, the new first mortgage must not exceed 105% of the current value of the home. The problem is, most of the people in trouble are much further in the hole than this. If you bought your home three years ago, put almost no cash down and have seen the value of your home decline by 40-50% this plan is of no help to you. And, that's a pretty common scenario in this area.

This plan is still entirely voluntary on the part of the lenders. Like every other plan announced thus far, it depends far too much on banks being willing to participate. There is a little carrot here, but it's a very small carrot that seems unlikely to be very effective.

The plan still does not require any reduction in principal. Until the banks are required to reduce the principal, to take their lumps, I don't believe this problem gets fixed.

And, maybe just as importantly, as long as the banks books continue to not reflect the real value of homes, I don't believe they can ever recover, nor will their stock prices.

It's a wishy washy plan and I'm disappointed.

The $8000 tax credit in the stimulus plan will do more good than this.

2/20 7:30 p.m. update:

I've been reminded that the details aren't going to be available until March 4th.

I've also been reminded that there will be a mandatory component for those banks that took TARP money.

I hope I'm wrong and this is wildly successful!

The Senate, yesterday, passed an ammendment to the stimulus bill that would create a $15,000 tax credit for home buyers for the next year. It would apply to anyone buying a primary residence, new construction or an existing home. It passed by unanimous voice vote and appears to have no serious opposition.

That doesn't ensure it will still be in the final bill, but the odds appear pretty good.

Today the Senate is likely to vote on a provision that would lower mortgage rates for purchases or refinancing to 4.5% or lower. Again, it seems like there's a good chance of passage.

All this is very good news and could bring out a lot of new buyers in the next few months. And, one senator suggested that this would not be the end of the help for the real estate market.

Are we about to turn the corner? Stay tuned, but I'm feeling pretty optimistic today!

There are lots of little bits of information so thought I'd do a blog post today that just hits a few different topics.

As part of the stimulus package that both the House & Senate have now passed the loan limits for Fannie Mae and Freddie Mac have been increased. This has the potential of helping stabilize the housing market since those with an ARM on a house worth more than $417,000 may now be able to refinance more easily. That may mean fewer forclosures which may mean less downward price pressure. See this CNBC article for more information.

The Virginia Housing Development Authority (VHDA) has been a great source of mortgages for first time home buyers in Virginia. Unfortunately, they're not immune to what's been going on in the credit markets. They've suspended some of their programs and they will now only loan up to 97% of the value of the home. This will definitely hurt first time home buyers in Virginia and the sellers who hope to sell to them.

You've heard the old adage "work like you don't need the money". These days it's a tough one, but I'm proud to say I've run into a lot of my fellow real estate agents lately who are living this. (Trust me, most of them DO need the money!) These are the days I'm proud to say I'm a REALTOR.

The VA Senate finance committee approved SB768 on Wednesday. This reduces the cash proffers that builders must give to communities for roads, schools, hospitals etc. that are needed to support new development. This is an incredibly bad idea. Theoretically the idea is to reduce the cost of homeownership.  In reality it will force many communities to halt new development. This deserves its own blog post and I'll get to that down the road.

Happy Friday!