As a Consumer Bankruptcy Attorney in Naples and Fort Myers, I see things happening which make no sense. While reviewing the various articles written about the "new" program announced to help homeowners, I came across the following hypothetical situation in the Wall Street Journal. The hypothetical sets forth the following scenario of how the bill would help the homeowner. If your loan is $225,000 at a 6.5% interest rate, the homeowner's payment would drop about $495, by lowering the interest rate to 2.73%. At the end of a 5 year period, after the lender receives federal subsidies, the principal balance would be $193,000. This sounds like a great deal until you apply the hypothetical to the Lee County housing market.
The problem facing Lee County homeowners is that the $225,000 dollar loan is for a house that is currently worth less and in most cases significantly less. For example if the house were worth $150,000, at the end of the five year period the house would still be worth less than what is owed on the loan, by perhaps as much as $40,000. (Even if housing prices stop their steep decline and start to recover the homeowner is still facing a deficit of about $20,000). Leaving the homeowner still unable to sell their home for what it is worth, while at the same time increasing the interest rate at the expiration of the five year period.
This new program allows the suffering homeowners the right to rent their own home while paying the costs for property taxes and insurance, only to be left with the same predicament of owning a home they cannot sell for what it is worth. Is this really homeowner relief or assistance?
This post was submitted by David Lampley, Esq. attorney for The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Lampley is currently serving as co-chair of the Lee County Foreclosure Relief Task Force. Mr. Lampley also writes for the firm's bankruptcy blog.
