It does nothing. Most of the defaults are occuring due to stated income/IO/NegAm type mortgages. Those don’t exist and any program that is started by the goverment (Hope Now etc.) requires full doc qualification which means it excludes pretty much everyone who is in trouble.
Very few buyers qualify full doc for houses at these prices and the bottom line is to generate sufficient demand to clear inventory house prices have to come down substantially, there is nothing that can stop that except the readmission of exotic lending which of course is never going to happen!
The government giving these people 30 yr fixed mortgages is one thing, whether they are going to be able to qualify is highly doubtful so the program is pretty much irrelevant.
It has been argued on many blogs that this “Hope whatever” program is useless because it requires lenders to voluntarily take a loss. Which lender is going to voluntarily take losses in this climate if it means taking more red ink on their books, putting downward pressure on their stock price and jeopordizing the CEOs bonus?
Regardless of what housing prices are going to do, my advice is that it is not a good time to make huge commitments. There is a tremendous uncertainty in the market going forward and being in a flexible position give you an edge.
