Oil and Real Estate: Fannie Mae to the Rescue
As I continue my week here on the Gulf Coast of Florida, I hear more and more real and anecdotal stories of contract cancellations for new home purchases and second homeowners walking away.
There is no question that while oil has barely brushed the beaches here in Pensacola, the place is awash in fear.
Fear and real estate are like, well, oil and water; they don't mix well.
But then a ray of hope…from none other than the government-controlled mortgage behemoth Fannie Mae, which is in so much hot water itself that it actually had to delist from the stock market yesterday.
"Servicers may immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill," goes the press release. “We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes,” said Michael J. Williams, President and CEO. “Our policy is in place to support those who are experiencing a disaster-related hardship through no fault of their own and are acting in good faith to meet their mortgage obligation.”
This is part of the company's (or should I say agency's) “Special Relief Measures” policy.
Borrowers can get up to 90 days of relief while the servicer "determines the nature and extent of the impact the disaster is having on the condition of the property or on the borrower’s financial condition."
And what then? "At the conclusion of that assessment, servicers have additional flexibilities to evaluate the appropriate loss mitigation alternative based on a case-by-case determination, including an additional three months of forbearance, a loan modification or other customized solution."
Sounds great, if this were, like, 1997, and the housing market was otherwise fine and dandy.
So many Floridians are already in the midst of trying to get loan modifications and forbearance plans, that I'm just not so sure how you separate it all around here.
And what about the fact that the bulk of the properties on the Florida coast are second homes, which have always been a no-no for modifications and the like? Yes, I see how this will help some fishermen and business owners in Louisiana, Alabama and Mississippi, but when you get here to Florida, housing crash central, it's just a whole different scenario.
Real estators I'm talking to in Pensacola Beach tell me that they're looking to BP for cash, not the government. They say some folks have already gotten checks! (I'm not so sure I believe that). Condo owner/investors are actually expecting BP to pay their mortgages for a while, as their renters cancel out on them in droves. Good luck with that.
But then I think about the government, which has been trying to pull itself out of the housing market, and is now just dipping itself right back in. I wonder just how this announcement is going to affect underwater borrowers in Florida, even those who don't live near water. The very process of deciding who is really a victim of oil and who is just a victim of the ongoing housing crisis? Just the mechanics of it!
I'm sure far greater minds than mine in the upper levels of our government have already thought of that.
Questions? Comments? RealtyCheck@cnbc.com