The federal government estimates that its recently unveiled mortgage-relief plan will help more than 1 million homeowners nationwide, but analysts expect very few of them will be in the Bay Area.
The bailout plan seeks to freeze certain interest rates on subprime loans, which real estate analysts have cited as the source of the nationwide mortgage crisis.
The situation has prompted the federal government to freeze interest rates on mortgages for homes with less than 3 percent equity — meaning those properties appreciated by less than 3 percent since the time the homeowner purchased it, San Francisco Association of Realtors President John Asdourian said.
With home prices continuing to appreciate at a rate of approximately 9 percent in San Mateo County, despite a drop in home sales, Geoffrey Craighead, president of the San Mateo County Association of Realtors, said the federal relief would do little to change the housing economy here.
“We saw a drop in housing sales but prices haven’t gone down a bit,” Craighead said.
Foreclosures across the country have increased as lenders have granted loans to borrowers with bad credit who did not qualify for mainstream loans, which ultimately bred a subsection of people who could not make good on their debt, Craighead said. While the Bay Area has had relatively few foreclosures, they continue to happen at an increasing rate, Asdourian said.
There were approximately 400 foreclosures in San Mateo County in 2007, according to Deputy Assessor Terry Flint. Information from Mayor Gavin Newsom’s office shows San Francisco foreclosures account for approximately 2 percent of those in the Bay Area.
Areas such as Fresno and San Bernadino with large and now quickly failing subdivisions could see some relief, since property owners there are suffering equity losses of $100,000 or more, Craighead said.
Asdourian said lenders are not going to be pleased with the federal proposal to tamper with the free-market rates. After all, the lenders expect a certain percentage of return on their investment and won’t be pleased if they don’t receive it, Asdourian said.
“This is just a bailout for people in the most extreme circumstances, translating to a very small amount of people here,” Asdourian said, noting San Francisco’s low unemployment rate and booming economy.