Comments on: Solving the foreclosure crisis. Taxpayer subsidized home loans?

By: Summit County Real Estate Broker

Summit County Real Estate Broker — Fri, 09 Apr 2010 01:26:05 +0000

Interesting to read this article nearly 1.5 years later. While we did not see the 30 year fixed hit 4.5%, it did spend quite a bit of time under 5%. But that was only if the Buyer could get the loan in the first place. In my market, well qualified Buyers were denied loans based on the fact that the condo building they were interested had several income producing properties in them.

By: Byron Katie

Byron Katie — Tue, 24 Nov 2009 10:27:36 +0000

AP - Black and Latinos are at a disproportionate risk in the ongoing foreclosure crisis because they are more likely than whites to have higher-cost mortgage loans and home insurance face higher unemployment rates, a report says.

By: Nikhel

Nikhel — Mon, 23 Nov 2009 08:54:31 +0000

Nice that I have gone through this post, because I got have some good piece of information from this post. Thank you very much.

By: Al

Al — Thu, 20 Aug 2009 20:57:00 +0000

Excellent information from annonymous 8/19. Also clarifies why servicers have no power or authority to make any decisions. I’m sure many servicer employees don’t know a tranche from a trench as is evidenced when one calls them. In the end however, “it’s worth what it’s worth”, so when the sheriff or auctioneer comes lender still gets 200k and all the attendant consequences are still there. Of course, why should the Senior investor care? Al

By: Sean

Sean — Thu, 20 Aug 2009 18:52:27 +0000

Great post.

By: Anonymous

Anonymous — Wed, 19 Aug 2009 16:48:49 +0000

Al, your suggestion makes very good sense if you assume the mortgage is held by a bank, particularly a bank that has received TARP assistance. But here are the reasons most lenders aren’t interested: 1) the servicing agents, not the lenders, control the terms of loan workouts, and the servicers receive more fees from the default and foreclosure process than they will from a workout; 2) the “lenders” are securitized entities that have up to 14 different “tranches” of investors. The super senior tranche still receives full payment even if a good percentage of the pools loans are foreclosed upon. This is because the tranches divide cash flow, not profits. Using your example, the foreclosure would generate $200k of cash, all of which (after admin and servicing costs) goes to service the senior tranches. Under your workout, it generates very little cash and, in fact, reduces cash flow immediately. In short, these mortgage pools are run for short term gain not long term profit; 3) the lender-issuers don’t want to admit that their collateral is only worth $200k, as that would mean all their other, similarly situated collateral is worth only that much. If the home goes to foreclosure sale, they can argue that the price is only a “distressed price” and that their remaining loans will continue to pay. If they voluntarily drop their payment terms in half, it will likely cause other borrowers to default and demand the same terms, resulting in a much lower value for the entire pool. This lower value is the “mark to market” issue that threatens the solvency of many of our banks.

By: Al

Al — Wed, 19 Aug 2009 16:06:50 +0000

What is wrong with EQUITY PARTICIPATION Financing? Here is how I see it working.......It's been done in commercial real estate and private financing for years.

Homeowner is underwater, owes 400k on a house worth 200k, Original loan 80% LTV / 6%/30 yr. pmnt 1918+taxes (3600). Homeowner will be forced out and will have to live SOMEWHERE and pay Something. Instead of foreclosure what if the lender reduced the rate to 4.5%, cut the payment in half to $811.00 + taxes and took a 50% EQP. Loan would review in five years and be adjusted to market conditions and borrower conditions. Homeowner would be responsble for repairs and maintenance, would not have a foreclosure, family would not be besmirched or disrupted, neighborhood would not see another potentially borded up property, etc. At sale time the mortgage balance and any profit would go to the lender up to a pre-agreed amount. A deed would be held in escrow if the homeowner defaulted. And the lender certainly would not get any less than they could expect now. If state laws interfere.....change the law....These are desperate times.

Al Marczyk, CCIM

By: jenna

jenna — Mon, 25 May 2009 01:38:00 +0000

i really love reading your website , although i just started doing overtime recently, so it is less frequent now

By: arizona mortgage

arizona mortgage — Sat, 25 Apr 2009 01:16:56 +0000

The article is very informative, but the banks are still not jumping to assist homeowners. It is an up hill battle all the way. They may offer a principal reduction, but they add the reduction back to the end of the loan.

By: Greg

Greg — Tue, 14 Apr 2009 23:20:30 +0000

Paul is very right “Funny how when things are left alone that they just naturally work their own way out”. Let Treasury and the rest of the government get out of the way and let the free market work.