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Rules for modifying loans may ease
Mortgage help
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TEXT OF STORY
Kai Ryssdal: One of the ways the Obama administration is trying to resuscitate the housing market is through what are called mortgage modifications -- helping homeowners stay in their homes by reducing their monthly payments. Progress on that, though, has been slow in part because banks and loan servicers, who have to agree to modify those loans, have been holding back.
Now, there is some discussion that the Treasury Department may be tweaking some of the formulas it uses to make those modifications easier. Marketplace's Mitchell Hartman explains.
MITCHELL HARTMAN: When a struggling homeowner calls up to get a break on their monthly mortgage payment, the bank has a few choices, aside from doing nothing. It can reduce the interest rate, extend the life of the loan, or reduce the principal owed.
But banks have been loathe to do this last fix and risk losing out when the market recovers, says Desmond Lachman of the American Enterprise Institute.
DESMOND LACHMAN: If for some reason house prices were to rise in value, if the person who borrowed, their financial circumstances became better, the bank would still have the option of getting paid back the full amount.
Now, there are reports the Obama Administration may tweak one of the financial formulas that lenders use to determine whether to write down the principal, or foreclose.
CATHY OLIVETTI: What they're doing is purely to evaluate, what's a better position for the lender and the investor? Is it better that we let the loan get modified, or do we just need to foreclose? So what in that equation is, we're looking out for the homeowner. They're looking out for the investor.
South Carolina real-estate lawyer Cathy Olivetti is seeing more and more homeowners willing to walk away from their mortgages. That's because they owe so much more than what the property is worth now.
OLIVETTI: We've got to start addressing principal reductions.
A new report from First American CoreLogic finds that people whose homes are worth 25 percent less than what they owe on the mortgage are much more likely to stop paying. One in 10 American homeowners will reach that point by June.
I'm Mitchell Hartman for Marketplace.
Who says I have an ARM loan? I apologize for computer errors in my last email. But you don't know what I'm referring to. The Home Affordable Program, or HAM, is a Bank scam and there are no safeguards. The bank tells you to make lower payments during a trial period. But the docs they send you do NOT tell you that they will report you to a credit bureau and then after that trail period, they can foreclose on your property. I have equity (which cannot be acessed due to the financial problems we're in) and the bank would love nothing more than for me not to make full payments. That is MISREPRESENTATION. You don't learn the truth of the matter unless you call the bank, wait endlessly, and speak to someone. When you ask that they put their words in writing, they refuse. I am a prudent person and having bought a home years ago does not make me imprudent -- quite the contrary. Being a good mother, staying fit, taking care of my property and responsibilities make me a prudent person. You appear to be jealous of property owners during this financial crunch and would want their demise. You offer no solutions. Nothing. You remain anonymous. The matter vis-a-vis HAM and misrepresentation is something for the State Comptroller of the Currency and our elected officials to look into. The problem is on their table. Will they do anything beyond talk? That's the question.
Migdia Chinea:
First just because you bought a house does not make you prudent.
Second you are not entitled for tax payer bailout.
Third bailing you does not make bailing out banks right. Both you and bank are part of problem and causing tax payers to absorb losses and fund your reckless ness.
Fourth, I dont think you understand concept of ARM loans. If your current home worth is less than loan amount then you can not be refinanced for the loan amount unless you pay the difference. You should have known that when you took ARM loan instead of fixed loan.
I have excellent credit and I'm not a reckless person. But I as assaulted in 2007 ON THE JOP and, after getting scant attention to my injury, went back to school for my Master's. I wish to keep the home in which I've lived most of my life and raised my son. Why are the banks we bailed out holding back on loan modifications for prudent people like me? They, themselves, have NOT been prudent and their bail out was at tax payer's expense. This is not a handour but a refi at the current rate of interest rates and an extnsion on the life of the loan.
DKD DKD:
Yes reckless borrowers!
I can prove most of the buyers during the bubble were reckless. They knew their income. The knew price of house they are buying. They knew the interest rates. Still they bought using liar loans etc. It is not just banks that played the bubble game. Home buyers also player equal part. Dont blame others for your mistakes.
You are behaving as if you are entitled for bail out from tax payers. And you think some how your bailout will teach big banks. Prudent people are paying for your and bank mistakes.
I am just sick tired of entitlement displayed by these reckless borrowers. When nasdaq crashed in 2000, did those investers get bailed out? Why are you so special then?
We bought during the bubble; letting ourselves be convinced by other homeowners that home ownership is "better". Only to have been lied to by the previous owners regarding house issues; i.e. "no water issues". It has been hard and we remain committed, despite anger at BoA for having told us they wanted us out of the 80/20 loan that got us the house and never delivering on that statement, to being told we qualify for program but it would be of NO benefit to us. We are making what we can out of it; I will never do business with a national bank or mortgage company again. That being said I do not think we nor many, many Americans could afford going back to the 20% down rule. 20% down in Mass would be forking over 50-100K worth of savings, which most of us would think to use for other things, given that home ownership is very, very overrated IMHO.
Excuse me? Reckless buyers? I became disabled in 2005. .Never late on payment but could no longer make payment.. Was told by my lender in May that I qualified for a Loan Mod. I do. I have been jerked around ever since May. As reported, my lender is helping themselves, not me - a "prudent" home owner. Most people I know that are losing their homes is because of the housing bubble - created by the lenders and investors combined with job losses. Its not about buying votes, it is about under regulated 500 lb gorilla banks getting their way without recourse. It will cost the tax payers more if homes keep foreclosing because most mortgages are insured or backed by the government. Who's Screwing who? Keep your faith in big banks, big insurance or any profit-driven big business. See if they help YOU out if you should ever need it. If is not profitable for them, they will not. I know this from experience.
