Posted on 04/18/2007 12:02:53 PM PDT by Proud_USA_Republican
NEW YORK (Reuters) - Washington Mutual Inc. (NYSE:WM - News), the largest U.S. savings and loan, said on Wednesday it will refinance up to $2 billion in subprime home loans at below-market rates to help borrowers who might otherwise struggle to keep up with payments.
The decision comes amid growing defaults nationwide by homeowners with weaker credit histories as gains in housing prices slow, rates on many mortgages adjust higher, and lending standards tighten.
(Excerpt) Read more at biz.yahoo.com ...
Lovely.
“I’m currently saving towards a downpayment on my first home and refuse to buy a house beyond my means. I guess I should be rewarded for this moronic behavior by paying .50 basis points higher for a 30 year fixed mortgage than condo flippers with crappy credit who were allowed to buy speculative real estate and now at risk of foreclousure because they can’t sell for a profit right now.”
Here are a couple of ideas, which may or not “help” you.
1. Life isn’t fair.
2. What goes around comes around.
Just keep doing the right thing, because it is the right thing. Don’t worry about other people.
Actually, this may be a smart business decision. If you have lots of defaults, the home buying market will be overssaturated, so when you go to auction the property it’s worth a fraction of the oustanding debt. Personally, I’d invest a little money (or in this case, a lot of money) in propping this up - continuing to get 5% or so on outstanding debt is a much better prospect than being saddled with a portfolio of unsaleable properties. Just MHO.
Exactly. So what if they get bailed out of one mistake? They'll make more. ;)
This is one way to move bad loans off the books. It usually works for a while.
In many areas, housing values have dropped significantly, and the home is worth less than the mortgage on it.
Foreclosing on such homes would result in them losing many billions of dollars.
So instead of forcing foreclosures, they are going to cut the interest rates for some of the borrowers so that their payments become affordable and they aren't forced into bankruptcy.
The $2 billion is the difference in the interest they would have received on those loans at the original rate, and what they will receive if the loan is paid at the lower rate, so we are talking about a very large number of loans.
This is pretty much an admission of total incompetence in their past lending practices to people with marginal credit.
They aren't doing this out of the kindness of their hearts. They are doing this because having all those borrowers with marginal loans default and only recouping what they can get through foreclosure could very well bankrupt WM.
From the lender’s standpoint, it’s better than letting millions go into foreclosure, honestly.
The idea here is that the people made their payments fine BEFORE adjustments...so keeping their payment at the pre-adjustment rate (we’re talking variable-rate loans here) is not a bad idea - defaults would be expected to be no worse than they were pre-rate-adjustment.
When you own the bank 1MM they have you buy the b@ll$ when you owe the bank 100MM you have them by the b@ll$
What do condo flippers have to do with anything? I am betting the vast majority of sub-prime borrowers are homeowners and not flippers.
and the banks (and their stockholders) are going to continue to subsidize this all.
Guess the lesson I've learned. Screw not buying real estate beyond my means. Be a real estate flipper with no clue what I'm doing and either way it goes, I'll be rewarded with a bailout before I would have to take responsiblity for my actions. And even better, I'm going to get a longterm discounted rate on my bailout than the other losers (those with good enough credit that they don't buy real estate with subprime and Alt-A loans) who have to get their loans at market rates.
Comeon Donald, say it. 
"Your a loser Proud_USA_Republican for not buying real estate beyond your means and getting a bailout and reduced mortgage rate."
That made me laugh. It's true!
Yeah, but that darn greed thing gets in people’s way. Especially the loan sharks.
I still think the mortgage industry, home building industry hasn't seen the teeth of the tiger just yet.
The subprime and alt-A loans were almost always based on selling strategy of offering a “teaser rate” aka the first 6 months to 2 years of the loan had an extremely low interest rate, with it then quickly re-adjusting upward. The flippers pounced on these loans because it gave them a perfect window of time to buy and flip while paying almost no interest while the banks didn’t care what your credit rating/history was or how much collateral or earning potential you had.
The mortgage lenders were only too glad to hand out these loans to anyone because they still collect all those upfront fees for the loan origination and then quickly sell it off in mortgage backed securities, etc....
To the mortgage lenders, these loans were like playing one of those hand games you played as a kid to pick some one out. Duck-duck-goose, hot patato, etc..... You kept passing the loan to someone else hoping you didn’t get stuck with it went into default.
Fannie Mae and Freddie Mac were created by Congress to pump money into the home-mortgage market by buying home loans from banks and other lenders and turning them into securities for sale on Wall Street. They have grown dynamically in recent years and now finance or guarantee some $4 trillion of home mortgages, representing about half of the single-family mortgages in the country.
ohh, here we go. The bailout of flippers and people who bought homes beyond their means continues today. The Fed is all over this one.
Freddie Mac Buying $20B in Mortgages
WASHINGTON (AP) — Mortgage finance giant Freddie Mac has committed to buy as much as $20 billion in mortgages to help borrowers with high-priced loans stay in their homes, the company’s chief executive said Wednesday.
The initiative by the government-sponsored company, which is the second-largest buyer and guarantor of home loans in the country, was disclosed by Freddie Mac Chairman and Chief Executive Richard Syron at a meeting on Capitol Hill. It came a day after federal regulators called on lenders to work with distressed borrowers unable to meet payments on high-risk mortgages to help them keep their homes.
Much rhetoric, but no proof that flippers are the major problem.
Im not sure how easy this will be to pull off, especially after loans have been sold to be packaged into mortgage backed securities.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.