Posted on 08/24/2007 6:41:18 AM PDT by Hydroshock
I ignore the losers.
realtors and mortgage shills make me ill. All the care about is $$$$$$$$$$$$.
I actually feel sorry for them, they are so used to swimming in a sea of paper, and it is drying up.
>You don’t have to start at the top—you can start lower and move to the top.<
Life is much more comfortable a few pins down from the top. There’s too much stress trying to stay at the top.
Many of these homeowner were pushed into these loans at the advice of licensed professionals and many had no idea what they were getting into. When questined n=by the borrower the typical response was, ‘Ah, Don’t worry, this is a band aid loan and in 2 years we’ll refinance you out of this terrible loam into a brand new 30 year fixed loan. All will be fines, just sign here, so I can make $20,000 in rebates and fees because this loan is better for me and not really you because I get paid more to sell you this loan!” Yes, that is how it works most of the time.
I have been in the mortgage, real estate and loss mitigation industry for years and I UNDERSTAND how this all works from the inside and what is GOING NOW with defaulting borrowers.
Plain and simple, they CANNOT refinance out of these ARM/s and that’s the MAIN contribution to the housing and foreclosure crisis. It’s not the media hyping things, it’s reality.
Where we are is the result of TERRIBLE lending practices and that is the ONLY reason. I’m so sick and tired of hearing comments from people who are not, have not been or are not on the front lines of WHAT REALLY is going on out there in the market.
If lender don’t offer loan modifications of these toxic mortgages then it will cause our country to go into a deep, deep recession like we have never seen.
Welcome to Free Republic.
I suppose you are the expert, so please give me an example or two of how a lender could “modify” the terms of a loan so that it doesn’t cost him any money.
Thanks.
Hello Lancey and thanks for the introduction :)
OK, homeowner is in a 100% loan fixed for 2 years and bought at the top of the market. So there is no equity or the homeowner mey be upside down on the mortgage. The borrowers’s loan has just reset from 6% to 9% raising his payments let’s say $1,000. He tries and refis and can’t. He’s paid perfectly for 2 years but now has become delinquent 2, 3 months and now is in default and on the way to foreclosure.
Now the lender has 2 choices to mitigate loss.
#1. Foreclose on the home and take a huge loss in reposessing the home and selling it in a depressed real estate market where these repos are not selling. Cost avearge $50,000-$70,000 and is now not an asset but a liability to the lender that it has to manage and sell. Now it is in the real estate business in a DOWN market with no postitive outlook for aproximately 2-3 years.
#2. Loan Modification - Lender works with the borrower to kepp them in the home. Drop the rate back down to the original not rate (now the homewoner can afford the loan) and work out the delinquent fees into the principle and the form of a good faith payment.
Option #1 everyones loses
Option #2 everyone wins (the only difference is that the investors will not see the gains they had hoped for at the reset of these mortgages) OK, i understand their concern but if they didn’t modify that loan then there would be no gains at all and significant losses.
Either way it will cost money to the lender and to investors.
Loss mitigation is about mitigating loss to the lender and the way they have it set up now is for the way the loss mitigation beiness was ran in the past, in the old days.
When these loans were at 60-80% loan to value and they could play hard ball and take homes back from defaulted borrowers and still make great gains in the REO departments. Those days are over and these departments need to adjust to the way the market is now. Tapped out mortgages, no equity, no refiance alternatives and no money to be made, only lost by foreclosing.
Regards,
Moe
www.LoanSafe.org Homeowner Advocate Forum
Now we've got lots of highly leveraged institutions that cannot tolerate even the modest default on interest payments. Same for the institutions that lent these primary dealers the money to offer the loans. Other savvy banks and lenders, with their own survival in mind, dare not lend these institutions the money to cover the delinquencies until such time as the servicing institution can liquidate the collateral (taking time and money). Because of the falling RE prices, and growing inventory, the problem will become much worse before we see the light at the end of the tunnel.
Apparently, only the tip of the iceberg has been seen. September through December, 2008, some trillion dollars of sub-prime ARMs are going to be reset, some three times what this year's volume has been. How many of these "homeowners" will walk rather than throw good money after bad? I think there is going to be a cascade of defaulting debt for years to come.
And Helicopter Ben will come to the "rescue".
Making huge quick profits writing mortages for folks that logically would not be able to honor their contracts, bundling these worthless deals and selling them to other fools was clever, to a point. But like junkies they just didn’t know when to quit. There is a fine old saying that seems to apply “when you owe the bank $1000 you have a problem, when you owe the bank $1,000,000 the bank has a problem.
I hate to break it to you, but some of these people still won’t be able to make their payments even if they get refinanced at 0% interest. Some people have bought more than they can afford hoping to make a killing by selling quickly. How are we to help them?
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