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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.

The problem is that typically the mortgages in question are no longer an identifiable obligation of the loan servicing agent. It was bundled into a graded wholesale bundle, traded many times into a huge financial market, and ultimately borrowed against 10-100 times it's face value - in the magical process that creates money.

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".