The investors might have a pretty good lawsuit against any servicers who agree to across-the-board lower rates for the borrowers.
Not arguing with you. Just trying to understand what's going on here. Are they talking about lower rates than the homeowners are now paying, or lower rates than what they would otherwise adjust to.
If homeowners can stay in their homes with reasonable rate adjustments is that not a win for both borrower and lender?
So investors should be happy getting a negative return because of all the defaults? This is a win-win if someone is actually able to pay off his loan somehow.
Hear hear. If I were one of these investors, I'd be looking for something else to invest in from now on, something whose return doesn't get cut by 25% or so one fine day with the stroke of a government pen.
It would follow that this would be the end of the availability of mortgages in the United States.
That could very well be true.
However, how does that compare with foreclosing on the properties if the loans are unpaid? Is there liability in that case as well?
Not being a smartass, I’m being serious.
First, it will not be the servicers agree, but rather the owners of the mortgage notes. Second, the servicers for the most part are a bunch of guys who open envelopes, deposit checks and call up folks who they think can be induced to speed up their payments. They don't have any assets and will quite happily go bankrupt. Third, the servicers are not the cause of any damages. Once it is headed for bankruptcy, the contract has in effect been broken and all that is left is to pick up the pieces. You can be sure that any settlement agreements in all of this will discharge all parties of any liability for the losses incurred by reaching the new accommodation.