Investors -- including big fish like former Countrywide Financial Corp.As numerous homeowners struggle to make higher adjusted mortgage payments, or face personal circumstances (divorce, health problems,job loss) that prevent them from keeping up with their obligations, there seemed to be no other way out. Many cannot get out of their loans by selling their homes, since they purchased properties utilizing 100% mortages, or refinanced at a similar loan-to-value ratio. Further, banks across the nation have been facing a struggle of defaulting subprime mortgage portfolios - bets that made sense two and three years ago. With everything stacked against these parties, and the fallout of their misfortunes seeming quite vast, the prospect of savvy investors saving the day sounds like an enormous blessing - and a profitable one for them. Read on:
President Stanford Kurland as well as smaller fry like Gentry -- are buying
loans on the cheap from lenders who want them off their books. By paying
less than face value for the mortgages, the new holders can modify loan
terms, including shrinking the amount owed, and still make money.
With some economists projecting 2 million foreclosures this year, legislators
and regulators are hoping to encourage wide use of this model. They want lenders
and investors in mortgage bonds to mark down what borrowers owe and then provide
them with lower-cost loans. It's a tricky business: No one wants to be seen as
bailing out speculative buyers or imprudent lenders, but they also don't want
mass foreclosures to devastate neighborhoods and the economy.
The greatest enemy of this program, however, appears to be the victims, themselves. Fewer than 50% of homeowners who are delinquent on their subprime mortgages are willing to return phone calls regarding lender work-out plans (mortgage lenders attempting to renogotiate loan terms in order to keep a homeowner in their home, and paying agreeable loan terms). Many homeowners worry that lies told regarding stated income, or other fraudulent information given to lenders, will come back to haunt them. Given the widespread existance of such fraud, on behalf of homeowners and lenders, investors buying subprime mortgage notes are not making fact-verification of old mortgage applications a matter of importance.
The headline here reads of an innovation that may save the real estate market, and the broader economy. It 
may as well read:
Homeowners Facing Foreclosure: Call Back Your Lender!
Source:
Investors move in to save broken mortgages
Los Angeles Times, E. Scott Reckard
http://www.latimes.com/business/la-fi-loanbuyer-2008may01,0,3521729.story
2 comments:
One response to this post that I've already heard from readers: Doesn't changing mortgage terms after all mortgage documents have been executed reduce the inclination for "traditional" mortgage investors to lend money? If I was an investor and I knew that the terms of my investment could be changed at any time- how likely would I be to continue my practice of lending for purchase-money mortgages?
This recent development has been made utilizing loans sold at a fraction of their initial value. Even loans that have been paid on time are selling for 70 and 80 cents on the dollar, with defaulting loans selling for less than 50% of their value. At the point in time these mortgage notes are being sold, the initial investor - the one who would have qualms about lending to someone with terms that could be changed subsequently - has lost big already. The lesson being learned by these traditional mortgage investors is merely to avoid the riskiest loan terms. This is not a bad thing for the real estate market, as far as I can tell.
Hey!
Your blog is wonderful.Thanks for sharing this.
Post a Comment