190,452 New Listings - March 2010 - Last update March 20, 2010 6:15 AM ESTMere Lowering Of Rates Will Not Help Foreclosure Victims
The mere lowering of rates will not help all the foreclosure victims. This is primarily because the value of the house has gone down and is often less than the loan amount. This does not make the house worth fighting for. The loans will not be large enough to clear the old ones. The solution to the present foreclosure problem must be customized for this specific situation. The nearest sensible approach has been the one taken by chairperson of the FDIC Sheila Bair. Even then how far effective it will be it is too early to comment.
The crux of the problem – will a sizeable number of investors holding mortgaged-backed securities be persuaded to suffer losses and cooperate with the plans? The alternative is that they might be tempted to hold on and wait for the market to rally. The foundation of the prescribed remedies for tackling foreclosures is reduction of interest rate and waiving of a good part of the loans.
Experts opine that most of the investors will comply with the plan for obvious reasons. By modifying they lose anything from 20% to 30% but if they followed the foreclosure route their expenses would have cost them to suffer 50% losses. Critics say that not all investors would gain from loan modification. This is because of the complex nature of the problem with a single unit having multiple mortgages. The investors with first rights will be the ones to benefit. The mortgage pool as a whole will profit but not all the investors who had taken a slice of the pie.
Another gray area is whether the loan servicers who collected and disbursed the mortgage payments have the authority to modify loans. William Frey of Greenwich Financial Services says that the servicers do not have much room to move. He said, “The problem is there was a failure to imagine the kind of catastrophic meltdown that we have had.”
During the first six months of this year there were 1.2 million foreclosures in comparison to 1.5 million during the entire previous year. Some gloomy predictions by pundits are that the figure will touch 3 million in the following year. The interest rates are set to increase for millions with ARMs and this is coupling with economic slump, unemployment and fall in housing market. It makes refinancing impossible. Foreclosures and defaults have wrecked havoc bringing down lenders and investors on their knees with begging bowls.
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January 24th, 2009 at 6:16 pm
I like millions of Americans purchase a house during the boom. Thinking that homes would at least stay at current price levels. My wife and I opted for a 80/20 interest only loan. Hoping that after we finished the basement and built a deck and installed a fence that the new appraised value would cover the twenty percent equity. At that time we could refinance to a 30 year fixed rate with good terms. Things have not gone the way we thought they would. In our new neighborhood with twenty homes, I would have to say half have gone to foreclosure or short sale. I get it, all Americans believed in a dream that could not sustain itself long term. But unless someone makes an effort to fix all the loans that are some type of adjusting, more and more people will leave their homes or be forced to leave their homes. We all need to give and we all need to change in these economic times. You cann’t just help the people that homes have already gone to foreclosure, you need to help ALL people. Everyone started this mess and the government has helped the finicial groups but the finicial groups want their cake and eat it too. We need to work together or this will be a long and never ending path we walk.
Matt M.
Frederick, Md
February 4th, 2009 at 6:06 pm
[...] second option was the lowering of the loan modification terms that had been put forward by FDIC and made more realistically affordable. FDIC had applied [...]
March 3rd, 2009 at 3:50 pm
[...] rather then opt for foreclosure. Milani said that the lender now wants to talk with him for modifying the loan. This means that the Atlanta White House is no longer in [...]
June 10th, 2009 at 6:55 pm
[...] prices quoted for these properties in Bank REO homes in Florida are just the outstanding mortgage loan amounts, which are well below the real value of the properties. Happy American families were [...]
June 19th, 2009 at 4:51 pm
[...] has been launched to help foreclosure victims. It has two segments – refinancing and loan modification. There are certain conditions [...]
June 22nd, 2009 at 2:52 pm
[...] efforts by the government to encourage loan modification and thus avoid foreclosures it is proving difficult for borrowers to set about it. [...]
July 7th, 2009 at 7:24 pm
[...] than 13,000 homes in our City were reported at risk of foreclosure. Many of them are eligible for loan modifications and refinances but either don’t know it or don’t have the help they need [...]
July 15th, 2009 at 5:10 pm
[...] going through one of the toughest periods. With the rise in unemployment, people are defaulting on loan payments. Subsequently, foreclosures are on the rise. In many areas, people are abandoning these [...]