Comments on: Stressed Home Owners: Is There a Bailout in the Works? http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/ Home loans made easy Fri, 21 Nov 2008 17:59:19 +0000 http://wordpress.org/?v=2.3 By: Marc Brinitzer http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/#comment-12969 Marc Brinitzer Mon, 01 Oct 2007 20:13:51 +0000 http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/#comment-12969 Matthew, I'd like to find a way for folks who are upside down in value be able to refinance their adjustable and subprime 1st mortgages and avoid the large payment increases that are putting them out on the street. Most of the problems are cause by the 1st loans, not the 2nd's that were piggybacked behind those 1sts. The idea behind FHA Secure is a good one. Get FHA to allow a refi of toxic 1st loans and a resubordination of the 2nd to a combined LTV that exceeds 100% of the property value. But the challenge is finding the holder of the 2nd loan and getting them to agree quickly to the resubordination. The loans, like other mortgages, are securitized, packaged, sliced and diced, and sold to various investors presumably all over the world. Finding someone to talk to is a problem. Getting them to agree is an even bigger challenge. Accomplishing all that before the homeowner goes belly up is darn near impossible. Perhaps we can legislate a mandatory or automatic resubordination of these 2nds, something that does not require asking their permission. The 2nd holder would lose nothing, in fact they would avoid losses from foreclosures. The home owner gets to live to fight another day. She avoids the big payment shock and gets into a safe 30 yr FHA mortgage with no surprises. We reduce the number of foreclosures which stabilize the real estate market and consumer spending. Matthew, I’d like to find a way for folks who are upside down in value be able to refinance their adjustable and subprime 1st mortgages and avoid the large payment increases that are putting them out on the street.

Most of the problems are cause by the 1st loans, not the 2nd’s that were piggybacked behind those 1sts. The idea behind FHA Secure is a good one. Get FHA to allow a refi of toxic 1st loans and a resubordination of the 2nd to a combined LTV that exceeds 100% of the property value.

But the challenge is finding the holder of the 2nd loan and getting them to agree quickly to the resubordination. The loans, like other mortgages, are securitized, packaged, sliced and diced, and sold to various investors presumably all over the world. Finding someone to talk to is a problem. Getting them to agree is an even bigger challenge. Accomplishing all that before the homeowner goes belly up is darn near impossible.

Perhaps we can legislate a mandatory or automatic resubordination of these 2nds, something that does not require asking their permission. The 2nd holder would lose nothing, in fact they would avoid losses from foreclosures. The home owner gets to live to fight another day. She avoids the big payment shock and gets into a safe 30 yr FHA mortgage with no surprises. We reduce the number of foreclosures which stabilize the real estate market and consumer spending.

]]> By: Matthew Rosov http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/#comment-12968 Matthew Rosov Mon, 01 Oct 2007 20:13:16 +0000 http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/#comment-12968 I am curious - what type of bailout would you like to see? I am curious - what type of bailout would you like to see?

]]> By: Christopher Moses http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/#comment-12959 Christopher Moses Sun, 30 Sep 2007 14:06:34 +0000 http://www.lendingclarity.com/2007/09/27/stressed-home-owners-is-there-a-bailout-in-the-works/#comment-12959 Marc, You knocked it out of the park with reference to the S&L delimma on this one. Unfortunately at that time we blamed the appraisers for the errors and so they all went through (and are still having changes come about that are just not fully implemented yet) and now the originators will probably see the same effect in our fields. While I am for fixing the problem and creating a solution- I'd sure hate to see everyone getting spanked for something only a few folks took advantage of. Keep up the good work, and Thanks again for staying on the frontlines! Chris Marc,

You knocked it out of the park with reference to the S&L delimma on this one. Unfortunately at that time we blamed the appraisers for the errors and so they all went through (and are still having changes come about that are just not fully implemented yet) and now the originators will probably see the same effect in our fields. While I am for fixing the problem and creating a solution- I’d sure hate to see everyone getting spanked for something only a few folks took advantage of. Keep up the good work, and Thanks again for staying on the frontlines!

Chris

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