The Homa Files

Excerpted from Wash. Post, “Foreclosure Relief Is Getting Lost In Fine Print of Loans”, November 13, 2008

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More than a year into the foreclosure crisis, whether a distressed homeowner is eligible for a more affordable mortgage can often come down to the fine print.

That fine print in contracts that govern mortgages bundled into investment pools dominated a House Financial Services Committee hearing yesterday as lawmakers questioned lenders.

Millions of loans are held in these pools, called securitizations. They are governed by contracts that dictate what changes can be made to the loans. Lawmakers and industry officials debated yesterday the degree to which those agreements are making it difficult to modify a homeowner’s loan and thus hampering foreclosure prevention efforts.

The rules vary depending on the investment group. Some “may prevent [loan servicers] from doing modifications [to loans].  Under some contracts loan modifications are expressly disallowed.

Lenders have had the most success modifying mortgages they own but run into trouble when they administer the loans held in pools for others, known as servicing. Securitized mortgages are the great majority of those in foreclosure or threatened foreclosure. 

“Macroeconomic forces bearing down on an already troubled housing market are simply too strong for private sector loan modification initiatives alone to counteract the nationwide increase in mortgage defaults and foreclosures.”

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HUD’s loan modification program — Hope for Homeowners — was expected to help 400,000 borrowers get new loans. But lenders have balked at a requirement to lower the principal owed on the loan to qualify for a refinancing deal under the program.

So far the program has helped only 42 homeowners, and HUD now expects only 20,000 applications over the next year.

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Ken’s Take: Didn’t anybody in the Congress realize this before voting to approve the $700 billion bailout?  Most folks perform more due diligence when they buy a car.

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Full article:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/12/AR2008111202845.html

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This entry was posted on November 14, 2008 at 7:45 am and is filed under Mortgage Crisis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.