Read the Full Bloomberg.com article here.
Federal Deposit Insurance Corp. Chairman Sheila Bair called for payments on most subprime mortgages to be fixed at current levels.
Lenders should extend “teaser” rates on all subprime adjustable-rate mortgages if the borrowers haven’t missed any payments and they live in the homes, Bair said today in New York. Modifying loans on a case-by-case basis and fixing rates for limited periods won’t avert enough foreclosures, she said.
Sheila Bair is a woman after my heart and she echoes what I have been saying all along.
Bair said her modification plan would be best for mortgage- bond investors, even though it would reduce interest payments by most borrowers. She said loan servicers don’t have the resources to review each loan and that they may default later anyway if their payments aren’t fixed permanently. Lenders generally have granted extensions for between six months and five years.
“In today’s housing market you can’t make the assumption that they’ll have enough equity in five years” to refinance, Blair said.
About 100,000 subprime mortgages a month will reset to higher rates for the first time during the next two years, according to UBS AG analysts led by Laurie Goodman. Rates on the loans typically are fixed for as long as three years, and can then climb every six months. Borrowers’ payments usually jump about 30 percent to start, Bair said.
Market Assumptions
Subprime adjustable-rate mortgages with a few years of fixed rates, or hybrid ARMs, were offered because lenders believed borrowers would refinance into new loans or sell their properties, Bair said.
“Let’s be honest about it: Hybrid ARMs were never made on the assumption that borrowers could continue to pay them back once the loans reset,” she said.
In response to Countrywide Real Rstate & Loans,you may have a good point there, banks have been trying to grasp the RE bubble for some time, with foreclosure in mammoth proportion as it stands now the banks certainly have the upper hand….
To date in Jacksonville, Fl there are over 1000 bank owned properties: according to the records accessed online at the property appraiser’s office, the biggest owners of vacant homes in Jax are: Wells Fargo Bank, Wells Fargo Home Mortgage, Bank of America, Deutsche Bank National Trust, Bank of New York as trustee, Countrywide Bank, Countrywide Home Loan, Ameriquest, Chase Home Financial, Citimortgage, Washington Mutual Bank, Wachovia Bank, SunTrust, Homecomings Financial Network, US Bank, as trustee; Aurora Loan Services, EMC Mortgage Corp., JP Morgan Chase Bank, as trustee; HSBC Bank as trustee; Mortage Electronic Registration Systems; HSBC Mortgage Services;
April,
I suspect we will see many areas like California and in Jacksonville, Florida where lenders have the largest inventory of homes. Soon, they will be renting them and lease optioning them. How long can they just sit without selling? The only next logical and smart business move would be to either acquire a real estate firm or open up a separate division to handle the real estate sales, property management and mortgages.
Thanks for sharing that. Very interesting and it confirms my suspicions.
Moe
Yes, they are now the dealer in a game of poker we did not want to play.
Sheesh, Moe… if the muckety mucks at Countrywide hadn’t already thought of making themselves the biggest landlords of single family homes in the nation, then you just gave them the idea. Nice going.
- Paul
San Francisco Countrywide employees get a memo from Mozilo.
That’s a great picture, I love it! Thanks for letting me use it on my blog.
Excellent Article
Thanks for taking the time to say that! It is much appreciated.
I’m not buying it! These lenders who made a lot of loans they shouldn’t have are now paying the price. They are all losing an enormous amount of money and the last thing they want to do is accumulate REO properties. Most residential property values are going down not up so every day they own that property only adds to their loses. If you were faced with huge loses you too would be looking for ways to minimize them. Business isn’t all that easy in times like this for Mortgage Brokers or Real Estate Agents so many will quit and find other work. Believe me, it has very little to do with lenders like Countrywide and what they are doing with their REO properties. My experience suggests to me that within two years we’ll see many more new loan programs once again. And once again it will create more opportunity, leading to more people getting into the business. I have no idea what type of effort lenders are giving to loan workouts and modifications but you sure can bet that if it’s better for their bottom line to do so then they will. Contrary to what the Lenders may say or people may think, these companies are in business to make money and keep their shareholders happy, not keep borrowers in their home.
Why can’t you buy it? Most every loan that was originated by a lender was then sold to “investors”. The key here is “SOLD” When you sell, as you know, you no longer own that thing you sold. So most of these loans are now owned by “investors”. Are you following me here?
So lenders are losing yes, but it’s really investors are the ones losing big time. So why wouldn’t they want to work with people? Because these loans are insured sir. They get full face value if the borrower defaults. So why would an investor take less by working with a borrower when they can get their FULL investment by letting you foreclose and getting all their money.
What you said pretty much sums it up, ” Lenders may say or people may think, these companies are in business to make money and keep their shareholders happy, not keep borrowers in their home. “
They are in the business of making shareholder happy and shareholder want ALL their money, which they will get in the insurance policy.
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