There has been a recent change in the air and it looks like the tides are starting to change for the better for those homeowners who are wishing and a hoping to modify their exploding, adjustable rate mortgage.
There has been strong resistance in the recent past with lenders and servicers willingness to work with borrowers in fixing their toxic loans. They just would not do it and they literally were kicking homeowners to the curb and letting them dies a slow, foreclosure death. It wasn’t as if they did not want to assist people in modifying their mortgage. They just couldn’t because they have been too concerned with their finaicial outlook of their books and in the past, modifying mortgages would have affected their balance sheets in a negative way. Bloomberg:
Many lenders recorded upfront profits by selling loans in bulk to off-balance-sheet trusts — known as qualified special purpose entities, or QSPEs — which then repackaged the loan pools into mortgage-backed securities. The trusts are supposed to be beyond the lenders’ control. And if the companies servicing the loans tinker with them in ways that aren’t spelled out in the trusts’ charters, the sales must be reversed, and the trusts must come onto the lenders’ books, under the Financial Accounting Standards Board’s rules.
Thanks to the the SEC in a letter from the chief accountant, Conrad Hewitt, they may not have to now.
The Securities and Exchange Commission’s staff has granted the lending industry an exemption from the normal rules for off balance sheet accounting. This historic move by the SEC will allow lenders to keep their balance sheets looking lean, mean and less leveraged, even while the loans that are off the books are being modified for struggling subprime borrowers.
In December, the American Securitization Forum (ASF), published a report called “streamlined” framework for evaluating subprime mortgages”. Loans that meet the specific guidelines based on factors such as low credit scores, the number of days delinquent and loan to value (LTV) would be eligible for the fast tracking of loan modifications, where default is reasonably foreseeable.
{ 6 comments… read them below or add one }
I think this is not the right “solution”.
Lenders/investors don’t want to take the write-downs they need to take in order to do loan mods, so they’re being given a pass to what is essentially accounting/securities fraud? Come again??
My read is that the current sleazebags in charge want to have their cake and eat it too — do loan mods to quell the restive masses, but not take the write-downs that would show to the financial world that they made horrible managerial and executive decisions.
The result of this is going to be longer-lasting turmoil in the financial sphere, which will probably make it harder for new people to become home owners legitimately.
But hey, if you need a loan mod right now, this is good for you. But its just another reason your children (or grandchildren) won’t be home owners until they’re 40.
“But hey, if you need a loan mod right now, this is good for you. But its just another reason your children (or grandchildren) won’t be home owners until they’re 40.”
Oh, they’ll be homeowners, all right, if we hang on too long while our equity plummets, they’ll inherit the debt load that we couldn’t finish paying off, and end up pouring cash into that hole, too — if you know what I mean.
This all makes sense now, it’s like when I did my refinance and they didn’t have to tell me that my non-recourse loan is now recourse.
The mortgage broker doesn’t work for the bank that loaned me the money to buy my home. The bank that loaned me the money to buy my home didn’t really loan me the money either. No wonder they didn’t really care that my home wasn’t worth what I was paying, or what they lent me to buy it Then there’s the caveat that they won’t touch these things, becasue then they’d have to buy them back and they know what crap they’re all dealing with.
No, this isn’t a scam.
This has been a real harsh lesson – one I shall certainly never rinse, lather and repeat. Nonetheless, I am not real happy about the bank (that didn’t even lend me money) being able to come after me for a judgement to collect some dollar value attached to a piece of paper that was never really worth its value anyway due to all of this hocus pocus. They’ve probably already written it down as a loss anyway and will continue to try to double collect it from all of us as well. Half of the sheep will probably keep on paying into this scam and they’ll make what they should have made legitimately anway.
Clever scheme, although my version is probably way off base – I think Chris is onto something. There’s no way they didn’t see this coming.
Here we go, in come the accountants for their cut. They’ll have a ball figuring this out.
Oh gawd! First it was the simple abacus, then bookkeeping, then accounting, then public accounting, then certified public accounting, then creative accounting (Enron and Worldcom ideas), and now re-creative accounting (Citigroup, et al, idea). Before long we’re all going to find ourselves back in the Garden of Eden starring at the Tree of Knowledge and its luscious Fruit (anyone want to wager that it’s Money), which will lead us into the temptation of wreckage accounting. If anyone understands what I’m babbling about, please email and explain it to me because I sure as hell don’t know, and I pretty sure that’s the way the banks want it at least since the time of caveman and cavewoman and clams.
State housing agencies are having a hard time doing refinances too.
http://www.bloomberg.com/apps/news?pid=20601109&sid=al4wLYqTFa10&refer=exclusive
First of all, the Real Estate Investment Trusts set the guidelines for the lenders as well as the rate range, not the lenders or brokers. They also were greedy and wanted to punish the people who were not making a ton of money – so they could – due to their lower income, perhaps mis-handling of money, or those who had lost a job, medical problems, etc. And they would only give them 2 or 3 years to fix the problem and if they solved it sooner, they were penalized with a pre-payment fee. Go Wallstreet!
Second of all, FNMA & FHLMC would accept a house with a higher value the day after it was flipped. Subprime would do appraisal reviews on their loans and lower the appraised value. Congratulations OFHEO, for allowing FNMA & FHLMC to do so, and who now designates redlining for them, since FNMA & FHLMC cannot do so.
This certainly causes one to pause, and look at the government lending billions of dollars to the Lenders (Banks) recently, so lenders can fund more loans and still be able to declare their losses. Has anyone bothered to review the agreement the lenders signed with the government and ask what if the Lenders cannot repay these loans to the government in the future? Perhaps one could even think forward enough and see the government asking the Lenders for the collateral which they loaned the money, and are not receiving payments any longer. I wonder if the Real Estate Investment Trusts would receive the properties – I don’t think so! Hmmm…now the government owns the properties…. and what would they do with them…. lease them out to the citizens…yes, that’s the answer. It’s similar to what Mexico does, isn’t it.
It would have been so simple to just modify all the loans which were adjusting initially when a borrower was in trouble, instead of making such a complicated debacle out of all this. Greed is still alive and well and raising it’s ugly head higher than ever.
Did you really think slavery was dead? It’s just mutated itself to a new level.
Live well and prosper!