by Moe Bedard
The Federal Reserve’s Ben Bernake sent a letter to the Senate Banking Committee announcing a new loan modification program to help keep struggling homeowners in their homes. The program will be applied to whole owned mortgage assets that it aquired in the recent Fed assisted JPMorgan Chase’s purchase of Bear Stearns and support of insurance giant AIG.
The Bear Stearns portfolio is worth approximately $27 billion and it is not clear how much of the $27 billion is tied to residential mortgages. AIG assets include a $20 billion portfolio of mortgage backed securities (MBS) and a $27 billion portfolio that includes securities that are backed by mortgages.
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by Moe Bedard
Under the measure, owner-occupants with risky mortgage features such as interest-only loans or loans with short-term introductory interest rates or adjustable rate mortgages, would be offered a loan modification based on the home’s current value.
“Our legislation also provides a safe harbor for creditors who comply,” she said. “In other words, we can be the bad guy to get these loans modified in a way that makes sense for everybody.”
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