A Solution to Mortgage Crisis | Newsweek Voices - Jane Bryant Quinn

If banks would modify the loan terms, the majority of at-risk borrowers could pay their mortgages and stay in their homes.

From the magazine issue dated Nov 26, 2007

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Some 2.2 million homeowners face foreclosure, thanks to the subprime-mortgage bust. Their losses will drag down the value of nearby homes whose owners are faithfully making monthly payments. That implies worse to come for the institutions—hedge funds, mutual funds, pension funds and banks—that invested in these high-risk loans. Everyone says that something must be done, but what?

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Subprime borrowers have modest credit scores and little or no cash for a down payment. They took "exploding" loans, at 7 to 9 percent for the first two or three years, expecting to refinance at lower rates. But the market turned against them. Their rates are jumping to 10 or 15 percent, which they can't afford.

So far, most lenders are handling defaults one slow case at a time. If they offer any help at all, it's a stretched-out payment plan (including late charges and piles of mystery fees). Experience shows, however, that these plans rarely work.

Instead, borrowers need loan "modifications"—meaning changes in the terms. What would help most is holding the payments level. That way, a majority could cover their mortgages and keep their homes. So far, "mods" have been made to only 1 percent of the loans.

At this point, the holier-than-thous are sniffing, "Why let them off the hook? They made their bed, let them be thrown out of it." I agree, for borrowers who told the bank, falsely, that they were going to live in the house but actually bought it to flip. Owners who occupy their homes are another story. Often, they were seduced into buying or refinancing by a slick salesperson who misled them about the risks.

There are two sticking points, says Guy Cecala, publisher of Inside Mortgage Finance.

Many believe the economy won't improve soon unless the rate of housing
foreclosures reverses course.
Consider this idea:
Allow the FED to directly purchase a portion of any mortgage where a homeowner is turned down on his re-finance application.
It should be documented by the lending institution that the applicant has no other supporting assets to assure the payment of his debt, but otherwise has acceptable credit scores and a regular income which may be acceptable to the ???Government Assist Corporation??? (Imagined conduit for my solution), and will likely be facing foreclosure without some assistance.
Here's the basic proposal:
The homeowner who applied for, but is turned down for refinancing, (Can???t qualify with stricter lending standards) obtains a form from the ???qualified lender??? who refused the refinance, stating the reason for denying the re-finance. This document is submitted to the ???Government Assist Corporation??? (aka GAC) created specifically to dispense, track, make recommendations, etc. toward it???s lending mandate.

If the borrower qualifies with the GAC (minimal qualificatons - has a job and otherwise acceptable credit scores and can meet the monthly obligations) then the Government Assist Corp. would PAY OFF 1/2 of the homeowner???s mortgage debt. This payoff would be subject to note-holder???s agreement to re-set that loan at the same rate, same amortization period, but for ½ the amount. (Otherwise of course the minimum monthly payment would not change.) Simultaneously at pay-off, the Government Assist Corp. puts a 2nd lien against the property in favor of the GAC, with proceeds payable to the Dept. of the Treasury. The 2nd is to be written amortized out to the end date of the first and the interest shall be HALF the interest rate of the 1st (or some other reduction designed to create the effect I???m targeting).
For example 50% of a 6.6% original note is paid off, then the second, GAC loan is written at 3.3%. The re-written wrap-around payment should be approximately 75% of the previous.

The homeowner will be paying off the 1st and 2nd concurrently just as a Wrap-Around Mortgage is paid. A collection escrow might be set up with the GAC to ensure compliance oversight.

Benefits hoped for:
The 1st note holder???s position is substantially strengthened by receiving ½ the balance on the note. It???s assumed that written cooperation to re-set that payment will be had.

(The 2nd note would be made 'subject to' the re-writing of the 1st.)
By involving the GAC to loan at ½ the rate of the 1st the payment should be reduced approximately 25%. (See your amortization table.)
Furthermore, if these new loans were made ???Assumable??? by borrowers who nearly (let the GAC be the judge) qualify for current stricter standards loans, then more homes could be saved from the ???Short-Sale/Auction process so devastating to the current economic situation.

This lower rate is lent directly by the government and

Modifications are a joke. Let the lender squeeze your last few dollars out of you while you hope they honor the commitment to write a new loan or better terms down the road. It's estimated over 85% of all loans made are suffering from impairment...in other words don't meet the stringent guidelines of the Government. RESPA and TILA are tow big legislative forces most homeowners are clueless about. File claim thats first. Do a qualified audit second. Then send a demand for relief under threat of filing an action for predatory lending Wake up folks. you can buy back your home for half the mortgage according to expert Maher Solman. "And that maybe more than they will sell it as a bank REO"! admin@borrowerhotline.comorroerhotline.com

Member Comments

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Posted By: philnphil @ 09/23/2009 10:21:56 AM

HI MY NAME IS PHILIP S.C.
I BELIEVED I AM THE WORST VICTIM OF CHASE BANK ,WITH A LOAN 12 1/2% RATE.
I STARTED BEGGING AN CRYING TO CHASE SINCE AFTER THE FIRST MONTHLY BILLS. FOR THE PAST TWO YEARS.
UNTILL NOW THE CASE REMIND UNSOLVED. MY EXPERIENCE AFTER WRITING CHASE OVER 20 LETTERS NOT EVEN ONE REPLY.REALIZE IS NOT CHASE FAULT.IS THE REGULATION LAW GIVING THEM A LICENSE TO KILL .TO MUCH TO TELL ,FOR ANY PROOF CONTACT ME ON BROTHRHOODSF@AOL.COM OR SEVENSUNGARDEN@AOL.COM
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Posted By: picoman @ 01/13/2009 7:17:54 PM

Many believe the economy won't improve soon unless the rate of housing
foreclosures reverses course.
Consider this idea:
Allow the FED to directly purchase a portion of any mortgage where a homeowner is turned down on his re-finance application.
It should be documented by the lending institution that the applicant has no other supporting assets to assure the payment of his debt, but otherwise has acceptable credit scores and a regular income which may be acceptable to the ???Government Assist Corporation??? (Imagined conduit for my solution), and will likely be facing foreclosure without some assistance.
Here's the basic proposal:
The homeowner who applied for, but is turned down for refinancing, (Can???t qualify with stricter lending standards) obtains a form from the ???qualified lender??? who refused the refinance, stating the reason for denying the re-finance. This document is submitted to the ???Government Assist Corporation??? (aka GAC) created specifically to dispense, track, make recommendations, etc. toward it???s lending mandate.

If the borrower qualifies with the GAC (minimal qualificatons - has a job and otherwise acceptable credit scores and can meet the monthly obligations) then the Government Assist Corp. would PAY OFF 1/2 of the homeowner???s mortgage debt. This payoff would be subject to note-holder???s agreement to re-set that loan at the same rate, same amortization period, but for ½ the amount. (Otherwise of course the minimum monthly payment would not change.) Simultaneously at pay-off, the Government Assist Corp. puts a 2nd lien against the property in favor of the GAC, with proceeds payable to the Dept. of the Treasury. The 2nd is to be written amortized out to the end date of the first and the interest shall be HALF the interest rate of the 1st (or some other reduction designed to create the effect I???m targeting).
For example 50% of a 6.6% original note is paid off, then the second, GAC loan is written at 3.3%. The re-written wrap-around payment should be approximately 75% of the previous.

The homeowner will be paying off the 1st and 2nd concurrently just as a Wrap-Around Mortgage is paid. A collection escrow might be set up with the GAC to ensure compliance oversight.

Benefits hoped for:
The 1st note holder???s position is substantially strengthened by receiving ½ the balance on the note. It???s assumed that written cooperation to re-set that payment will be had.

(The 2nd note would be made 'subject to' the re-writing of the 1st.)
By involving the GAC to loan at ½ the rate of the 1st the payment should be reduced approximately 25%. (See your amortization table.)
Furthermore, if these new loans were made ???Assumable??? by borrowers who nearly (let the GAC be the judge) qualify for current stricter standards loans, then more homes could be saved from the ???Short-Sale/Auction process so devastating to the current economic situation.

This lower rate is lent directly by the government and
- Reply
- Report Abuse
Posted By: msoliman @ 07/10/2008 1:36:09 AM

Modifications are a joke. Let the lender squeeze your last few dollars out of you while you hope they honor the commitment to write a new loan or better terms down the road. It's estimated over 85% of all loans made are suffering from impairment...in other words don't meet the stringent guidelines of the Government. RESPA and TILA are tow big legislative forces most homeowners are clueless about. File claim thats first. Do a qualified audit second. Then send a demand for relief under threat of filing an action for predatory lending Wake up folks. you can buy back your home for half the mortgage according to expert Maher Solman. "And that maybe more than they will sell it as a bank REO"! admin@borrowerhotline.comorroerhotline.com