HOW THE MORTGAGE CRISIS WILL BE SOLVED
If you’re having trouble making your mortgage payment or in fact are already behind, there may be some good news! I believe your lender and all lenders are getting ready to solve your problem. So who am I and why should you pay attention to what I’m going to tell you.
In 1989 I got into the business of loan modifications — at the time it was almost an unknown business of helping homeowners resolve their loan problems, primarily those in foreclosure. Computers were few and far between so mail and the phone were my tools. During the next two years I got loan modifications for over two hundred homeowners. At that time it was relatively easy to negotiate with the banks on behalf of the delinquent homeowner and come out a winner for both the lender and the borrower. There were very few homeowners in trouble, there were no exotic loans and many times I was able to actually go into the bank talk and work things out.
Fast forward to the present day situation, this of course is unheard of today, you’re very lucky if you can get someone in authority to speak to you and in most case you’re lucky if you can ever get the same person you may have spoken to back again. Believe me, I know of your frustration, disbelief and anger at what you cannot accomplish, but there are some good signs coming from the lenders.
There have been thousands if not millions of words written by those who for the most part are trying to analyze why and how this housing catastrophe happened. You know what, it really doesn’t matter, what does matter is how you are going to get out from a seemingly impossible situation.
Since 2004 my company has been doing mortgage loan audits of which we have done over four thousand. My purpose is not to explain what a mortgage loan audit is, but to let you know that we have been dealing with lenders – the ones still here and the ones no longer here on a daily basis for years. I believe we know how they think. In order to defeat your adversary you must know how they think. Since the bank bailout it has been almost impossible to get a clients loan restructured. Prior to the federal government getting involved compromises were made in favor of the borrower. Modifications now are done through government mandate and do the borrower in some case more harm than good. Some of you may have experienced this dilemma.
For the past year or so some colleagues and I have been saying something has got to give with this entire housing-banking standoff, but what? We’ve speculated as to how the housing problem would be solved. Involved on a daily basis and well-versed, we knew that principal loan reduction could not be a remedy — there are too many complicated issues as to why this cannot be a solution. Continuing to foreclose (which has been slowed down or stopped completely) is not the answer — who’s going to buy these properties? Currently the banks have thousands of properties that they have not put on the market. Now we’re getting to the good news. If the banks were to put all the properties they own on the market it would further depress the prices they could get for these properties.
We now know that lenders don’t want to foreclose, it cost them money and they then have another house they have to maintain, pay taxes and insurance on and try to sell. This is in the homeowners favor — but for how long? They can’t reduce the principal balance because of a myriad of complications. This is not in the best interest of the homeowner.
Along with government interference, investor complication, bad press, the lender and borrower have been in a tight spot. Up until now!
Something has been happening that may have something to do with “our Mortgage Loan Audits.” We do audits for homeowners, attorneys, mortgage brokers and realtors. Recently a realtor that we did a particular audit for called and said the client got a loan modification that went like this: the loan was rewritten to a forty year fixed loan, the interest rate was reduced to two percent for the first ten years to be increase by two percent at the ten year point and two percent until it reached six percent in the thirtieth year. When all was said and done the borrower did not lose the house and the monthly payment was reduced by about half of what they were originally paying making the house affordable.
Similar reductions have been done for four different homeowners and four different lenders we did audits for in the past few months. At first we thought the lenders are finally resolving these problem loans without putting up major obstacles. We were right, but not for the reasons we thought. It’s too soon to come to a definite conclusion as to why this is happening, but it appears to be the solution that both homeowners and lenders have been looking for.
There had to be a number of things worked out in order for lenders to resolve this most critical problems. I have speculated many times as to why lenders would not extend the length of the loan period, from thirty years to forty, fifty or more years. It now appears that is part of the solution; the other part of the puzzle is to reduce the interest rate in doing these two things many homeowners will be able to stay in their homes as the payment will become affordable.
But, why do this and why now? Many of these loans were given to people who could not afford them and the lenders knew this from the origination of the loan... ever hear of Wall Street? This is not a problem only shared by this country, it’s a worldwide problem. Many of these loans were sold around the world. I think we are all aware that there is no benevolence coming from these lenders, so what’s up?
Well you could theorize that the same lenders (the ones that are left) and Wall Street are up to their same old tricks, again with federal government blessings.
Here’s how I think it’s going to work, a bad loan is turned into a new performing loan – disguising the fact that a few weeks ago it was ready to become another failed loan. The new loan is fully affordable and in compliance in every way, ready to be sold once again to the US taxpayers at another huge profit. WOW!!! What a deal???
And as they say in fairy tales “and everyone lived happily ever after”!!!