Posted on 08/24/2007 6:41:18 AM PDT by Hydroshock
NEW YORK (CNNMoney.com) -- Countrywide Financial, the nation's biggest home lender and one of those most affected by the subprime mortgage crisis, found itself the target of stinging criticism Thursday from an organization trying to help homeowners in peril.
The Neighborhood Assistance Corporation of America said Countrywide (Charts, Fortune 500) was not doing enough to help people who took out subprime adjustable-rate mortgages (ARMs) over the past few years and now may lose their homes. Subprime loans are issued to borrowers with poor credit histories who often lack the funds to make large down payments.
Justin Urquhart Stewart of Seven Investment Management joins CNN to talk about mortgages and the markets. Play video
Millions of homeowners are considered at risk of foreclosure as adjustable-rate mortgages reset at higher interest rates over the next year or so. NACA has committed $1 billion to helping some of those borrowers by refinancing their mortgages, but says it can't meet its goals unless lenders like Countrywide cooperate.
Countrywide CEO: Outlook grim NACA CEO Bruce Marks called on Countrywide to take more active steps to provide its borrowers with terms they can meet to help them keep their homes, something Countrywide said it is already doing
(Excerpt) Read more at money.cnn.com ...
Bruce Marks is a socialist whose group has been shaking down major lenders for “partnership” contributions for years. I suspect Countrywide has cut off the money for his organization so now he is going after it. Countrywide may be having its problems, but being an irresponsible or predatory lender is not one of them.
The vultures will happily quote anyone willing to feed the Big Panic on real estate.
What exactly is Country wide expected to do? Not ask people to make their payments? Crazy.
I really find it hard to have any sympathy for people who don’t read the fine print. These homeowners should have done their homework.
Yawn.
Or for mortgage companies that lent more money that the house was worth to people that couldn't afford the payments.
Homeowners in peril have their own problems. They have chosen, however unwisely, to put their future earning capabilities and monetary security at risk. They have a legally enforceable contract, which they signed of their own free will (albeit subject to some selective blindness), which binds them to repay a given sum of money according to an agreed set of terms. The biggest problem, is variations in the rate of the interest on the unpaid balance. They signed on perhaps an “interest only” or “below market rate” interest bearing loan, and did not realize what “amortization” really means. The effect is, that on any amortized loan, the initial payment is mostly payment on interest, with only a very small amount going to reduce the principal of the original loan. So even after a year, or two or three, most of the original debt still exists.
There is a way to beat this. Determine how much the principal is being reduced each month, then pay two or three times that much in addition to the agreed monthly payment. This one act alone can reduce the loan repayment by literally years.
And do not fret about the lender going “broke”, as the obligation is often no longer held by the original lender anyway, though they may be acting as the servicing agent. And even if they still hold the paper, all these insturments are passed to the hands of a court-appointed receiver, as “successors and assigns”.
If you fail to pay regard (and the agreed monthly payment), the “successors and assigns” are in a well-established position to pursue you for the remaining debt, unless satisfactorily discharged in some manner.
And the Realtors have been only too happy to accept 6% of all those deals...they are the ones who kept prices rising....yet the lenders are blamed as the predators for finding new ways to help people afford these astronomically high home prices.
This is a lot like those folks that bought Enron stock for $5/share and watched it climb to $100 and they scream that they had been “cheated” out of $95 when it fell back to its true value.
I have often said this train wreck was caused by greed adn stupidity on all involved.
I read the other day that half the people who got no-doc loans had inflated their annual income by more than 50%.
Isn’t it a federal offense to lie on a mortgage application?
Lloyd Dangle is a radical leftist. Is he your economics mentor? Why are you spamming his cartoon propaganda all over Free Republic?
1) Alan Greenspan urges Americans to take out ARMs for a "better deal".
2) Bush signs the "Bankruptcy Reform" Act, which includes numerous provisions making it harder for consumers to obtain protection from foreclosure--including killing the medical exemption (those who went broke solely from healthcare bills and not from buying plasma TVs) which was in the bill before March 2004
NACA is a socialist organization that uses guerilla tactics to “negotiate” ridiculously good terms for unworthy people. They then ask these “clients” to go on the offensive against ALL mortgage brokers and banks as well. Basically a breeding ground for left-wing “corporations are evil” activists.
Bingo. HGTV had a show for awhile about first time home buyers. We were throwing things at the teevee as some of these people who could barely pay their RENT got in debt to their eyeballs to buy a house that in most cases was bigger than what they needed—and cost lots more than what they could afford. They would get what they called “creative” mortgages so they could have a fairly luxurious place to live—and who knows how long before the foreclosure?
What’s with some of these people? There is nothing wrong with renting and saving until you can come up with a decent down payment, then buying something within your means—and moving up as circumstances permit. You don’t have to start at the top—you can start lower and move to the top.
OF course if one can barely afford the payment as it is...then this is impossible.
I don’t agree with them, but I thought it was interesting to hear the calls for this. And I think we will hear more of it.
“Subprime loans are issued to borrowers with poor credit histories who often lack the funds to make large down payments.”
Seems to me that someone with poor credit history should not be given a loan at all.
Sorry, but this does indeed smack of predatory activity, especially since the corporation knew ahead of time that these people were a poor risk.
There’s enough “blame” to go around on both sides in my opinion.
Agreed.
Look at some of the crap on the NACA website:
https://www.naca.com/about_naca/nacaHistory.jsp
https://www.naca.com/refinance/refinanceQuestionaire.jsp
Starts off OK, but as you read on, basically any loan that the customer doesn’t like, or has an interest rate more than a half-point over the lowest fixed rate available is considered “predatory” even if borrower has horrible credit BEFORE doing the loan.
Isn’t it a federal offense to lie on a mortgage application?”
I heard that as well, but in the context that it was the mortgage brokers that were inflating the income figures. The borrowers signed those phony documents, of course, but my guess is that most of them didn’t even know that they had been rigged.
Using Dangle to back up NACA says a lot about Hydroshock’s worldview...and it isn’t what most people might call “conservative.”
They should just ban stupidity, and it will all go away.
Then Wall Street would be a ghost town.
Here’s a novel idea-how about instead of schools teaching young skulls full of mush about global warming, and how to put a condom on a cucumber they return to teaching things such as economics and the economics of running a household.
ping
BackToTheTop
That's a blanket statement that is not completely accurate. It really depends on several factors. First, why is their credit bad? Is it a habitual thing, or something that happened and has been corrected? Realize that a rash of late payments 3 years ago from a job loss, that you've caught up on and redeemed still pulls your FICO scores down - and since you're not really a major risk in that circumstance, something should be available to you. Or - perhaps a divorce? That's different than someone who, over 10 years of credit history, has never paid a single bill on time. It's that latter group that is the problem. Subprime used to be for the first example, but too many of the last example didn't perform as well.
Agreed. This is total crap.
Morning RR :)
How are things?
You’re right in your breakdown of the history of a poor credit risk.
But then I highly doubt those people who are in the unfortunate role of having their credit ruined by forces outside of their control are going to be biting into an ARM in the first place.
Generally speaking those folks are going to do what they can to repair their credit first and then go after a fixed rate loan.
That still leaves the great unwashed masses that think past due notices are mere suggestions for payment.
Not bad, just goofing off this morning waiting for my corporate assistant to get done with his morning meeting :)
All ture, but keep in mind, even know only 2-7% of subprime loans are in or near delinquent status. Most of this is hype that makes things 100 times worse than they really are.
Yeah, lenders should tighten guidelines. And they have. But the liquidity crisis is deeper than that and is rooted mostly in overreaction.
Blaming realtors is off the mark. For most realtors, they couldn't care less about 6% of some marginal amount squeezed out of a sales price.
For example, say your house sells quickly for $375,000 and yields a $22,500 commission (6%) for your realtor at closing. Do you really think that any realtor would prefer that you hold out for $400,000 (thereby costing your realtor time and marketing expenses, and risking her listing getting old and expiring) just so she can maybe pocket an extra (relatively) measly $1,500 (6% of $25,000) a few months down the line?
Here's a tip for home sellers: Your realtor wants you to demand as low a price as possible for your house. She wants her commission, and she wants it as soon as possible.
You are so right on.
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I ignore the losers.
realtors and mortgage shills make me ill. All the care about is $$$$$$$$$$$$.
I actually feel sorry for them, they are so used to swimming in a sea of paper, and it is drying up.
>You don’t have to start at the top—you can start lower and move to the top.<
Life is much more comfortable a few pins down from the top. There’s too much stress trying to stay at the top.
Many of these homeowner were pushed into these loans at the advice of licensed professionals and many had no idea what they were getting into. When questined n=by the borrower the typical response was, ‘Ah, Don’t worry, this is a band aid loan and in 2 years we’ll refinance you out of this terrible loam into a brand new 30 year fixed loan. All will be fines, just sign here, so I can make $20,000 in rebates and fees because this loan is better for me and not really you because I get paid more to sell you this loan!” Yes, that is how it works most of the time.
I have been in the mortgage, real estate and loss mitigation industry for years and I UNDERSTAND how this all works from the inside and what is GOING NOW with defaulting borrowers.
Plain and simple, they CANNOT refinance out of these ARM/s and that’s the MAIN contribution to the housing and foreclosure crisis. It’s not the media hyping things, it’s reality.
Where we are is the result of TERRIBLE lending practices and that is the ONLY reason. I’m so sick and tired of hearing comments from people who are not, have not been or are not on the front lines of WHAT REALLY is going on out there in the market.
If lender don’t offer loan modifications of these toxic mortgages then it will cause our country to go into a deep, deep recession like we have never seen.
Welcome to Free Republic.
I suppose you are the expert, so please give me an example or two of how a lender could “modify” the terms of a loan so that it doesn’t cost him any money.
Thanks.
Hello Lancey and thanks for the introduction :)
OK, homeowner is in a 100% loan fixed for 2 years and bought at the top of the market. So there is no equity or the homeowner mey be upside down on the mortgage. The borrowers’s loan has just reset from 6% to 9% raising his payments let’s say $1,000. He tries and refis and can’t. He’s paid perfectly for 2 years but now has become delinquent 2, 3 months and now is in default and on the way to foreclosure.
Now the lender has 2 choices to mitigate loss.
#1. Foreclose on the home and take a huge loss in reposessing the home and selling it in a depressed real estate market where these repos are not selling. Cost avearge $50,000-$70,000 and is now not an asset but a liability to the lender that it has to manage and sell. Now it is in the real estate business in a DOWN market with no postitive outlook for aproximately 2-3 years.
#2. Loan Modification - Lender works with the borrower to kepp them in the home. Drop the rate back down to the original not rate (now the homewoner can afford the loan) and work out the delinquent fees into the principle and the form of a good faith payment.
Option #1 everyones loses
Option #2 everyone wins (the only difference is that the investors will not see the gains they had hoped for at the reset of these mortgages) OK, i understand their concern but if they didn’t modify that loan then there would be no gains at all and significant losses.
Either way it will cost money to the lender and to investors.
Loss mitigation is about mitigating loss to the lender and the way they have it set up now is for the way the loss mitigation beiness was ran in the past, in the old days.
When these loans were at 60-80% loan to value and they could play hard ball and take homes back from defaulted borrowers and still make great gains in the REO departments. Those days are over and these departments need to adjust to the way the market is now. Tapped out mortgages, no equity, no refiance alternatives and no money to be made, only lost by foreclosing.
Regards,
Moe
www.LoanSafe.org Homeowner Advocate Forum
Now we've got lots of highly leveraged institutions that cannot tolerate even the modest default on interest payments. Same for the institutions that lent these primary dealers the money to offer the loans. Other savvy banks and lenders, with their own survival in mind, dare not lend these institutions the money to cover the delinquencies until such time as the servicing institution can liquidate the collateral (taking time and money). Because of the falling RE prices, and growing inventory, the problem will become much worse before we see the light at the end of the tunnel.
Apparently, only the tip of the iceberg has been seen. September through December, 2008, some trillion dollars of sub-prime ARMs are going to be reset, some three times what this year's volume has been. How many of these "homeowners" will walk rather than throw good money after bad? I think there is going to be a cascade of defaulting debt for years to come.
And Helicopter Ben will come to the "rescue".
Making huge quick profits writing mortages for folks that logically would not be able to honor their contracts, bundling these worthless deals and selling them to other fools was clever, to a point. But like junkies they just didn’t know when to quit. There is a fine old saying that seems to apply “when you owe the bank $1000 you have a problem, when you owe the bank $1,000,000 the bank has a problem.
I hate to break it to you, but some of these people still won’t be able to make their payments even if they get refinanced at 0% interest. Some people have bought more than they can afford hoping to make a killing by selling quickly. How are we to help them?
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