Skip to comments.Talk of gaming White House mortgage plan emerges
Posted on 12/07/2007 5:57:26 PM PST by jiggyboy
A day after the White House unveiled a program to salvage the mortgage market, people are already talking about how borrowers might game the system.
To qualify for the fast-track program, borrowers must have a FICO score of less than 660 and it can't have increased by more than 10% since they took out their original subprime mortgage.
Because income isn't checked, some experts worry that borrowers who might otherwise be able to afford higher payments will try to lower their FICO score to qualify for a rate freeze.
"The message here is to get your FICO score down," Mark Adelson, a structured finance expert, said. "Don't pay some bills, but keep up with mortgage payments."
(Excerpt) Read more at marketwatch.com ...
Why should people with bad credit ratings get rewarded?
my head spins. it seems like those are the sort of people that need the most help and is it a bad thing if they take an incentive and don't walk away?
If someone has a FICO score of better than 660 and a reasonable downpayment, they should have no problem refinancing. I imagine the problem may come if their house appraises for less than they owe though.
But credit scores are tracked. They should look at the score they had the day the announcement was made.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
That was the plan. These loans in many cases are held in funds and can not be easily renegotiated unless it is in the best interest of the fund investors. So yes, legally only those that are most likely to walk away can be given the option.
I think it's a fair bet that somebody who has virtually no money down in the property was a late entrant into the housing bubble. It follows that they bought their house at a price far higher than it is now or will be for a number of years. In this case, the offer to continue paying off an overpriced asset is no incentive at all.
It'd be fair to me, if I could take it.
There was no point tying up cash in equity when money was so easy. It didn't make sense.
I fail to see why the federal government should concern itself with these contract matters or what authority they have to do so.
This is supposed to help ONLY owner-occupants, NOT speculators.
What exactly will be done to enforce that?
And... my understanding is that there have already been many mortgage loans made under the condition that the borrower was the occupant, but the system was “gamed” and the borrower was actually a speculator. What is supposed to be different this time that will keep this from happening (when mortgage lenders couldn’t enforce it the first time around)?
Good points. Look for the FBI to begin investigating that kind of fraud sometime in 2015 or so.
And sooner are later during the five years they will figure it out!
So what? The government is not funding this. The mortgage companies are, and they went into it with their eyes wide open.
All players involved were gaming the system. The borrower who was getting more house than they should have qualified for. The mortgage brokers for convincing people these were good loans so they could collect their big fees and pass the loans to someone else. The banks and investors who bought these loans because of the higher than usual returns for mortgage backed loans. The mortgage broker is long gone and out of the picture, now we have investors and banks and borrowers who are stuck between a rock and a hard place. Now we have these crappy loans that no one can afford (and believe me, the rates these subprime loans carry are no bargain, even the so-called ‘teaser’ rates are above normal fixed rate loans). This is really only a small bandaid for the problem. Banks and investors should be happy if as many borrowers as possible wish to scam the system to keep paying their mortgage. Foreclosing on a house that has lost 20% in value and had little equity is a losing proposition, big time.
It is neither the government nor the mortgage companies. It is the banks' other customers, who will pay the difference.
This plan is deader than an aborted Dodo bird.
“Mortgage companies” are off the hook as they are no longer performing as funding agencies but have become mere order-takers.
The losers here are the institutions who bought the mortgages expecting to get a higher post-teaser rate for the bulk of the loan. Now they’re getting screwed out of that higher rate for five years.
It remains to be seen whether that is better for them than losing some amount of interest and principal as homes go into foreclosure, which is as widely and frequently stated, and without any real analysis, as any Democrat talking point.
What difference??? You think banks are doing this because they are gonna lose money? This deal is trying to save the banks from losing a heck of a lot more money. And beside, the theory that banks are entitled to make "x" dollar is not how things work.
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